There will be six candidate questions below and three will be chosen from the six. Two are new to you. You haven't seen them before and are on the last portion of the course. The other four you have seen. These are the unassigned candidate questions from Midterm 1 and Midterm 2.
The New Questions:
A. This concerns turnover, quite possibly efficient, in the setting of the repeated Prisoner's Dilemma. One example can be seen in major college sports where the players have 4 years of eligibility. They can play at most 4 years after which new players take their place. For the very best players, who have the potential to play professionally, they may face a choice of foregoing a year or two of their college eligibility and turning pro early. Consider this from the perspective of the coach. Having such an excellent player on the roster increases the likelihood that the coach's team will win its games. Discuss the incentives for the coach in advising the player to turn pro or not and in utilizing the player to showcase his skills in game situations to pro scouts. Does the coach try to retain the player in making these decisions? Why or why not?
Now consider a similar situation of how upper level management considers the professional development of rising middle management. It is not unusual for middle management members to attend formal education aimed at executives, such as an Executive MBA program. We think of such formal education as providing "general human capital." Thus the education raises the productivity with the current employer but also increases the value of the employees outside option. What criteria will upper level management use for selecting candidates for such formal education? Will they be reluctant to send the very best middle managers to such programs for fear that they will lose these good personnel to other companies? Why or why not?
B. This question concerns innovative practice in the the setting of the repeated Prisoner's Dilemma. Employees with some responsibility allocated to them may be quite diligent in doing their established work, so shirking per se is not an issue at all, but they may be very reluctant to try out new approaches for fear of being blamed when an experiment along those lines blows up in their faces. There are various possible solutions to this issue:
(i) provide large rewards for experiments that succeed,
(ii) pool experiments across several employees each with some responsibility so responsibility is shared,
(iii) punish work groups if they don't show innovation over time.
(iv) possibly other mechanisms that might occur to you.
Discuss the pros and cons of each of these and discuss how the organization might come to a particular approach in trying to encourage organization members to be innovative.
Candidate Questions from Midterm 1
C. This question concerns transfer prices. Provide a working definition for what a transfer price is. In a for-profit organization how should ownership (shareholders) want the transfer price to be set? Explain why others in the organization might want the transfer price to be set differently. What transfer price would these others like to see? When service quality is jointly set with the transfer price, what service quality would ownership like to see? Explain why this is the case. Others may want a different service quality level. Explain how their preferred service quality level differs from what ownership wants.
D. This question concerns economic efficiency concepts. There is a partial equilibrium concept and a general equilibrium concept. Describe each of these. Do the two concepts always coincide? If not, under what additional assumptions do they coincide. Provide an argument for why we should expect efficient outcomes. Economic efficiency has been critiqued on several grounds. Explain some of these criticisms and provide settings where the particular critique appears valid.
Candidate Questions from Midterm 2
E. This question concerns procurement. Discus why in government agencies procurement is subject to regulation. What is the regulation aimed at preventing? What does it try to accomplish? Explain why during the bidding process the lowest price bidder may not be selected, although the process is competitive. Discuss the various goals the agency conducting the procurement may have going into the process.
F. This question concerns an agent who while performing the same function serves two different principals. What are some examples where this situation emerges? What problems are created that don't exist in the case where there is a single principal? Explain what "capture" means and how it arises in this context. What might be done to discourage capture?