Economic Organizations, Institutions and Markets (EOM/EIM)

Introduction

Contents: 3 blocks of topics

▪ ▪ ▪ I. Individual behavior ♦ ♦ Topic 1. New cognitive perspectives Topic 2. Business implications of Evolutionary Psychology II. Economic organization ♦ ♦ Topic 3. Incentive management Topic 4. Delegation and divisionalization III. Institutional environment ♦ ♦ ♦ Topic 5. Markets and politics Topic 6. Institutional support of private contracting Topic 7. The role of business firms in society

Objectives

▪ ▪ Learn to think Learn to apply theory to real problems ♦ They do not only lack a “solution”—there is not even a “question”

Socratic Method

▪ ▪ (1) Guided reading, writing & analyzing  (2) Active class discussions Difficulties ♦ ♦ ♦ ♦ ♦ Reading, not merely recording class notes Cases, projects Speaking in theory classes Stress!?

Overall: average in both, the effort required and the grades obtained

How would you use readings in topic #1 to think on Jan. 2015 terrorist acts?

Example: CTBP Case study on the water scarcity suffered in CAT years ago

▪ ▪ ▪ Possible questions ♦ Why? Which policies were implemented? Etc. How did 4 th -yr students analyze it?

How would you analyze it? ♦ As an economist? (What is your comparative advantage? Journalism?) ♦ After the readings of topic #1?

Materials

▪ ▪ ▪ Dossier of required readings  OCE Theory  Course Website ♦ ♦ ♦ ♦ Rules and teaching material (readings, PPTs, additional info., articles from the press, etc.): http://www.arrunada.org/Teaching.aspx?lang=ENG&Id=4 “Topics and teaching materials” PASSWORD: “lluria” Seminars  “Aula Global”

Grades

▪ 60% Theory (5/10 required to pass) ♦ ♦ Multiple-choice exam (sample questions below) Class participation: both, voluntary and guided through “cold calling” ▪ ▪ 30% Seminars (5/10 required to pass) ♦ 4 problem sets + 1 team presentation 10% Individual essay applying one theory to a

current

&

real

case of your choice

Class rules

▪ ▪ ▪ Strict punctuality: no entry after classes start No phones, laptops, tablets, etc. in classroom Contact by email only for exceptional & urgent problems  ♦ Read the course and seminar rules ♦ Address administrative concerns to the school administration ♦ Address all questions on seminars to your assigned seminar teacher ♦ Contact student delegates for class issues

Next steps

▪ ASAP, this week: students should create teams of 3-4 ▪ One week before seminar: problem set posted ▪ See PDA for dates

Exam

▪ ▪ ▪ ▪ ▪ Medium difficulty About 35 multiple-choice questions. About 2 hours, so a little more than 3 minutes per question Marks are taken off for mistakes: for example, with 40 questions and 4 possible answers for each question: ♦ ♦ ♦ correct, 2.5 points incorrect, -0.75 points. So, if a random answer is given, 0.25 Questions of varying difficulty. Sample questions below are harder than average Also varied content, based on concepts, reading and case studies

Example of exam question (1)

▪ Which of the following best describes the relationship between institutions broadly defined and the various types of contractual enforcement?

a) Institutions promote first and third party enforcement, and seek to limit second party enforcement

b) Institutions promote third party enforcement, and seek to limit first and second party enforcement c) Institutions promote all three types of enforcement d) None of the above

Example of exam question (2)

▪ In the experiments discussed by Fehr and Falk, incentives for the agent could come from four sources: (1) the desire to improve the principal's payoff by exerting more effort; (2) the desire to avoid a fine; (3) the desire to earn a bonus; and (4) the desire to avoid being punished by, or to seek out reward from, the principal after the latter observed effort. Which combination of these produced the highest effort levels?

a) (1) alone b) c)

d)

(1) and (2) (1) and (3)

(1) and (4)

Example of exam question (3)

▪ With which of the following perspectives on mandatory contracting rules is Coase most in agreement?

a) b)

c)

d) They always limit the ability of two parties to reach efficient outcomes In a world with no transaction costs, the inefficiencies they create must be weighed against the inefficiencies they avoid in order to judge whether their use is appropriate

The amount of mandatory rules in most societies probably goes beyond what is desirable

In a world with transaction costs, they are necessary for allowing two parties to reach efficient outcomes

Example of exam question (4)

Note: Not covered now in OEM/EIM courses ▪ Based on experiment X, should I offer better service to a male or a female customer?

a) b) c) d) The experimental results show that women are less prepared to accept unbalanced offers. So I should offer more to the woman. The experimental results show that women are more prepared to accept unbalanced offers, so I should offer less to the woman. I should pay no attention to the experimental results because experienced customers are never representative of the people used in experiments. There is not enough information to decide.