Describe an adverse selection problem a company is facing

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Reference no: EM133712552

Homework

Task I:

Assigned Readings:

Chapter 19. The Problem of Adverse Selection.
Chapter 20. The Problem of Moral Hazard.
Chapter 21. Getting Employees to Work in the Firm's Best Interest.
Chapter 22. Getting Divisions to Work in the Firm's Best Interest.

Initial Postings: Read and reflect on the assigned readings for the week. Then post what you thought was the most important concept(s), method(s), term(s), and/or any other thing that you felt was worthy of your understanding in each assigned textbook chapter.Your initial post should be based upon the assigned reading for the week, so the textbook should be a source listed in your reference section and cited within the body of the text. Other sources are not required but feel free to use them if they aid in your discussion.

Also, provide a graduate-level response to each of the following questions:

1) Describe an adverse selection problem a company is facing. What is the source of the asymmetric information? Who is the less informed party? What transactions are not being consummated as a result of the information? Could you (or do you) use signaling or screening to consummate these transactions? Offer your company some sound advice, complete with computations of the attendant profit consequences.

2) Describe a decision that is centralized (or decentralized) in your company. How could you decentralize (or centralize) the decision? What would happen if it were decentralized (or centralized)? Compute the profit consequences of the change.

Task II:

This homework is an individual-specific assessment of the industry in which you currently work or of the industry in which you intend to work after completing your MBA. You should discuss the sources of the value created within your particular industry. Your document should address the following issues:

A. Brief description of your current or intended industry

B. Evaluation of the unique, specific sources of value created by your firm (for its customers) relative to all of its competition and the unique sources of value you will add to it. In other words, what makes your firm special for its customers. The value may be derived from the quality of the product (relative to others on the market), customer service, overall purchase experience, future prospects, company culture, or a combination of these and other factors.

C. Describe the unique sources of value that you will bring to the firm and enable you to contribute positively to the firm's performance. This is the most important part of this research project.

D. Concluding discussion that addresses how the factors that influence value created in this industry may change over the next five years. Also: describe how the value and contributions you make may evolve and grow over the next five years.

Reference no: EM133712552

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