Chapter19:

19-4 Job Auction⁷

When China reformed state-owned enterprises, it tried a new approach to choosing managers: it put managerial jobs up for auction. The bids for the jobs consisted of promises of future profit streams that the managers would generate and then deliver to the state. In cases where the incumbent manager was the winning bidder, firm productivity tended to increase dramatically. When outside bidders won, there was little productivity improvement. If incumbent man- agers were not generally more qualified, how can you explain this result?

19-6 Hiring Employees

You need to hire some new employees to staff your start-up venture. You know that potential employees are distributed throughout the population as fol- lows, but you can’t distinguish among them:

What is the expected value of five employees you hire?

Chapter20:

20-1 Extended Warranties

Your product fails about 2% of the time, on aver- age. Some customers purchase the extended war- ranty you offer in which you will replace the product if it fails. Would you want to price the extended warranty at 2% of the product price? Discuss both moral hazard and adverse selection issues.

20-3 Locator Beacons for Lost Hikers

Lightweight personal locator beacons are now available to hikers that make it easier for the Forest Service’s rescue teams to locate those lost or in trouble in the wilderness. How will this affect the costs that the Forest Service incurs?

Chapter21:

21-1 Real Estate Agents

When real estate agents sell their own, rather than clients’, houses, they leave the houses on the mar- ket for a longer time (10 days longer on average) and wind up with better prices (2% higher on average). Why?

21-6 Meeting Milestones

A convenience store manager earns a base salary plus small bonuses for each of ten different possi- ble monthly milestones he meets. Typical man- agers can meet half of these milestones. Do they miss the others by a little or a lot?

Note:

1-you should use the book to answer all these questions (you should not use any additional sources), I will give you the link of the book.

2-you should not be cheating from internet or other sources.

3-Academic writing.

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