Managerial Economics and Business Strategy, 4/e Michael Baye,
Indiana University - Bloomington
The Organization of the Firm
Chapter OutlineHeadline: Incentives at Saturn: Will a New Kind of Car Company Continue to Roll? - Introduction
- Methods of Procuring Inputs
- Purchase the Inputs Using Spot Exchange
- Acquire Inputs under a Contract
- Produce the Inputs Internally
- Transaction Costs
- Types of Specialized Investments
- Site Specificity
- Physical-Asset Specificity
- Dedicated Assets
- Human Capital
- Implications of Specialized Investments
- Costly Bargaining
- Underinvestment
- Opportunism and the "Hold-Up Problem"
- Optimal Input Procurement
- Spot Exchange
- Contracts
- Vertical Integration
- The Economic Trade-Off
- Managerial Compensation and the Principal-Agent Problem
- Forces that Discipline Managers
- Incentive Contracts
- External Incentives
- Reputation
- Takeovers
- The Manager-Worker Principal-Agent Problem
- A.Solutions to the Manager-Worker Principal-Agent Problem
- Profit Sharing
- Revenue Sharing
- Piece Rates
- Time Clocks and Spot Checks
- Answering the Headline
- Summary
- Key Terms and Concepts
- Conceptual and Computational Questions
- Problems and Applications
- Selected Readings
- Appendix: An Indifference Curve Approach to Managerial Incentives
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