Friday , November 22 2019
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Managerial Econ

Managerial Econ is hosted by a group of economists who have written a managerial economics book together called Managerial Economics. This blog add an economic analysis to quirky topical news like why uber drivers are more efficient than taxi drivers.

Which organizational forms can best adapt to change?

One of the themes in this blog is that it is not necessarily the strongest firms that survive, but the most adaptable.  Kodak once dominated the film industry but now it is bankrupt.  How did this happen? Part of the fault lies with Kodak's centralized structure which was slow to react to the expiration of its patents, and the advent of digital photography.  Colby Chandler, former CEO of Kodak, admitted as much at the 1984 annual meeting: Like many companies, we are not used to working in...

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Incentives matter: physicians perform fewer surgeries on smokers

The move towards fixed fees, and away from fee-for-service, has given physicians an incentive to get their patients as healthy as possible before surgery, so that there are fewer complications.  Under a fixed fee system, e.g., $20,000 for a joint replacement, the surgeon makes less money if there are complications. “A year from now, I’ll probably be at a point where I would require all my patients to stop smoking,” Spector said. “Currently, I evaluate it on a case-by-case basis. Over time,...

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A novel way to screen using the felony box

A student told me how his company used the felony box (previous posts) to screen out bad applicants Being a felon did not rule you out from being hired to work for my company.  Instead, we used the box to see if the job applicant was truthful about their felony past.  We did not hire those who (i) had a felony record and didn’t disclose it; or (ii) lied when filling out the explanation of the charges.   However, we did hire those who disclosed truthfully (except for certain crimes), and...

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Holiday book recommendations (add your own in the comments)

This year's book recommendations are below, in the order I would recommend them.  Click on the links for my blog posts that reference the book. FactfulnessShoe DogAn Economist Walks into a BrothelSapiensDataclysmRising Strong (squishy, but good)Last year's recommendations are copied below--the first two are highly recommended.  Friday, November 30, 2018 Book recommendations (add your own in the comments) Everybody LiesRandomistasAlgorithms to Live ByStreaming, Stealing,...

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Using credit history to price car insurance

In 2007, the FTC's Bureau of Economics just relased their FACTA study, which concludes that: Credit scores effectively predict ... the total cost of [auto insurance] claims. Credit scores permit insurers to evaluate risk with greater accuracy, which may make them more willing to offer insurance to higher-risk consumers ...[note: this is why you can call up GEICO, let them look at your credit report, and get an auto insurance quote over the phone]. ..as a group, African-Americans and...

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Time to Experiment with Price Transparency in Health care

For ten years, Vanderbilt students have heard about two airport gas stations who refuse to post prices.  When travelers stop to fill up, they see a price on the pump that is $2/gallon higher than in the rest of Orlando.  Because few travelers will risk missing a flight to shop for a better deal, there is no pressure on the stations to reduce their outrageous prices. Our students are amused by the story until they try to complete their first assignment, “find the price for any health care...

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Sapiens, a brief history of humankind (2015)

The scope of the book Sapiens is extraordinary.  From the birth of our species, about 150,000 years ago until about 70,000 years ago, we were just another unremarkable "Great Ape."  Then about 70,000 years ago, we went through what Harari calls the "Cognitive Revolution," and we began to ...behave in far more ingenious ways than before, ... and we spread rapidly across the planet. About 11,000 years ago we enter on the agricultural revolution, converting in increasing numbers from foraging...

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Is this collusion?

We report, you decide: If you are looking for an interesting case to discuss with your classes, I recommend to you the Commission’s complaint against Valassis.  The product at issue in the case was free-standing inserts – the booklets of coupons that come in Sunday newspapers. Historically, two companies each had about half the market – Valassis and News America Marketing, a subsidiary of NewsCorp. According to the complaint, in June 2001, Valassis raised its prices by 5%. When News America...

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Does a sense of fairness make us better bargainers?

Most ultimatum games, in which one player makes a take-it-or-leave-it offer to another, result 60-40 splits.  This occurs because the player making the offer knows that their offers will be rejected if seen as too "unfair." Some hypothesize that this notion of fairness makes us better bargainers so there might be some evolutionary basis for passing on a sense of fairness.See how monkeys behave when they get an unfair payoff.[embedded content]

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