Economics

1. Contracting with imperfect information

Consider a manufacturing firm which needs to seek some outside legal help from a law firm. Assume further that the true marginal benefit of this help is given by MB=$400- 2L, where L equals hours per week of legal services. At the same time assume that the marginal cost to the law firm for providing these legal services is constant and equal to $200 per hour. In this context, with the aid of some diagrams, discuss how different assumptions about how well the manufacturing firm understands the marginal benefit of the legal work, and how different assumptions about the relevant market structure, information availability and agency cost will yield different conclusions about the amount of legal services actually provided and also about how the law firm will charge for these services.

2. Architecture of Markets and Firms

Write a short essay on how and why the "architecture" of markets and the "architecture" of firms help decide how well markets and firms, respectively, deal with imperfect information and incentive problems. As part of your answer, with the aid of some examples, make sure that you discuss why, and in what sense, the information and incentive problems faced by a large hierarchical multi-department corporation are generally likely to be less tractable than the problems faced by markets for specific goods and services.

 

3. Different Organizational Architectures for Different Kinds of Firms

Write a short essay providing examples of situations where each of these structures is likely to be effective as well as situations where that same structure is likely to be ineffective in achieving the organizational goals of the firms in question.

 

** For Question 2 and 3. Note that this essay assignment will be reviewed for originality using Turnitin.

ORIGINALITY:

The assignment must be your own original work and it must be written specifically for this class. The assignment will be checked for originality using turnitin.com. Any citation omissions will affect your assignment grade, but significantly plagiarized assignments will receive a grade of zero, with no exceptions and with no do-overs.

CITATIONS & CITATION STYLE:

You must cite all your sources.

PROPER QUOTATIONS & QUOTATION MARKS:

You must use quotation marks, or else use indented blocks, to identify all quotations. It is OK to paraphrase and not use direct quotes only when your language is completely different from the original, but you must still give proper credit to your sources. It is not OK to just insert a few words of your own into another writer’s text and then appropriate it without using quotation marks.

but you must still give proper credit to your sources. It is not OK to just insert a few words of your own into another writer’s text and then appropriate it without using quotation marks.