What happens to spending when the decider does not pay?

Taken from http://www.realclearhealth.com/articles/2017/03/27/the_root_cause_of_health_care_dysfunction_110514.html.

What is Domino's Strategy and Why is It Successful?

https://qz.com/938620/dominos-dpz-stock-has-outperformed-google-goog-facebook-fb-apple-aapl-and-amazon-amzn-this-decade/

IBM moves from telecommuting to co-locating

This article in qz.com discusses some of the costs and benefits of telecommuting and "co-locating". Co-locating = working together in the same office building. It raises several interesting questions in my mind.

1. Do the relative costs and benefits depend on the type of work?
2. How has the development of new forms of communication and interaction affected the relative costs and benefits?
3. Where is the equilibrium wage higher, in a telecommuting job or one that requires the employee to be in an office during work hours?

Let's predict

What would happen to GPAs if college funding increases when graduation and retention rates increase?

What would happen to the mix of majors offered if college funding increases when job placements and salaries of graduates increase?

What would happen to GAPs if college funding increases when job placements and salaries of graduates increase?

What would happen to the mix of majors offered if college funding increases when job placements and salaries of graduates increase?

States Challenge Public Universities to Prove They Are Worth Their Funding
by: Melissa Korn
Mar 13, 2017
Click here to view the full article on WSJ.com

TOPICS: Education, Public Funding

SUMMARY: States such as Kentucky, Wisconsin and Arkansas have adopted, or are considering, funding models for higher education that allocate money based on outcomes like student graduation and retention rates.

CLASSROOM APPLICATION: Students can discuss and evaluate whether states should tie their funding of public institutions to the institutions' educational outcomes.

QUESTIONS: 
1. (Introductory) Why are states shifting toward basing higher education funding on educational outcomes?

2. (Advanced) Just as salespeople are compensated by commission based on sales, should public university receive state funding based on educational outcomes such as job placements and salaries of their graduates?

3. (Advanced) If colleges and universities are funded according to educational outcomes, how could these institutions game the funding system? What type of funding system could encourage colleges and universities to push for appropriate educational outcomes without gaming the system?

Reviewed By: James Dearden, Lehigh University

The Bad News and the Really Bad News for Retailers Fighting Amazon.com

The Bad News and the Really Bad News for Retailers Fighting Amazon.com
by: Miriam Gottfried
Mar 06, 2017
Click here to view the full article on WSJ.com

TOPICS: Competition, Strategy

SUMMARY: Amazon.com's ability to sustain its retail growth rate will determine the fate of the rest of the retail industry.

CLASSROOM APPLICATION: Students can examine the effect of Amazon's ascendance on the strategies and profits of other retailers. The article also alludes to the tradeoff between price and sales, which is due negatively sloped demand curves.

QUESTIONS: 
1. (Advanced) "Defending their turf against Amazon already comes at a steep cost. Wal-Mart managed to return to minimal sales growth in fiscal 2016, but operating margins fell to 4.7% from 5% the previous year. Conversely, Target Corp.'s operating margin climbed to 7.2%, but its sales tumbled." Does this statement imply a tradeoff between price and sales? If so, what is the source of the tradeoff?

2. (Introductory) Describe Amazon's growth rate of revenues. Are sales increasing at an increasing rate? Will the company's sales always increase at this rate?

3. (Advanced) What is the effect of the willingness of Amazon's investors to tolerate low profit margins on retailers' distribution strategies?

Reviewed By: James Dearden, Lehigh University

Screening Applications to Law School

Which screen works better for law students, the GRE or the LSAT? Harvard says they are equally good ways to identify students suitable for Harvard Law.

Digital Monitoring of Employees

This Marketplace story describes some of the ways that employees can use devices to monitor digitally what the employees are doing: http://www.marketplace.org/2017/02/22/world/meet-workplace-sensors-are-watching-you.

1. How could an employer assess digitally the traits of job applicants to determine which ones to hire?
2. How could an employer monitor digitally what employers are doing or producing to determine which ones to reward monetarily or to promote?

What happens when the Net is Not Neutral?

Keywords. Consumers Are Going to Love the End of Net Neutrality : at First
by: Christopher Mims
Feb 13, 2017
Click here to view the full article on WSJ.com

TOPICS: Internet, Regulation

SUMMARY: The Trump administration looks likely to change a foundational principle of America's tech ecosystem. And consumers are going to love the government's possible first steps at dismantling net neutrality, writes Christopher Mims. "Advocates for 'net neutrality'-the principle that all data transmitted through the internet should be treated equally-argue it is needed for America to cultivate innovative web-focused startups. Critics say that alternatives to net neutrality could lead to innovation and competition in the country's communications infrastructure, where they are badly needed."

CLASSROOM APPLICATION: Students can learn about net neutrality and two policies : zero rating and paid prioritization : that violate net neutrality. They can also learn about the players that favor net neutrality and those that do not, and they can learn about the possible impact on consumers of dropping net neutrality.

QUESTIONS: 
1. (Advanced) What is 'zero rating'? Why do internet service providers practice zero rating? Why do some content providers oppose the practice? What are criticisms of zero rating?

2. (Advanced) What is 'paid prioritization'? How is paid prioritization similar to zero rating?

3. (Introductory) Why is the end of net neutrality a threat to Snapchat?

4. (Advanced) What are the possible impacts on consumers of dropping net neutrality?

Reviewed By: James Dearden, Lehigh University

Big Pharma uses Price Discrimination

Marathon Pharmaceuticals to Charge $89,000 for Muscular Dystrophy Drug After 70-Fold Increase
by: Joseph Walker
Feb 11, 2017
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Health Economics, Pricing

SUMMARY: Marathon Pharmaceuticals will charge $89,000 annually in the U.S. for a decades-old steroidal drug that was approved for U.S. sale for the first time on Thursday, a price that is as much as 70 times higher than the drug's price overseas. Related article: Marathon Pharmaceuticals will delay the U.S. launch of its muscular dystrophy drug amid mounting criticism of its $89,000-a-year price, including from two members of Congress who launched an investigation Monday.

CLASSROOM APPLICATION: Students can investigate the reasons for the marked difference between the U.S. and U.K. prices, examine the ethics of the price difference, and consider whether Americans subsidize the use of the drug in the U.K.

QUESTIONS: 
1. (Advanced) Research question. Why is the price of deflazacort 50 to 70 times greater in the U.S. than the U.K.?

2. (Advanced) Is it ethical for a pharmaceutical company to set a U.S. price for a drug that is 50 to 70 times greater than it sets for the drug in the U.K.? What criterion could be used judging the ethics of the pricing policy? (In the online interview of the reporter, comment on the reporter's last sentence.

3. (Introductory) Do Americans subsidize use of the drug in the U.K.?

Reviewed By: James Dearden, Lehigh University

The End of Employment?

Questions to consider.

1. Are wages lower for contract workers than employees? If wages are lower, why?
2. Are transactions costs of hiring, supervising and firing lower for contract workers than for employees? Why or why not?
3. Does employment of contract workers instead of employees increase the firm's flexibility? If so, why?

The End of Employees
by: Lauren Weber
Feb 02, 2017
Click here to view the full article on WSJ.com

TOPICS: Labor Economics

SUMMARY: Never before have big employers tried so hard to hand over chunks of their business to contractors. From Google to Wal-Mart, the strategy prunes costs for firms and job security for millions of workers.

CLASSROOM APPLICATION: Students can examine the rationales for the outsourcing of jobs. The reasons fall into two categories : increased flexibility and lower costs.

QUESTIONS: 
1. (Introductory) What are the reasons covered in the article's cases for companies choosing to outsource jobs?

2. (Advanced) According to the article, what is the effect of the outsourcing of jobs on the likelihood that workers are promoted from lower-level positions to higher-level ones, from the mailroom to the executive suite?

3. (Advanced) Why is it that no one knows how many American work as contractors?

Reviewed By: James Dearden, Lehigh University

Here is a summary: https://www.thefastlaneforum.com/community/threads/the-end-of-employees-wall-street-journal.72709/

See http://www.nakedcapitalism.com/2017/02/the-end-of-employees.html for a contrarian review.

See http://www.forbes.com/sites/lizryan/2015/08/13/is-this-the-end-of-employment/#52b332f332d6 to see advice for a contract worker.

This writer advocates that firms allow workers to work from home

https://qz.com/891537/if-you-dont-trust-your-employees-to-work-remotely-you-shouldnt-have-hired-them-in-the-first-place/

Here are two questions to consider:

1. What prerequisites exist for ROWE to be feasible?
2. Is ROWE always better than open-office butts-in-seats? If not, under what conditions is each more likely to be better?

What happens when profits are high and barriers to entry are not?

http://www.marketwatch.com/story/cvs-takes-on-mylans-epipen-with-much-cheaper-version-of-an-alternative-2017-01-12

Does Tim Cook's compensation scheme align his interests with the other owners' of Apple?

http://money.cnn.com/2017/01/06/technology/apple-tim-cook-pay-cut/index.html

How to give and to receive feedback

Feedback shouldn't be something to dread. When done right,feedback in the form of appreciation gives people a clear picture of where they’re adding value, helps them understand their strengths, and provides opportunity for improvement.

From qz.com.

Wal-Mart and Amazon compete to sell the Star Shower Motion

Star Shower Price War Shakes Up Retailers
by: Sarah Nassauer and Laura Stevens
Dec 14, 2016
Click here to view the full article on WSJ.com

TOPICS: Pricing

SUMMARY: The battle for sales of outdoor projector Star Shower Motion shows how frequent online price changes have challenged the retail industry. "The battle for Star Shower Motion sales shows how Amazon's frequent online price changes have challenged the retail industry, changing how shoppers compare prices, how traditional retailers price goods and how product manufacturers look to sell their wares. It also illustrates how Amazon is willing to give up profits on a popular item in the hope of capturing more sales from shoppers and maintaining a reputation for having the lowest prices, even if that doesn't apply to every single item."

CLASSROOM APPLICATION: The article offers three interesting points for students to examine. First, retailers sell product lines, and a retailer might lower the price of one product so as to increase the profits of another. Second, retailers compete. Therefore, one retailer, Amazon for example, lowers the price of product to increase sales of other products. However, competitors may not experience the same product complementarities. Hence, in matching Amazon's price, other retailers may be pricing suboptimally. Third, other retailers may be upset with a manufacturer for selling its product to Amazon. In turn, these other retailers may drop the product.

QUESTIONS: 
1. (Advanced) "Mr. Khubani says he worries the weekslong price war has trained some shoppers to expect to pay less for the Star Shower Motion, part of why he is rethinking his strategy for next year, hoping to keep profit margins higher." Why would a manufacturer choose not to sell its product on Amazon? Describe the tradeoff between sales and the wholesale price of the product.

2. (Introductory) Why would Wal-Mart choose to match Amazon's price for popular products, despite a small share of the retail market for the products?

3. (Advanced) "Keeping everybody happy while we are selling on Amazon has become a challenge," Mr. Khubani said. Why are manufacturers concerned about keeping resellers (i.e., retailers) of their products happy?

Reviewed By: James Dearden, Lehigh University

How incentives work in socialist countries

How NOT to motivate physicians: lessons from Cuba

Cuba penalizes physicians for "not meeting quotas" on infant mortality.  How do they respond?

• When pregnancies are deemed risky, doctors have to coerce women to undergo abortion in spite of their wishes. 
•  On top of this, forced sterilization in some cases are an actually documented policy tool. These restrictions do reduce mortality, but they feel like a heavy price for the people. 
•  ...doctors ... lie about the statistics. One thing that is done by the regime is to categorize “infant deaths” as “late fetal deaths” – its basically extending the definition in order to conceal a poorer performance.

What happens when you adjust the infant mortality statistics?

• ...Cuba moves from having an average infant mortality rate ... to having the worst average infant mortality in that dataset – above that of most European and North American countries.

Pricing and price discrimination in the automobile market

Car Dealers Take Steps to Help 'Underwater' Buyers Trade Up
by: Adrienne Roberts and Christina Rogers
Dec 02, 2016
Click here to view the full article on WSJ.com

TOPICS: Pricing

SUMMARY: Customers who owe more than their cars are worth are getting financing incentives including rebates, long loan terms-even cash.

CLASSROOM APPLICATION: Students can evaluate the causes of underwater auto loans, the incentives that auto manufacturers and dealers offer to consumers who are underwater on current loans, and the effect of lower gasoline prices on the types of automobiles that consumers are purchasing,

QUESTIONS: 
1. (Introductory) What are the causes of the increase in the number of car owners who are underwater on their auto loans?

2. (Advanced) What is the effect of a decrease in gasoline prices on the willingness of consumers to trade in the vehicles they purchased when gas prices were higher?

3. (Advanced) Why would car manufacturers and dealers set lower prices for customers who are underwater on their auto loans than for customers who are not?

Reviewed By: James Dearden, Lehigh University

Hoteling and locational choice

https://www.youtube.com/watch?v=jILgxeNBK_8

Incentives matter

http://www.bbc.com/news/blogs-news-from-elsewhere-38208914 reports that visits to nursing homes in China increase when the home pays people to visit.

Startups and organizational design

This article describes the need for a change in organizational design that startups face when they grow. Here is a money quote:

"the company needs more structure for communications and decision-making".

The article talks about the need for good information flows and clear decision rights.