Does college attended help resolve adverse selection in the labor market?

If so, Deloitte may be in for a rude awakening: http://qz.com/513028/deloitte-no-longer-wants-to-know-which-university-its-job-applicants-attended/

Here is a related article: http://www.theatlantic.com/business/archive/2015/10/reverence-bachelors-degree/408346/.

Asymmetric information

When 2 is better than 1

This article reports that Alcoa is splitting into two companies.

1. Would a breakup  be more or less likely when economies of scope are significant? 
2. Would a breakup be more or less likely when both companies serve the same customers?
3. Would a breakup be more or less likely when both companies have similar strategies?

Organizational structure

A useful paper in a economics journal?

This article reports that checklists + monitoring their use results in better performance of employees but checklists without monitoring does not. The results indicate that helping employees to remember what to do and increasing what supervisors learn about what employees are doing are the drivers that increase performance.

Here are two takeaways.

1. Tell people you supervise clearly what you want them to do, if possible.
2. Monitor their behavior to learn what they do.

Extrapolating the takeaways suggests that

1. Supervisors should think hard about exactly what they want employees to do.
2. Supervisors should communicate clearly to employees what they want the employees to do and coach them to do these things,
3. Supervisors should monitor what the employees do.
4. Supervisors should communicate to employees what the employees are doing well and what they need to do to improve.
5. .The reward structure should reward employees for what they do well and should not reward them for what they do poorly.
6. It the supervisor cannot communicate clearly to employees what they want employees to do, they better be able to communicate clearly what they want the employees to accomplish. If you can't identify good behavior, you better be able to identify good outcomes.

Aligning interests @ Chipotle

Here is a review and compensation scheme that appears to work well: http://qz.com/493971/inside-chipotles-extremely-intense-39-point-checklist-for-good-management/

Why Shell and not Eni?

Shell just announced that it is ceasing its exploration for oil and gas in offshore Alaska. However, Eni plans to "bring online its 100,000 barrels a day Goliat project in the Barents Sea, that field was discovered more than a decade ago and had billions of dollars spent on bringing it to production before oil prices plunged."

Is Eni committing a Sunk Cost Fallacy?

Lock in

iPhone6s: Apple's Best Trap Yet
by: Geoffrey A. Fowler
Sep 23, 2015
Click here to view the full article on WSJ.com

TOPICS: Microeconomics

SUMMARY: The newest iPhone makes it even harder for users to ever switch to another phone-but Geoffrey A. Fowler wonders: Is that so wrong?

CLASSROOM APPLICATION: Students can examine issues of lock-in and switching costs among products, related especially to social networks. "Very few Apple apps and services are available for other kinds of phones. To switch would be like packing up and moving to a new city. That's easy enough if you're alone, but the iPhone is as much a social network as it is a phone. To bring along everyone you care about, and every gadget you own, is more effort than most people can take on."

QUESTIONS: 
1. (Introductory) What would be the effect on the prices of Apple products of the company building consumer switching costs? What would be the effect on future sales?

2. (Advanced) Why is it important to Apple to build network externalities associated with the company's products? That is, why is it important to make texting seamless among iPhone users?

3. (Advanced) Why is increasing the cost of switching from Apple products an important issue to Apple? Does Apple design its software and hardware to increase this cost?

Reviewed By: James Dearden, Lehigh University

Is big better?

Health-Care Providers, Insurers Supersize 
by: Anna Wilde Mathews
Sep 22, 2015
Click here to view the full article on WSJ.com

TOPICS: Health Economics, Mergers

SUMMARY: Five years after the Affordable Care Act helped set off a health-care merger frenzy, the pace of consolidation is accelerating, transforming the medical marketplace into a land of giants.

CLASSROOM APPLICATION: Instructors can present the factors that are causing horizontal and vertical mergers in hospital systems. They can also introduce increased profit of the systems as the goal of mergers, and present that economies of scale and scope or increased market power lead to the increased profits.

QUESTIONS: 
1. (Introductory) What factors are causing mergers in health-care systems? What is "horizontal integration"? What is "vertical integration"? Why do these mergers involve both horizontal and vertical integration?

2. (Advanced) What are "economies of scale" and "economies of scope"? Do economies of scale and scope exist in the health-care industry?

3. (Advanced) Do mergers in health-care systems increase the market power of the systems?

4. (Advanced) Moody's Investors Service found that the median operating margin for the 50 largest nonprofit hospital systems it monitors was 3.4% last year, but for the 50 smallest it was just 1.5%. Does this fact indicate economies of scale and scope in health-care systems? Does it indicate market power?

Reviewed By: James Dearden, Lehigh University

Organizational structure