Economies of scale in the on-demand economy

http://www.bloomberg.com/view/articles/2016-06-29/uber-isn-t-going-to-conquer-the-world

Does what Kalanick say about Uber apply to Facebook? Airbnb? Microsoft Windows? Google Chrome? Verizon cell phone service? A brand of cell phone?

What determines the drugs your doctor prescribes for you?

Even Cheap Meals Influence Doctors' Drug Prescriptions, Study Suggests
by: Peter Loftus
Jun 21, 2016
Click here to view the full article on WSJ.com

TOPICS: Moral Hazard, Statistics

SUMMARY: Doctors who received a single free meal from a drug company were more likely to prescribe the drug the company was promoting than doctors who received no such meals, according to a study.

CLASSROOM APPLICATION: Students can critically evaluate the study examining the relationship between industry-sponsored meals and physician prescriptions. In particular, instructors can stress the difference between a correlations between meals and prescriptions and the causal effect of meals on prescriptions. Students can also discuss whether

QUESTIONS: 
1. (Introductory) The study reports, "Receipt of industry-sponsored meals was associated with an increased rate of prescribing the brand-name medication that was being promoted. The findings represent an association, not a cause-and-effect relationship." Does this statistical association between meals and prescription decisions imply that the meals influence doctors' drug prescriptions?

2. (Advanced) Is it possible that pharmaceutical reps promote (i.e., detail) drugs that are most effective? If so, could the detailing improve economic efficiency by its promotion of effective drugs?

3. (Advanced) What types of studies should be done to determine (1) whether pharmaceutical detailing has a causal effect on the prescriptions physicians write, and (2) whether detailing improves economic efficiency by providing information about pharmaceuticals?

Reviewed By: James Dearden, Lehigh University

How changes in wages and technology affect employment decisions

At Western Firms Like Adidas, Rise of the Machines Is Fueled by Higher Asian WagesAt Western Firms Like Adidas, Rise of the Machines Is Fueled by Higher Asian Wages
by: Kathy Chu and Ellen Emmerentze Jervell
Jun 10, 2016
Click here to view the full article on WSJ.com

TOPICS: International Trade, Manufacturing

SUMMARY: Global companies, such as Adidas, are doing more manufacturing closer to home thanks to advances in automation and increasing pay demands from workers in the developing world.

CLASSROOM APPLICATION: Students can evaluate the effect of innovation in manufacturing processes (i.e., increased automation), wages in the developing world, and the marketing benefits of manufacturing closer to home on the decision by companies to move manufacturing from the developing world to their home countries.

QUESTIONS: 
1. (Introductory) What is the effect of increased manufacturing in the developing world on wages in these countries?

2. (Advanced) Why is automation critical for companies to move manufacturing from the developing world to their developed countries?

3. (Advanced) What is the effect of increased wages on the mix of capital and labor used in production processes?

Reviewed By: James Dearden, Lehigh University

The Rational Actor Paradigm at work

https://www.bloomberg.com/view/articles/2016-05-17/here-s-why-the-tsa-is-so-terrible

"Career-minded TSA officials have no incentive to admit their methods are inefficient, while the security staff serving eight-hour shifts have little reason to speed things up" (Qz.com).

Would Porter Agree?

http://pndblog.typepad.com/pndblog/2016/04/5-reasons-why-strategic-doing-beats-strategic-planning.html

How would Porter respond to each of the two quotes below?

1. "Herb Kelleher, ... held that 'strategy is overrated, simply doing stuff is underrated. We have a strategic plan. It's called doing things.' Or, as management guru Tom Peters puts it, 'the thing that keeps a business ahead of the competition is excellence in execution.'"
2. "Strategic planning too often is an episodic exercise in tinkering rather than reimagining, one in which discussions tend to focus on 'How do we do it better?' — even as the organization's leadership should be asking, 'What should we be doing?' and 'Why?'

Discounts for Drugs

Here are some questions to consider as you read the article. Does asymmetric information afflict the markets for prescription drugs? If so, who knows the most, the drug company, the patient, the doctor, or the health insurance company? Does a "claw-back" clause that gives an after-the-fact discount to the health insurance company if the drug fails to deliver as much as expected be a possible solution to problems created by asymmetric information? Who can determine whether the drug fails to deliver as much as expected and how? Health Insurers Push to Tie Drug Prices to Outcomes by: Peter Loftus and Anna Wilde Mathews May 11, 2016 Click here to view the full article on WSJ.com TOPICS: Contracts, Pricing SUMMARY: Health insurer Cigna will get extra price discounts from drugmakers if new cholesterol medications don't help patients as much as expected, a significant step in a broader push to tie the cost of drugs to how well they work. CLASSROOM APPLICATION: The article raises interesting issues about contracts: the costs of enforcing contracts (tracking patient experiences) and the reliability of drug trials as indicators of general experience with drugs. QUESTIONS:  1. (Advanced) Are drug trials perfect predictors of drug efficacy in large populations? 2. (Introductory) Why are health insurers and pharmacy-benefit managers pushing to tie drug prices to efficacy? 3. (Advanced) How does the ownership of data about drug efficacy affect the negotiation of value-based contracts? Reviewed By: James Dearden, Lehigh University

Older posts on Organizational Architecture

http://edlikeseconomics.blogspot.com/search/label/Organizational%20Architecture