A great majority of social and economic relationships are of the principle agent type. The principle-agent problem is a game-theoretic situation where; there is a player (the principal) and one more other players (the agents). This is the problem of how the principle can motivate the agent to act for the principles benefit rather than follow self interest. “The problem is how to devise incentives which lead to report truthfully to the principle on the facts they face and the actions they take
Premium Market failure Information asymmetry Principal-agent problem
The Edgeworth Box was developed by Francis Edgeworth‚ who later published his findings in his work‚ “Mathematical Psychics: an Essay on the Application of Mathematics to the Moral Sciences” in the late 1800’s (Fraley). Ultimately‚ the Edgeworth Box is a common and extremely useful tool in general equilibrium analysis‚ in which the box can be used to analyze the trading of goods and market efficiency (General Equilibrium I: Exchange). More specifically‚ the Edgeworth Box allows for the study of the
Premium Economics Macroeconomics Capitalism
is based on the principle of ownership and employment. By not complying with the duty of serving the owners’ interest (maximum profit)‚ a manager would allocate resources artificially and arbitrarily. This spending would be unjust and probably non-Pareto-optimal‚ because it is not democratically authorized. Assigning duties other than serving the owners to a non-democratically selected manager would result in abandoning parts of freedom and democratic achievements. Freeman: Management serving
Premium Corporation Property Profit maximization
other. There are two pure Nash equilibria: either both swerve right or both swerve left. Which side the drivers swerve to is irrelevant so long as they both swerve the same direction. Both outcomes (both swerving right‚ both swerving left) are pareto efficient. Why this game is called a cooperative game? The game is cooperative because a successful outcome depends on both players (i.e.‚ drivers). In short‚ outcomes depend on the action of both participants so there is no indifference between individual
Premium Economics Game theory Nash equilibrium
to have another loaf of bread? b) In the initial allocation‚ each individual has 15 kilograms of cheese and 15 loaves of bread. Draw the Edgeworth Box diagram for this economy and explain whether the initial allocation of cheese and bread is Pareto efficient. c) Draw the contract curve for this economy. Question 3 For each of the following situations‚ is the Coase Theorem applicable? Why or why not? a) A group of university students in a residence share a communal kitchen. Some of the users
Premium Welfare economics Externality Utility
dollar amount. 5. Conclusion 2pages Non-proportional reinsurance is becoming more and more popular today. The three major pricing techniques to calculate the adequate premium for non-proportional reinsurance are Burning Cost¡BExposure Rating and Pareto Model. These methods are
Premium Insurance Mathematics Actuarial science
organize the minds of their employees) to conduct some activities. Personal knowledge management: see below (Personal time management). Contents [hide] 1 Creating an effective environment 2 Setting priorities and goals 2.1 ABC analysis 2.2 Pareto analysis 2.3 The Eisenhower Method 2.4
Premium Time management Management
CHAPTER 11 SIX SIGMA AND PROCESS IMPROVEMENT TRUE/FALSE QUESTIONS 1. In Six Sigma‚ a problem is defined as a deviation between what should be happening and what actually is happening that is important enough to need correcting. Answer: T AACSB: Analytic Skills 2. Half the tolerance is equal to the distance from the target to the upper specification limit. Answer: T AACSB: Analytic Skills 3. A change in the quality level from 3-sigma to 4-sigma represents
Premium Education Strategic management Employment
marginal social costs are below marginal social costs intersect marginal social costs 3.Economists generally call the effect of an agreement on others that is not taken into account by the parties making the agreement an externality welfare loss Pareto optimality excess burden 4.The size performance improvements sought by those pursuing horizontal mergers is economies of scale increased market share to coordinate activities more efficiently to spur growth to decrease competition 5.A company buys
Premium Supply and demand Externality Welfare economics
raising the minimum wage. First‚ as the minimum wage gets higher‚ more people are attracted to find a job‚ which poses a fierce competition. As a result‚ some low-income people who are supposed to get higher wages will lose their jobs because some efficient workers substitute them. Another reason why raising the minimum wage harm individuals is that the cost of a higher minimum wage will pass along to customers. In other words‚ we need to pay more to get the same goods and services‚ so some low-income
Premium Minimum wage Economics Supply and demand