PAM 200 10.15 - • Assume o A group of Q identical team...

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10/15/07 PAM 200 Theory of the Mine Assume: o a fixed amount of a commodity (oil, good, etc.) o Zero costs of production o Zero storage costs The question is when to sell it o If the objective is to maximize present value of profits (ie maximize profits) (P1Q1)/(1+i)^1 + (P2Q2)/(1+i)^2 + (P3Q3)/(1+i)^3 If Pn/(1+i)^n > Pm/(1+i)^m then we would not sell in year M but might sell in year N Moore’s law, processing power of computers doubles every 18 months Team Production
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Unformatted text preview: • Assume: o A group of Q identical team members o They agree to product and share their output equally (ex. communism, sales teams, group projects, families, shareholders, etc.) Principle – Agent Problems • An owner decides how much profit versus amenities • How does the new owner induce the CEO to increase profits? o Production bonuses o Equity (stock options) o Reduce short term behavior o Induce overly risky behavior...
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