ecos3003_UoS_v1_2010 - ECOS3003 Hierarchies, Incentives and...

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ECOS3003 Hierarchies, Incentives and Firm Structure Semester 2, 2010 Unit of Study Outline Coordinator: Andrew Wait Phone: 93513060 Email: Office: 358 Merewether Building H04 Consultation Time: Wednesday 10-11am; Thursday 10-11am Classes: Time(s): Tuesday 9am-12pm Venue(s): Chemistry Lecture Theatre 4 1. Unit of study information 1.1. Faculty Handbook description This unit deals with the coordination and motivation problems faced by firms. More specifically this unit examines: whether firms use price or command mechanisms to allocate resources within firms; the problems associated with designing incentive contracts; the principles of efficient contract design and; the real world applications of those principles. The final section deals with the manner in which the coordination and motivation problems faced by firms determine their financial, vertical and horizontal structure. 1.2. Aims and context Hierarchies, Incentives and Firm Structure is an optional unit for the Bachelor of Economics degree (BEc) and for the Bachelor of Commerce degree. Firms are a critical component of our economic system, but they are often neglected when it comes to economics. More often than not, the operations within a firm are considered a ‘black box’. In this subject we examine what happens within a firm. We will look at incentives workers and managers, how information should be processed within an organisation and what determines the boundaries of a firm. The required prerequisite for the course is one of ECOS2001 or ECOS2901. While not a technical course, students are expected to be familiar with algebra, graphical analysis and basic differential calculus. 2. Learning outcomes, learning and teaching activities & assessment 2.1. Intended learning outcomes This course is concerned with the following broad topics: (i) the model of consumer behaviour and at the end of this unit of study you should have an understanding of important economic factors that help shape the structure of the firm. The way an organization allocates its decision-making rights, the way it rewards its employees and the measures it uses to assess performance are all inter-related. From the material covered in both lectures, in readings and in the weekly problem set, you should have a good understanding of the following concepts: free-riding; principal agent; incentive compatibility; individual rationality constraint; real and formal authority; prisoners’ dilemma; coordination game; and multi-task problems. You should be able to apply these concepts to real problems faced by organisations. At the end of this unit of study you should be able to analyse the effect of changes in technology, product market competition and globalization on these decisions about the internal structure of the firm. These skills should be able to be applied from the perspective of the firm, but also from the perspective of a policy maker (attempting to maximise social welfare). When presented with a particular organizational (or
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ecos3003_UoS_v1_2010 - ECOS3003 Hierarchies, Incentives and...

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