04_Overheads - Objectives for today Define critical...

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ACC 333 (Farrell), Fall 2011, Class 04 1 ACC 333 (Far el ) Fal 2011, Class 04 1 Objectives for today Define critical concepts – Specific and general knowledge – Decision rights and alienable rights – Incentives – Bounded rationality Understand knowledge, rights, and incentives – In markets – In firms In-class activity ACC 333 (Far el ) Fal 2011, Class 04 2 Critical concepts – Knowledge What are the different types of knowledge, how are they defined, and what’s an example of each? ACC 333 (Far el ) Fal 2011, Class 04 3 Critical concepts – Bounded rationality What is bounded rationality ? – Every individual has limits (i.e., bounds) on his/her abilities How does knowledge relate to bounded rationality ? It’s impossible for a given individual to have all the knowledge necessary to take an action But, since individuals are REMMers, they deliberately seek new knowledge that enables them to expand their limited abilities
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ACC 333 (Farrell), Fall 2011, Class 04 2 ACC 333 (Far el ) Fal 2011, Class 04 4 Critical concepts – Rights What is a decision right ? – Right to decide on and take actions with a resource What are alienable rights ? – Right to sell a resource and capture the net proceeds Why the distinction? – Together these two rights define ownership – But these two rights can be separated • Those with alienable/ownership rights may delegate decision rights to those with more specific knowledge of how to best use a particular resource • But they don’t have to also pass along the rights to sell the resource ACC 333 (Far el ) Fal 2011, Class 04 5 Critical concepts – Rights (continued) When are decision rights and alienable rights
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This note was uploaded on 03/19/2012 for the course ACCACC 333 taught by Professor Anne during the Fall '11 term at Miami University.

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04_Overheads - Objectives for today Define critical...

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