Week 7 decisions and asymmetric information chapter

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Week 7: Decisions and Asymmetric Information
Chapter 17: Making Decisions With Uncertainty Chapter 18: Auctions Chapter 19: The Problem of Adverse Selection Chapter 20: The Problem of Moral Hazard Making Decisions With Uncertainty After watching the video below, click the tabs above to view more learning resources for the week. Learning Objectives Identify the three benefits of modeling uncertainty Use a decision tree to model uncertainty Making Decisions With Uncertainty How do you make decisions when you face uncertain events? Examine how to calculate expected benefits and costs and model uncertainty using a decision tree. Bidding Decisions After listening to the podcast below, click the tabs above to view more learning resources for the week. Learning Objectives List and describe the main attributes of each auction type and the inherent trade-offs of each Bidding Decisions In many industries, managers must submit bids to win contracts. What are the key features of bidding and the different types of auctions? What are the inherent trade-offs of each type? Transcript 1. What are the four types of auctions? 2. In an oral or English auction, who does the item go to? 3. What is another term for a second-price auction? 4. How is the item awarded in a sealed-bid auction?
5. What does a common-value auction suffer from? Adverse Selection After watching the video below, click the tabs above to view more learning resources for the week. Learning Objectives Explain the consequences of adverse selection Provide examples of adverse selection and how to solve it Adverse Selection When one party has more information than another, the likelihood of consummating high- risk business transactions increases. How do you anticipate this and protect yourself? Moral Hazard After watching the video below, click the Next button to view this week's discussion board. Learning Objectives Describe the moral hazard problem Distinguish adverse selection from moral hazard Moral Hazard Moral hazard refers to post-transaction incentives to engage in riskier behavior. You will identify how to anticipate moral hazard and explore solutions such as monitoring and changing incentives. Week 7 Discussion Describe either an adverse selection or moral hazard problem a company is facing. What is the source of the asymmetric information? Who is the less-informed party? Are there any wealth-creating transactions not consummated as a result of the asymmetric information? If so, could you consummate them? What advice/recommendations would you give the company? Post your answer to the discussion board. Response Parameters
The discussion board will be set in Canvas to require students to contribute their own response to the prompt prior to reading what classmates have posted. Each student will submit an initial response posting to reflect on all aspects of the prompt. Conclusions must be defended with evidence in appropriate APA format, which means both in-text and end- of-text citations should be included.

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