Chapter 8 ECON 365

Question 1

Why teams?

Answer 1

Production technology

Output sometimes hard to measure

Competition/ Sabotage

Question 2

What are three reasons why you should have teams?

Answer 2

Production technology

Output sometimes hard to measure

Competition/ Sabotage

Question 3

What is if a worker actually works he will not get the full benefit of his effort and there for the worker is under-invested

Answer 3

Free riding

Question 4

What can create valuable knowledge transfer?

Answer 4

Teams

Question 5

What are the two conditions must teams have to create valuable knowledge transfer?

Answer 5

1. Members have idiosyncratic (private) information

2. Idiosyncratic information possessed by one member is valuable to others.

Question 6

Teams can lead to what?

Answer 6

Specialization

Question 7

Specialization can mead to what?

Answer 7

Productivity gains

Question 8

What size team has communication problems, bureaucracy, confrontation, wasted time, more free rider problems

Answer 8

Large Teams

Question 9

What size team has not much to gain from information transfer, peer monitoring more effective

Answer 9

Small teams

Question 10

What are the five things that are incentives in teams?

Answer 10

Team bonus
Profit sharing
Stocks and options
Implicit rewards
norms

Question 11

What are three things must you have to have bonus for finished project?

Answer 11

Small groups
well-defined project/outputs
short duration, so that team remains intact

Question 12

The following is advantage what?

• Reward based on company profits, typically split in proportion to worker’s base salary
• can be motivating
• Shirking by worker, hurts shareholders
• Easier for workers to feel bad hurting someone they know

Answer 12

Profit Sharing

Question 13

The following is disadvantages to what?

Team = Whole firm
-workers have their human capital already tied up in one firm, they should diversify their financial capital to reduce risk

Implies risk sharing (not optimal)

• workers are more risk averse than shareholder
• They demand a bigger compensation to accept risk

Answer 13

Profit sharing

Question 14

The following is the effects of what:

Usually for high-level managers

• Cooperation is very important
• Impact on firm is big
• Makes them care about own and other people’s output

Answer 14

Stocks and options

Question 15

The following is the implicit implicit incentives to what?

• Studies suggest US firms DO use implicit incentives for whole work force.
• Don’t make pay explicitly a function of team performance, but if profits rise, give bigger pay raise
• More expensive because of wage hikes usually go to all workers, not just senior management

Answer 15

Stocks and options

Question 16

What are two ways to structure teams to maximize profit?

Answer 16

May want to rotate workers among tasks

Give managers bonus if their workers later promoted to management and so well.

Question 17

The following are problems for the following?

• Multiple teams
• Put workers who need to cooperate on the same team
• Encourage cooperation among related teams by per-specifying that they must cooperate in order to earn full bonus

Answer 17

Teams

Question 18

What are two methods of picking a team?

Answer 18

Alternating draws and Bidding for members

Question 19

What is the following in information technology and decision making?

• facilitates product complexity, time-based competition
• Better collection and use of specific knowledge in real-time
• Lower-level employees have more info, better analysis tools
• facilitates ad hoc communication and groups

Answer 19

Decentralizing

Question 20

What is a new era of production has begun, brought about by the combination of the computer and the self-regulation machine, socialists in India in the early 80’s protested computerization of banks

Answer 20

A dismal view

Question 21

What is a new era of production has begun, brought about by the combination of the computer and the self-regulation machine, socialists in India in the early 80’s protested computerization of banks

Answer 21

A dismal view

Question 22

What of the following are disadvantages?

Computer often replace human

Computer often make jobs less meaningful

end result: less empowered, less skilled workers

Answer 22

IT the job destroyer

Question 23

What are three positive view of IT within jobs?

Answer 23

Creates jobs or even industries

often empowers even low skilled workers

places even grater value on skilled workers

Question 24

What are three positive views of IT within firms

Answer 24

Speed up product cycle

facilitates customization and complexity

opens up new customers and products never before possible or even conceivable