Gains from Trade Flashcards
1
Q
List 3 things that prices do
A
Give signals, incentives and information
2
Q
What are internal markets?
A
They are markets within a company that buy and sell scarce resources
3
Q
Who do internal markets help?
A
Companies, non-profits and government agencies allocate scarce resources to better use
4
Q
Why do companies use internal markets? (concept)
A
Knowledge problem - occurs when the knowledge needed to make a good decision is not available to the decision market
5
Q
How do internal markets solve the knowledge problem?
A
They so not rely on a centralised decision maker knowing what is best and allocating scarce resources. Internal markets allocate scarce resources
6
Q
How can managers harness market forces? 3 step process
A
Internal markets, knowledge problem & prediction markets
