02_bea683_lecture 1 part 2 student
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On the Economic Way of Thinking
BEA683 Economics for Managers
The Case of the Day Care Centre, Haifa, Israel
What are the lessons, if any?
1. Norms
2.Pecuniary Incentive Undersold?
3. Lesson about Economics
• Incentive Mechanisms
• Selection Mechanisms
A framework for solving problems
1. Who made the poor decision?
2. Did they have the information they needed?
3. Did they have the appropriate incentives?
4. Is there any selection device that will put the right people in the right place?
Incentives Selection
Methodological Individualism
Assumptions
Incentives affect behaviour at the margin
runsin aninnings
99 100
Total SocialEsteem
currentscore
Individuals are self-interestedUndertake an additional unit of an activity when
Expected Marginal benefitto me
Expected Marginal cost to me
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Manager of a Blood Bank
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