Introduction

1. Introduction

2. Objectives • Learn to think • Learn to apply theory to real problems • They do not only lack a “solution”—there is not even a “question”

3. Example: CTBP Case study on the water scarcity suffered in CAT years ago • Possible questions • Why? Which policies were implemented? Etc. • How did 4th-yr students analyze it? • How would you analyze it? • As an economist? (What is your comparative advantage? Journalism?) • After the readings of topic #1?

4. Socratic Method • (1) Guided reading, writing & analyzing  (2) Active class discussions • Difficulties • Reading, not merely recording class notes • Cases, projects • Speaking in theory classes • Stress!? • Overall: average in both, the effort required and the grades obtained

5. Materials • Dossier of required readings  OCE • Theory  Course Website • Rules and teaching material (readings, PPTs, additional info., articles from the press, etc.): • http://www.arrunada.org/Teaching.aspx?lang=ENG&Id=4 • “Topics and teaching materials” • PASSWORD: “lluria”. • Seminars  “Aula Global”

6. Grades • 60% Theory: • Multiple-choice exam (sample questions below) • Class participation—guided? • 30% Seminars • 4 problem sets • 1 team presentation • 10% Individual essay • applying course’s theories to a current reality of your choice

7. Class rules • Punctuality: no entry after classes start • Contact by email only for truly exceptional and urgent problems  • Read the course and seminar rules • More active student delegates • Questions on seminars to seminar teachers • No phones, computers, tablets, etc. in class

8. Next steps • This week: students create teams of 3-4 • Monday 13: problem set posted • Monday 20: first problem set handed in tp be discussed in that week’s seminars

9. Topics • I. Individual behavior • Topic 1. New cognitive perspectives • Topic 2. Business implications of Evolutionary Psychology • II. Economic organization • Topic 3. Incentive management • Topic 4. Delegation and divisionalization • III. Institutional environment • Topic 5. Markets and politics • Topic 6. Institutional support of private contracting • Topic 7. The role of business firms in society

10. Exam Medium difficulty About 35 multiple-choice questions. About 2 hours, so a little more than 3 minutes per question Marks are taken off for mistakes: for example, with 40 questions and 4 possible answers for each question: correct, 2.5 points incorrect, -0.75 points. So, if a random answer is given, 0.25 Questions of varying difficulty. Sample questions below are harder than average Also varied content, based on concepts, reading and case studies

11. Example of exam question (1) Which of the following best describes the relationship between institutions broadly defined and the various types of contractual enforcement? Institutions promote first and third party enforcement, and seek to limit second party enforcement Institutions promote third party enforcement, and seek to limit first and second party enforcement Institutions promote all three types of enforcement None of the above

12. Example of exam question (2) In the experiments discussed by Fehr and Falk, incentives for the agent could come from four sources: (1) the desire to improve the principal's payoff by exerting more effort; (2) the desire to avoid a fine; (3) the desire to earn a bonus; and (4) the desire to avoid being punished by, or to seek out reward from, the principal after the latter observed effort. Which combination of these produced the highest effort levels? (1) alone (1) and (2) (1) and (3) (1) and (4)

13. Example of exam question (3) With which of the following perspectives on mandatory contracting rules is Coase most in agreement? They always limit the ability of two parties to reach efficient outcomes In a world with no transaction costs, the inefficiencies they create must be weighed against the inefficiencies they avoid in order to judge whether their use is appropriate The amount of mandatory rules in most societies probably goes beyond what is desirable In a world with transaction costs, they are necessary for allowing two parties to reach efficient outcomes

14. Example of exam question (4)Note: Not covered now in OEM/EIM courses Based on experiment X, should I offer better service to a male or a female customer? The experimental results show that women are less prepared to accept unbalanced offers. So I should offer more to the woman. The experimental results show that women are more prepared to accept unbalanced offers, so I should offer less to the woman. I should pay no attention to the experimental results because experienced customers are never representative of the people used in experiments. There is not enough information to decide.