Strategy and Organization

by
ISBN-13 9781784471842
464 Flashcards & Notes
5 Students

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Samenvatting - Strategy and Organization

  • 1 Behavioural Theory of the Firm

  • What is different about the bahavioural theory of the firm in relation to microeconomics? 
    Microeconomics assume that firms only want to maximize their profit. In bahaviour theory of the firm, it is assumed that a firm is a coalition of groups of participants, each with their own objectives. 
  • Under what circumstances will an individual continue participating? 
    When the inducement they receive is greater than the contributions. 
  • Under what circumstances will the organization give inducements? 
    When the contributions are sufficient enough to keep the organization going. 
  • What are participants in the firm? (6)
    1. Employees
    2. Investors
    3. Suppliers
    4. Distributors 
    5. Creditors
    6. Consumers
  • What are inducements? 
    This includes monetary payments, but also non-monetary payments. 
  • Name 2 non-monetary inducements? 
    1. Self-achievement
    2. Job satisfaction 
  • What are contributions made by employees? (4)
    1. Labour hours 
    2. Ideas for improvements
    3. Relationships with their colleagues 
    4. Intelligence
  • What is assumed in microeconomics when it comes to a higher pay for the same job somewhere else? 
    This person would take the higher paid job. 
  • What is an aspiration level? 
    The employee will be content and not start looking for another job so long as the pay received is greater or equal to that aspiration level. 
  • What problem can arise in an organization taking into account the bavioural theory of the firm? 
    Participants have their own goals, which can cause conflicts. 
  • On what does the bargaining power depend of each potential participant? 
    It depends on how unique the contribution is that he can offer to the coalition. 
  • What is organizational slack? 
    The difference between total resources and the total payments necessary to preserve the coalition. 
  • What is the biggest difference when it comes to information between microeconomics and behavioural theory of the firm? 
    Microeconomics assumes that information is symmetrical and BTOTF assumes that not everyone has the same information. 
  • What are expectations? 
    The result of the drawing inference of participants from the available information. 
  • What is satisficing? 
    Searching for a solution that meets aspiration levels and is therefore acceptable. 
  • Name 3 reasons why in BTOTF firms do not maximize behaviour but rather satisfice? 
    1. Decision alternatives come one at a time. 
    2. Bounded rationality (human decision makers are not able to make all the calculations necessary to review all the alternatives) 
    3. More than 1 objective (individual objectives instead of one common objective)
  • Judgements and decisions - made in uncertainty - are subject to biases and are taken with heuristics, name 6? 
    1. Availability 
    2. Anchoring
    3. Representativeness
    4. Loss aversion
    5. Endowment effect
    6. Reciprocity and fairness
  • What is availability? 
    People base their prediction on an outcome of the vividness and emotional impact of recent information rather than actual probabilty. 
  • What is anchoring? 
    The tendency when people rely too heavily on one piece of information when making decisions and do not take other pieces of information into account. 
  • What is representativeness? 
    People base their prediction on a class of cases to which an individual case belongs, an not on an individual case itself. 
  • What is loss aversion? 
    There is a chance for a gain and a chance for a loss, but most people do not weight their chances equally. 
  • What is the endowment effect? 
    The tendency to value goods that we already hold to consume or otherwise enjoy higher than our willingness to pay for these goods before owning them. 
  • What is reciprocity and fairness? 
    Referred to the ultimatum game, which shows that most people apply social norms like reciprocity and fairness to exchange situations. In the game people tend to offer more money than the homo economicus model would predict, whereas people reject offers that are below their threshold of fairness. 
  • What is satisficing? 
    Searching for a solution that meets aspiration levels and is therefore acceptable. 
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