ECON600 Managerial Economics- Duty And Setting Good Priorities

ECON600 Managerial Economics- Duty And Setting Good Priorities

Task

Discussion Board Questions: 

Please consider reviewing https://fee.org/articles/the-power-of-incentives/and https://www.investopedia.com/terms/t/transferprice.asp

Discussion Board Questions:

Part I: Describe an example you have experience with of the principal-agent problem (for example, you have a desire for your children to listen in school and do well, while for them, goofing off at school might be much more fun), and explain how incentives can be used to overcome the principal-agent problem (such as paying your children for good grades). Include in your explanation an analysis of the risks in using incentives.

My reply to the Discussion board question: 

I have experienced a principal agent problem in the recent times. I was not involved directly into the scenario but it was related to my family.  My brother has picked up the habit of video gaming and due to that reason, he has stopped going outside to play outdoor games. This has affected his health significantly. He has put on huge amount of weight. My father became worried about his health and was trying to find out solution for the problem. However, my father is to some extent responsible for this outcome. He gave my brother an incentive of scoring goods marks in exam last year. The condition was that if he gets good marks, my father would buy him a PlayStation. Eventually, he did well in exams and my father gifted him a PlayStation. The objective of my father was to motivate him towards studying by incentivizing him but it did not work well. Initially, it worked but in the long run, it is not a sustainable solution. A student should always study well and it is his responsibility to get good marks. Responsibility do not come with the sense of self-interest but with sense of duty and setting good priorities. However, incentive only motivates one with the sense of gaining something (Lee 1998). Thus, there is a risk that if incentive is achieved the activity would stop.

Assignment:

Answer the question in green with 150 words.  No format needed.  Thanks for that information about video games above. Is Electronic Arts maximizing shareholder wealth?
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