Managerial economics week 7-8 discussion

Please answer each discussion with 250 -300 words, APA style. DO NOT FORGET THE CITATION!!!! Then write a response to 2 students for each discussion week with 100 words min, and directed at them in a positive manner not in 3rd person! The other students discussion posts can also be used as an example on how your initial post should be done. So by the end of this assignment your should have done 2 discussions and 4 responses!!! Read and watch all materials

 

Week 7 initial post

 

In oral or English Auctions, the highest bidder wins but only has to outbid the second highest bidder.  Does this concept make sense to you?  What bidding experiences have you participated in?

Watch Video

Tips for Bidding at Auction.

Duration: (4:40)
User:                                McGrath St George –                                                              Added:                                10/16/13

Part 2

Read the following articles and make observations/comments:

Place Your Bids here

Going Going Wrong here

Increasing Revenue from Online Auctions here

 

 

Student #1 Robert ( needs 100 word min response)

In oral or English Auctions, the highest bidder wins but only has to outbid the second highest bidder.  Does this concept make sense to you?  What bidding experiences have you participated in?

Yes, the highest bidder concept makes sense to me. Whoever is willing to pay the most for an auction item should win. I have participated in eBay auctions in the past with no luck. I assume that I would be considered a low value bidder, but I will usually select the buy now option if I feel that it is still a good deal.

Part 2

Read the following articles and make observations/comments:

Place Your Bids here

Going Going Wrong here

Increasing Revenue from Online Auctions here

I agree that you would get more bidders by having a low starting bid (McElroy, 2007). This would open the item to more bidders and drive the price up. I also can see where if you value something enough and have invested time into an auction, you might be more willing to go higher than what you normally would be comfortable with.

I always thought of auctions as being extremely competitive. I think of many movies and TV shows where they show a bid war between two wealthy bidders and the winner paying a ridiculous amount just to beat the other person. It makes sense that people would eventually collude to get a deal and return the favor on the next auction item, but that it will happen naturally without communication (Caley, 2010)  is very interesting.

From reading the last article, I have been looking at bidding wrong. It is best to have a strategy. By doing research of who is selling what and how many sellers there are, you can find the perfect time to bid (Caley, 2011) and hopefully win.

References

Caley, B. (2010).  Going, Going, Wrong. Retrieved from https://insight.kellogg.northwestern.edu/article/going_going_wrong

Caley, B. (2011). Increasing Revenue from Online Auctions. Retrieved from https://insight.kellogg.northwestern.edu/article/increasing_revenue_from_online_auctions

McElroy, M. (2007). Place Your Bids. Retrieved from https://insight.kellogg.northwestern.edu/article/place_your_bids

 

 

Student #2 Tatianna ( needs 100 word response )

The English auctions concept that the highest bidder wins but only has to outbid the second highest bidder is a very strange concept to me.  Even though this concept is the most common in practice, the rules seem lack structure from my perspective.  My understanding is that the bidders neither bid more than their value nor let an opponent win at a price they would be willing to beat. To be honest I don’t bid very much, I sometime bid kids toys on offer up nowadays.  I used to watch bid shows such as Bidding wars and storage wars because I find it interesting to watch their strategy, behavior and what was the outcome.

The first article discusses the power of commitment people demonstrate while placing a bid.  According to the researchers there are psychological factors that contribute to bidding when the starting price is lower that actually increase the amount of that engage and make a final commitment, resulting in a higher volume of bids. That makes a lot of sense to me, lower risk, lower cost, why not give it a try?

The second article describes what is a collusion in an auction, it was interesting to better understand how a collusion at an auction can involve bidders, sellers, and auctioneers in numerous ways. I think collusions can quickly distort prices and harm all parties.

The last article defines a way to increase revenue on online auctions.  I think it is crucial to have a strategy and understanding of the audience to be successful.  As I previously stated, whenever I sell items on Offer up I research the price of the item brand new on Amazon, then the same product on Offer up app before posting it.

References:

Ku, G., Galinsky, A. D., & Murnighan, J. K. (n.d.). Place Your Bids. Retrieved from https://insight.kellogg.northwestern.edu/article/place_your_bids

Li, J., & Plott, C. (n.d.). Going, Going, Wrong. Retrieved from https://insight.kellogg.northwestern.edu/article/going_going_wrong

Yao, S., & Mela, C. F. (n.d.). Increasing Revenue from Online Auctions. Retrieved from https://insight.kellogg.northwestern.edu/article/increasing_revenue_from_online_auctions

 

 

Week 8

Initial discussion

Description:

Moral hazard means that insured customers exercise less care because they have less incentive to do so. Do you agree with this concept?

Also, comment on the statement that we should anticipate moral hazard and protect ourselves against it.

 

Watch Video

What economists call a moral hazard | John Fishback | TEDxBrookings

Duration: (21:33)
User: TEDx Talks – Added: 4/3/14

 

 

Student # 1 Daniel response (needs 100 word min response )

In basic risk management actors have three options: accept the risk, mitigate the risk, or transfer it. Purchasing insurance is a form of transferring risk. However, in the case of medical insurance, only the financial risk is transferred. What I mean by this is that the impact of high risk behaviour on quality of life does not diminish simply by purchasing health insurance. For example, one of my hobbies is flying single-engine aircraft. My life insurance premiums reflect the greater risk associated with the activity. I have chosen to purchase a policy that includes coverage for loss of life in a plane crash.

This means that even if I pass in an airplane accident, my family will still receive my benefit. If, however, I don’t pass but suffer long-term physical disability – which is more likely- we won’t receive any benefit and, needless to say, no amount of money would be able to give me back the quality of life I had prior to the accident. Now, when I fly, I consider more carefully the weather conditions, take more precautions, and limit my risk because I am concerned about the burden life-long injury would pose on my family.

The answer is simple to me, we must be wary of moral hazards and the potential for people to circumvent good faith practices. We began this course with a discussion on morality of business. Although the conversation revolved around morality and economics, we were faced with considering the influence of immoral or amoral perspectives and behaviours. These two conversations are connected as moral hazards imply immoral behaviour to achieve a benefit that greater than what would result from moral behaviour. The issue is so pervasive in the health insurance world that the original literature on the subject dates back to the 1960’s and is still being researched today (Einave & Finkelstein, 2017). As a result, it is only prudent to be aware of, and protect ourselves from moral hazards.

Einave, L., Finkelstein, A. (2017). Moral Hazard in Health Insurance: What We Know and How We Know It. Retrieved from: https://economics.mit.edu/files/14545.

 

Student # 2 Tatiananeeds 100 word min response

  1. Moral hazard means that insured customers exercise less care because they have less incentive to do so. Do you agree with this concept?

I honestly don’t agree with the definition of moral hazard describe above because having insurance doesn’t drive me to care less about my health, car or any possessions. I do think it makes me feel protected if accident happens or in case of risk of losing it.

  1. Comment on the statement that we should anticipate moral hazard and protect ourselves against it.

On this week’s video moral hazard was described to be frequently used as an excuse and from the consequences of a potential risk or a problem which it sounds like it is an appeal to authority.  The term has been used with the wrong message in economics from certain authors that I don’t think it should be considered ethical.

I honestly believe that an individual should be responsible for their life choices and that moral hazard should be understanding that includes ethics, integrity and morality instead of rational economic behavior. I found it very interesting how a term can be evaluated and change the perspective of what individual qualifies if it is the best course of action financially.  I struggle to understand how choosing the best financial outcome to the situation in moral hazard as economics term is not considered a usual judgment of an individual behavior.  It’s just wrong from my perspective.

I think it is wrong to assigned the responsibility to the situation and avoid the consequences on any sort of transaction.  Ethics and integrity should always come before anything I do in my life.  There is quote that I try my best to live by that I would like to share.

“Live your life as though your every act were to become a universal law” (Immanuel Kant)