This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, The two “things” about economics  Incentives matter Nick Leeson and Barings Bank  Marginal not Average Continental Airlines  Fly-or-ground the plane  Selling the last seat  Buying a new plane The “two things” web-site was written by Glen Whitman and may be found at

This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, Alternative Models of Behavior  The Economist’s view of behavior  Only Money Matters  Happy is productive  Good Citizen Model  Product of the Environment

This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, Economic Choice  Unlimited wants, but limited time and resources  Marginal decision making  Opportunity costs are critical Implicit costs Explicit costs  Creativity and street smarts

The Hawthorne Experiments  Productivity Experiments at Western Electric’s Hawthorne plant Changed aspects of work environment Productivity increased for nearly all changes.  What happened? Happy is productive theory Economic study by Parsons This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

Sears Auto Center  June 1992: California filed charges against Sears Auto Center Average overcharge $230 Sears settled out of court for $20 million and its stock fell by 6%

Discussion Question  2-9: Employees in a plant in Minnesota are observed to be industrious and productive. Employees in a similar plant in Los Angeles are lazy and unproductive. Use alternative theories of human behavior to discuss what might be going on. This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

Discussion Question  2-13: A company recently increased pay of its employees by 20%. Employee productivity remained the same. The CEO was quoted as saying “It just goes to show that money doesn’t motivate people.” Provide a critical discussion of this statement. This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

Discussion Question  People give to charity. Is this consistent with the “economic view of behavior”? If charitable giving declines while per capita income and total employment stay the same, what might be going on? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

Discussion Question  Accounting problems at Enron ultimately led to the collapse of the large accounting firm Arthur Andersen. When the Enron scandal first became public, Andersen’s top management blamed one “rogue partner” in the Houston office who they claimed was less honest than other partners at the firm. They fired the partner and asked that others not hold the firm responsible for ‘one bad apple’. What model of economic behavior was used here? What would the economic view of behavior suggest here? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.

Discussion Question  2-10 Employees at a department store are observed engaging in the following behavior: (a) they hide items that are on sale from the customers, and (b) they exert little effort in designing merchandise displays. They are also uncooperative with one another. What do you think might be causing this behavior, and what might you do to improve the situation? This slideshow was written by Ken Chapman, but is substantially based on concepts from Managerial Economics and Organizational Architecture by Brickley Zimmerman & Smith, McGraw-Hill, 2004.