Wrong Answer Notes MG301

Mock Michaelmas 2017
 * Nash Equil - best response to what players believe to be other's strats and those beliefs are true
 * Strategic compliments are for games
 * When in doubt: differentiate, find unknowns, make first diff equal to zero
 * Don't forget about commitment by the incumbent in entry games
 * Need to find x, the consumer in hotelling questions. It's gonna be complicated as fuck. Fucking hell jesus christ.

Mock Lent 2015 Specimen 2015 Summer 2016 Summer 2015
 * TLDR: you get the concept but sometimes fuck up the calculations or remember all the details, learn exact definition from answers!
 * pay to play, piece rate = profit margin for optimal pay for performance
 * measure performance, less risk-averse worker the better, more financially able the worker the better, more alignement with company and consumer the better - less adaptation costs, reduce multitasking by incentivising activities that benefit firm, know which activities benefit firm
 * Check - worker sees entire firm/team surplus. No check - worker sees only own surplus
 * Set optimal output as goal and if not achieved, nobody gets anything. Budget breaking. Where does money go? Who takes it? How can you ensure nash equilibrium?
 * RPE - others do better, I get less. JPE - others do better, I do better.
 * There are two types of knowledge: tacit and explicit.
 * There is a cost to learning knowledge
 * There usually always is a cost to dong things. People will try not to them if cost is not as good as payoff.
 * Problems occurring is based on probability. Assessing whether to learn knowledge to solve these problems is based on probability of problem occurring and personal cost of learning the knowledge.
 * Knowledge can be costly to transfer
 * Rent and quasi-rent. The terms are: asset, return, owner, transaction, bargaining. Not colloquial terms.
 * Larger the quasi-rent, the more bargaining there is.
 * own profit + 1/n(joint surplus - own profit - the other guy's profit)
 * Decision Making in Organisations
 * probabilities
 * when calculating expected profits calculate in terms of what the manager thinks the profit will be not the worker
 * when not investing, you multiply zero by the probability of the profit occurring
 * as long as E(profit)>0 (make subject p) to find the condition of investing for manager
 * Find the investing conditions for worker and manager. Compare the two using >, < signs and find the condition for which worker will be delegated decision making.
 * Structure of Organisation
 * when all costs are observable, use a sequential tree diagram to see what the manager will do
 * which one they will send is self explanatory, the lower cost one is sent
 * the cost they are willing to pay for information is: cost from no info - cost with full info, ie the amount they save from knowing everything because they usually have higher costs from lack of info
 * Entry and comp
 * subgame nash equilibrium - the profile of strategies that lead to a nash equilibrium in every subgame
 * think sequentially even though the question doesn't seem like it in a sequential entry game
 * Write down the topic of the question at the top to trigger memory.
 * The questions are not going to be too ridiculous, don't worry.
 * Pay for performance
 * marginal benefit = marginal cost when actions can't be monitored
 * Information symmetry, asymmetry, signalling
 * remember fractions
 * Innovation
 * Drastic innovation leads to monopoly profits
 * Remember market structure. Homogeneous goods is perfect competition and make zero profits.
 * In non drastic innovation the firm with the innovation will charge market price but use the lowered cost for calculating profits
 * Competitive Advantage
 * Differentiation softens price competition
 * Complimentary firms can have strong bargaining power to reduce value captured
 * 1/n-cost for no monitor R - cost for monitor
 * Ask yourself: What would X want to maximise? What is the minimum amount that would satisfy X? What are the conditions needed to satisfy the maximisation condition?
 * Strategic Compliments and Strategic Substitutes are different from Compliment goods and Substitute goods. Lambda > 0 is Former. Lambda < 0 Latter.
 * As Lambda ~> 1 products become homogenous substitutes. As Lambda ~> 0 products become differentiated. As Lambda < 0, products are compliments.
 * Sometimes questions don't ask general stuff, they ask stuff specific to the question situation
 * Forced contract(can see worker effort) = Profit - Wage. Wage = Cost of effort by worker. Diff by effort for optimal effort given by worker.
 * If unable to see worker effort = Profit - Wage - Bonus. Diff by bonus b for optimal bonus.