Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

BMAN30702

CORPORATE CONTRACTING AND MANAGERIAL BEHAVIOUR

18 May 2018

Answer EACH question in a SEPARATE booklet

SECTION B

Answer ONE question from this Section

11.   Present and analyse the different Pre- and Post-Contractual information problems. Provide an example for each problem. (35 marks)

12.   Explain the reasons behind the need for the separation of corporate control and ownership. Provide examples when building your arguments. (35 marks)

SECTION C

Answer ONE question from this Section

13.   Helen  works  for  Mancunian  plc.  Her  utility  function  is  given  by  the  following equation: U(e) = W – e2  where W is her wage and e is the unit of effort.  Her reservation utility is £10,000. Mancunian’s benefit from Helen’s work is B = 2000*e. Assuming that Helen’s output is costlessly observable, then:

a)     What should be Helen’s wage? Why? (5 marks)

b)     What is the firm’s profit? Explain. (5 marks)

c)     Illustrate both numerically and diagrammatically the optimal effort level. (15 marks)

d)     Mancunian plc offers Helen a deal, whereby Helen pays £1 million to the company and  keeps all her output.  Is this a good deal for Helen?  Is this beneficial to the company? Show clearly your workings. Use a diagram to illustrate your point. (10 marks) TOTAL 35 MARKS

14.   The following matrix shows the payoffs for an advertising game between Coca Cola and Pepsi Co. The firms can choose to advertise or not to advertise. Numbers in the matrix represent profits; the first number in each cell is the payoff (in millions) to Coca Cola.

Pepsi Co.

a)     Explain why this would be described as a Prisoner's Dilemma game. (5 marks)

b)     Explain the probable outcome of this game. Is this a dominant strategy or a Nash equilibrium? (15 marks)

c)     Let’s now assume that Coca Cola is considering entering a new international market  but  knows  that  Pepsi  Co.  has  excess  production  capacity  in  that market. What impact does excess capacity have on determining the strategic focus of managers toward competitors? (15 marks)

TOTAL 35 MARKS