We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Managerial Economics - Essay Example

Comments (0) Cite this document
Managerial Economics Table of Contents Table of Contents 2 Introduction 3 A Brief Study of Principal-Agent Theory (PAT) 4 Key Requirements That Should Possibly Meet By an Optimal Incentive System (OIS) 6 Application of PAT to the Financial Sector Concerning Bank CEOs 8 Conclusion 11 References 12 Introduction Incentive systems are generally regarded as the techniques of motivating employees to perform activities in accordance with the objectives of an organisation…
Download full paperFile format: .doc, available for editing
Polish This Essay94.8% of users find it useful
Managerial Economics
Read TextPreview

Extract of sample
"Managerial Economics"

Download file to see previous pages The major objectives of introducing incentive systems in an organisation are to provide better control over the management as well as to inspire employees to perform operations in a desired manner. Moreover, incentive systems also facilitate in better recruitment as well as management of workforce. Employees of an organisation are provided with various incentive schemes by the organisations that include monetary as well as non-monetary incentives (Magnusson & Nyrenius, 2011). In the financial or banking sector, it has been apparently observed that incentive or compensation system has acquired an important place for the development of these sectors. Moreover, in the financial sectors, employees are required to take extreme risks for acquiring a better compensation schemes. The salaries of employees in these financial sectors have been identified to be low and thus they are offered with more cash bonus facilities through incentive or compensation schemes. The major purpose of this compensation system is to motivate employees to take excessive risks in the form of asymmetric rewards as well as penalty system (Murphy, 2009). This discussion intends to analyse the principal-agent theory (PAT) in order to identify the issue of incentive system design in relation to financial sectors. Moreover, the key requirements that an optimal incentive system should possibly meet and the application of the aforementioned theory to the financial sector in order to come up with an efficient compensation contract for bank CEOs will also be portrayed in the discussion. A Brief Study of Principal-Agent Theory (PAT) The significant aspect of PAT principally determines the association between a principal and an agent. The interrelation that exists between principal as well as agent is featured with conflict of objective as well as through asymmetries of information. PAT usually considers the affiliation between principals as well as agents through varied viewpoints as well as interests. Principals are the individuals who are considered to possess certain formal authority as well as are committed to fulfil organisational targets. Moreover, principals are provided with efficient time resources as well as expertises in order to perform business operations in a proficient manner. Whereas, agents are the individuals who are considered to possess specific objectives as well as expertises for conducting business operations in accordance with determined goals of organisations (Smart, 2010). The PAT is mainly formulated in mathematical format that has been recognised to be quite complicated as well as composite. In PAT, when a principal is able to observe the extent of effort made by an agent to perform a work, then the principal is required to provide the agent with a forcing contract. In accordance with forcing contract, the principal is obliged to pay the agent a certain amount of money for performing activities on a specific extent of effort. In case, if the agent is unable to perform activities at an expected extent of effort, then he or she will not be paid. These are certain incentive policies that are based upon symmetrical information (Bolton & et.al., 2005). The PAT considers certain imperative factors that ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Managerial Economics Essay Example | Topics and Well Written Essays - 2000 words - 1”, n.d.)
Managerial Economics Essay Example | Topics and Well Written Essays - 2000 words - 1. Retrieved from https://studentshare.org/management/1466380-managerial-economics
(Managerial Economics Essay Example | Topics and Well Written Essays - 2000 Words - 1)
Managerial Economics Essay Example | Topics and Well Written Essays - 2000 Words - 1. https://studentshare.org/management/1466380-managerial-economics.
“Managerial Economics Essay Example | Topics and Well Written Essays - 2000 Words - 1”, n.d. https://studentshare.org/management/1466380-managerial-economics.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
Managerial economics
In the demand and supply framework a detailed explanation of the demand and supply is given with the notion of market equilibrium and also how disturbances in the market self adjusts and return back to its initial equilibrium state. In the production possibility frontier paradigm, its construction is given for two countries and how the countries with comparative advantage can benefit from trade is exhibited.
5 Pages(1250 words)Essay
Managerial Economics
Managerial Economics Essay NAME: AFFILIATION: UNIVERSITY: COURSE TITLE: DATE OF SUBMISSION: Managerial Economics Essay One of the best articles that have discussed the importance of International Trade in World Market has been published in New York Times magazine which has highlighted the importance of trade agreements in this globalization period (International Trade, 2012).
4 Pages(1000 words)Essay
Managerial Economics
In other words, oligopoly can be termed as ‘competition among the few’. Admittedly, oligopoly has a large number of specific characteristics which encourage the companies to exhibit collusive behaviour (Fershtman & Pakes 2000). The first important characteristic of oligopoly is interdependence.
4 Pages(1000 words)Essay
Managerial Economics

The author argues about the effects of real-world transaction costs and states that they are rarely low enough to consent to efficient bargaining and so this theorem is almost inappropriate in economic reality. The Coarse’s theory is viewed as an essential basis for the analyses of most modern economic cases including government regulations.

11 Pages(2750 words)Essay
Managerial Economics
Managerial economic further explore the behaviour of consumers and producers as well as their impact to the economy. In above connection, managerial economics takes into consideration not only micro economic concept but also some components of macro economics. This is because organizations do not operate in isolation but rather they interact with external factors.
7 Pages(1750 words)Essay
Managerial Economics
From this paper it is clear that now the value of the housing properties is determined by both the supply side and the demand side factors, which include the price at which the seller would like to go for the transaction with a prospective buyer and the actual price which the buyer would like to pay (Ngai and Tenreyro, 2009, p.7).
4 Pages(1000 words)Essay
Tools of Managerial Economics

As a result, the economic analysis and appropriate managerial solutions are found to be quite similar.

One of the most distinctive features of the New Economy is the importance of the scale and scope of economies. A prime focus now is on the concept and viability of ‘scalability’ - the degree to which the total scale and scope of the business can be increased without a corresponding increase in costs (Mankiw, 2006).   

4 Pages(1000 words)Essay
Managerial Economics
There are a few theories of profit, each of which defines the element from a diverse angle. It is necessary to figure them all out before arriving at an investment decision. While some put a greater
8 Pages(2000 words)Essay
Managerial Economics
However, the issue is, with investment opportunities that are available becoming more global and diverse in nature, both in the territories sense as well as business sectors sense, it has become difficult to decide not only which companies but also
9 Pages(2250 words)Research Paper
Managerial Economics
The world oil markets have experienced significant fluctuations within the past year, with the demand being reduced by a weak world economy and increased after the natural disasters in Japan and India. It is anticipated that global oil demand growth will remain stable in 2014. 
8 Pages(2000 words)Term Paper
Let us find you another Essay on topic Managerial Economics for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us