lecture zero: introduction and logisticsccfour/eo0.pdf · f family management or family ownership....
TRANSCRIPT
Lecture Zero: Introduction and Logistics
Cheng Chen
School of Economics and Finance
The University of Hong Kong
(Cheng Chen (HKU)) Econ 6006 1 / 8
Firm Organization and Strategy in Daily Life
Managerial incentives and moral hazard:I Shirking (workers); short-termism (CEOs); multi-task (professors).I Apply to government organization as well (short-termism, multi-task,
relative performance measure).
Bank lending and adverse selection:I Heterogeneity in risks and screening (Only risky projects get funded).
Relative performance evaluation:I Grade, promotion, tournament.
Family �rms:I Dominant presence of these �rms in world economy: Out of large (>1
billion) �rms, 85% are family run in South-East Asia, 75% in LatinAmerica, 67% in India and around 65% in the Middle East. China:40%. 15% American Fortune Global 500 �rms: family �rms.
I Even more important when we talk about small and medium sized�rms and far from declining.
I Low productivity and worse managed:F First generation and later generations.F Family management or family ownership.
(Cheng Chen (HKU)) Econ 6006 2 / 8
Firm Organization and Strategy in Daily Life
Managerial incentives and moral hazard:I Shirking (workers); short-termism (CEOs); multi-task (professors).I Apply to government organization as well (short-termism, multi-task,
relative performance measure).
Bank lending and adverse selection:I Heterogeneity in risks and screening (Only risky projects get funded).
Relative performance evaluation:I Grade, promotion, tournament.
Family �rms:I Dominant presence of these �rms in world economy: Out of large (>1
billion) �rms, 85% are family run in South-East Asia, 75% in LatinAmerica, 67% in India and around 65% in the Middle East. China:40%. 15% American Fortune Global 500 �rms: family �rms.
I Even more important when we talk about small and medium sized�rms and far from declining.
I Low productivity and worse managed:F First generation and later generations.F Family management or family ownership.
(Cheng Chen (HKU)) Econ 6006 2 / 8
Firm Organization and Strategy in Daily Life
Managerial incentives and moral hazard:I Shirking (workers); short-termism (CEOs); multi-task (professors).I Apply to government organization as well (short-termism, multi-task,
relative performance measure).
Bank lending and adverse selection:I Heterogeneity in risks and screening (Only risky projects get funded).
Relative performance evaluation:I Grade, promotion, tournament.
Family �rms:I Dominant presence of these �rms in world economy: Out of large (>1
billion) �rms, 85% are family run in South-East Asia, 75% in LatinAmerica, 67% in India and around 65% in the Middle East. China:40%. 15% American Fortune Global 500 �rms: family �rms.
I Even more important when we talk about small and medium sized�rms and far from declining.
I Low productivity and worse managed:F First generation and later generations.F Family management or family ownership.
(Cheng Chen (HKU)) Econ 6006 2 / 8
Firm Organization and Strategy in Daily Life
Managerial incentives and moral hazard:I Shirking (workers); short-termism (CEOs); multi-task (professors).I Apply to government organization as well (short-termism, multi-task,
relative performance measure).
Bank lending and adverse selection:I Heterogeneity in risks and screening (Only risky projects get funded).
Relative performance evaluation:I Grade, promotion, tournament.
Family �rms:I Dominant presence of these �rms in world economy: Out of large (>1
billion) �rms, 85% are family run in South-East Asia, 75% in LatinAmerica, 67% in India and around 65% in the Middle East. China:40%. 15% American Fortune Global 500 �rms: family �rms.
I Even more important when we talk about small and medium sized�rms and far from declining.
I Low productivity and worse managed:F First generation and later generations.F Family management or family ownership.
(Cheng Chen (HKU)) Econ 6006 2 / 8
Firm Organization and Strategy in Daily Life
Managerial incentives and moral hazard:I Shirking (workers); short-termism (CEOs); multi-task (professors).I Apply to government organization as well (short-termism, multi-task,
relative performance measure).
Bank lending and adverse selection:I Heterogeneity in risks and screening (Only risky projects get funded).
Relative performance evaluation:I Grade, promotion, tournament.
Family �rms:I Dominant presence of these �rms in world economy: Out of large (>1
billion) �rms, 85% are family run in South-East Asia, 75% in LatinAmerica, 67% in India and around 65% in the Middle East. China:40%. 15% American Fortune Global 500 �rms: family �rms.
I Even more important when we talk about small and medium sized�rms and far from declining.
I Low productivity and worse managed:F First generation and later generations.F Family management or family ownership.
(Cheng Chen (HKU)) Econ 6006 2 / 8
Firm Organization and Strategy in Daily Life
Managerial incentives and moral hazard:I Shirking (workers); short-termism (CEOs); multi-task (professors).I Apply to government organization as well (short-termism, multi-task,
relative performance measure).
Bank lending and adverse selection:I Heterogeneity in risks and screening (Only risky projects get funded).
Relative performance evaluation:I Grade, promotion, tournament.
Family �rms:I Dominant presence of these �rms in world economy: Out of large (>1
billion) �rms, 85% are family run in South-East Asia, 75% in LatinAmerica, 67% in India and around 65% in the Middle East. China:40%. 15% American Fortune Global 500 �rms: family �rms.
I Even more important when we talk about small and medium sized�rms and far from declining.
I Low productivity and worse managed:F First generation and later generations.F Family management or family ownership.
(Cheng Chen (HKU)) Econ 6006 2 / 8
Organizational Economics and Contract Theory
Recent Nobel Prize winners: Oliver Hart and Bengt Holmstrom fortheir contributions to contract theory.
Speech: https://www.youtube.com/watch?v=zNWCbJLt6Qchttps://www.youtube.com/watch?v=vI6Dk8sWHzU
Previous Nobel Prize winners: Williamson (2009); Akerlof, Stiglitz andSpence (2001), Mirrlees and Vickrey (1996), and Coase (1991).
Previous Nobel Prize winners (closely related): Tirole (2014); Maskinand Myerson (2007).
(Cheng Chen (HKU)) Econ 6006 3 / 8
Organizational Economics and Contract Theory
Recent Nobel Prize winners: Oliver Hart and Bengt Holmstrom fortheir contributions to contract theory.
Speech: https://www.youtube.com/watch?v=zNWCbJLt6Qchttps://www.youtube.com/watch?v=vI6Dk8sWHzU
Previous Nobel Prize winners: Williamson (2009); Akerlof, Stiglitz andSpence (2001), Mirrlees and Vickrey (1996), and Coase (1991).
Previous Nobel Prize winners (closely related): Tirole (2014); Maskinand Myerson (2007).
(Cheng Chen (HKU)) Econ 6006 3 / 8
Organizational Economics and Contract Theory
Recent Nobel Prize winners: Oliver Hart and Bengt Holmstrom fortheir contributions to contract theory.
Speech: https://www.youtube.com/watch?v=zNWCbJLt6Qchttps://www.youtube.com/watch?v=vI6Dk8sWHzU
Previous Nobel Prize winners: Williamson (2009); Akerlof, Stiglitz andSpence (2001), Mirrlees and Vickrey (1996), and Coase (1991).
Previous Nobel Prize winners (closely related): Tirole (2014); Maskinand Myerson (2007).
(Cheng Chen (HKU)) Econ 6006 3 / 8
Key Aspect of This Course
Information Asymmetry and con�ict of interestsI Rent and e�ciency.I First best (FB) and Second best (SB).
Two fundamental issues:I Hidden information: Adverse Selection (AS).I Hidden action: Moral Hazard (MH).
Two fundamental constraints:I Incentive-compatibility constraint (IC)I Participation constraint (PC) or individual rationality constraint (IR).
(Cheng Chen (HKU)) Econ 6006 4 / 8
Key Aspect of This Course
Information Asymmetry and con�ict of interestsI Rent and e�ciency.I First best (FB) and Second best (SB).
Two fundamental issues:I Hidden information: Adverse Selection (AS).I Hidden action: Moral Hazard (MH).
Two fundamental constraints:I Incentive-compatibility constraint (IC)I Participation constraint (PC) or individual rationality constraint (IR).
(Cheng Chen (HKU)) Econ 6006 4 / 8
Key Aspect of This Course
Information Asymmetry and con�ict of interestsI Rent and e�ciency.I First best (FB) and Second best (SB).
Two fundamental issues:I Hidden information: Adverse Selection (AS).I Hidden action: Moral Hazard (MH).
Two fundamental constraints:I Incentive-compatibility constraint (IC)I Participation constraint (PC) or individual rationality constraint (IR).
(Cheng Chen (HKU)) Econ 6006 4 / 8
Logistics
Lectures: Mon. 6:45-9:45.
O�ce hour: Tue. and Fri.: 3pm to 4pm or by appointment (startingfrom 2nd. week).
Prerequisites: MA-level microeconomic theory; knowledge of(multivariate) calculus and basic probability theory and statistics.
Materials:I My lecture notes (self-contained).I Reference one: �Contract Theory� (Princeton University Press, 2005)
by Patrick Bolton and Mathias DewatripontI Reference two: �Handbook of Organizational Economics� (Princeton
University Press, 2012) edited by Robert Gibbons and John Roberts.
Slides are available at http://www.sef.hku.hk/~ccfour/.
(Cheng Chen (HKU)) Econ 6006 5 / 8
Logistics
Lectures: Mon. 6:45-9:45.
O�ce hour: Tue. and Fri.: 3pm to 4pm or by appointment (startingfrom 2nd. week).
Prerequisites: MA-level microeconomic theory; knowledge of(multivariate) calculus and basic probability theory and statistics.
Materials:I My lecture notes (self-contained).I Reference one: �Contract Theory� (Princeton University Press, 2005)
by Patrick Bolton and Mathias DewatripontI Reference two: �Handbook of Organizational Economics� (Princeton
University Press, 2012) edited by Robert Gibbons and John Roberts.
Slides are available at http://www.sef.hku.hk/~ccfour/.
(Cheng Chen (HKU)) Econ 6006 5 / 8
Logistics
Lectures: Mon. 6:45-9:45.
O�ce hour: Tue. and Fri.: 3pm to 4pm or by appointment (startingfrom 2nd. week).
Prerequisites: MA-level microeconomic theory; knowledge of(multivariate) calculus and basic probability theory and statistics.
Materials:I My lecture notes (self-contained).I Reference one: �Contract Theory� (Princeton University Press, 2005)
by Patrick Bolton and Mathias DewatripontI Reference two: �Handbook of Organizational Economics� (Princeton
University Press, 2012) edited by Robert Gibbons and John Roberts.
Slides are available at http://www.sef.hku.hk/~ccfour/.
(Cheng Chen (HKU)) Econ 6006 5 / 8
Evaluation
Tests:I Midterm exam (20%) 7-8:30 pm on April/16th. (Mon.)I Final exam (60%): 7-10 pm on May/7 (Mon.)
Homework:I 3 (+1) problem sets (10%).I Class Presentation and participation (10%).
No o�ce hours on Feb./9, 13, 20, 23 (Fri.) and on Apr./17, 20 (Fri.)
Extra o�ce hours during revision period
(Cheng Chen (HKU)) Econ 6006 6 / 8
Evaluation
Tests:I Midterm exam (20%) 7-8:30 pm on April/16th. (Mon.)I Final exam (60%): 7-10 pm on May/7 (Mon.)
Homework:I 3 (+1) problem sets (10%).I Class Presentation and participation (10%).
No o�ce hours on Feb./9, 13, 20, 23 (Fri.) and on Apr./17, 20 (Fri.)
Extra o�ce hours during revision period
(Cheng Chen (HKU)) Econ 6006 6 / 8
Lectures
Part one (1.5 lectures): Management practices and managersI Management practices and �rm performance around the world.I What do managers do?
Part two (2 lectures): Basic TheoryI Basic model of AS (two-type): HW 1.I Basic model of MH (two-action): HW 2.
Part three (4.5 lectures): Applications (empirical and theory)I Family �rms: Basic facts and theory (including my own work).I Managerial incentives: Optimal incentive scheme and evidence.I Hierarchies: Theory and empirical �ndings (including my own work)
and HW 3.I Incomplete contracts and �rm boundary and HW 4.
(Cheng Chen (HKU)) Econ 6006 7 / 8
Lectures
Part one (1.5 lectures): Management practices and managersI Management practices and �rm performance around the world.I What do managers do?
Part two (2 lectures): Basic TheoryI Basic model of AS (two-type): HW 1.I Basic model of MH (two-action): HW 2.
Part three (4.5 lectures): Applications (empirical and theory)I Family �rms: Basic facts and theory (including my own work).I Managerial incentives: Optimal incentive scheme and evidence.I Hierarchies: Theory and empirical �ndings (including my own work)
and HW 3.I Incomplete contracts and �rm boundary and HW 4.
(Cheng Chen (HKU)) Econ 6006 7 / 8
Lectures
Part one (1.5 lectures): Management practices and managersI Management practices and �rm performance around the world.I What do managers do?
Part two (2 lectures): Basic TheoryI Basic model of AS (two-type): HW 1.I Basic model of MH (two-action): HW 2.
Part three (4.5 lectures): Applications (empirical and theory)I Family �rms: Basic facts and theory (including my own work).I Managerial incentives: Optimal incentive scheme and evidence.I Hierarchies: Theory and empirical �ndings (including my own work)
and HW 3.I Incomplete contracts and �rm boundary and HW 4.
(Cheng Chen (HKU)) Econ 6006 7 / 8
Lectures
Part Four (1.5 lectures): Advanced theoryI Limited liability, multi-dimensional and multi-agent MH.I Dynamic AS and MH.
Part Five (1 lectures): Organizational Industry OrganizationI Prof. Legros and Prof. Newman's work.I Theory plus empirical work.
Part Six (1.5 lectures): Group presentations and review.
(Cheng Chen (HKU)) Econ 6006 8 / 8
Lectures
Part Four (1.5 lectures): Advanced theoryI Limited liability, multi-dimensional and multi-agent MH.I Dynamic AS and MH.
Part Five (1 lectures): Organizational Industry OrganizationI Prof. Legros and Prof. Newman's work.I Theory plus empirical work.
Part Six (1.5 lectures): Group presentations and review.
(Cheng Chen (HKU)) Econ 6006 8 / 8
Lectures
Part Four (1.5 lectures): Advanced theoryI Limited liability, multi-dimensional and multi-agent MH.I Dynamic AS and MH.
Part Five (1 lectures): Organizational Industry OrganizationI Prof. Legros and Prof. Newman's work.I Theory plus empirical work.
Part Six (1.5 lectures): Group presentations and review.
(Cheng Chen (HKU)) Econ 6006 8 / 8