Thursday, September 27, 2012

Acting Opportunistically

 Acting Opportunistically
To discuss acting opportunistically I will take a relatively simple and everyday example that occurred several weeks ago. While at work I was cleaning the floors and I found a wallet on the ground. The wallet was full of cash and other valuable items. If I was acting opportunistically in this situation I would have simply taken out the cash and anything else of use and maybe even thrown the wallet out as it was then of no use from me. Through that I would have taken advantage of my circumstances; I had a choice that would have granted me benefit with essentially no downsides. However, I did not take advantage of these circumstances. I instead opted to hand the wallet in with all of its contents to my manager.

While this may be a simple example it displays the issue at hand clearly. One choice has all utility gains with essentially no losses and the choice I made wasn't clearly the optimal one. However, there were several reasons that could have compelled me to make the choice I did. One is that it was ethical, a lost wallet that had many of someone's belongings in it would have been wrong for me to take. It is private property belonging to someone else and exploiting their mistake would have been unethical. Another reason I returned the wallet to my manager could have been that it was my first shift and I was trying to prove myself as an honest and trustworthy employee. While my manager would never have known that I took the wallet, he now knows that I am honest and wouldn't do something unethical like that. So in that respect the alternative I chose did have some benefit associated without, albeit more intangible and not guaranteed, it is still present.

The several explanations for not acting opportunistically provided in the blog prompt have differences among them but they all share something similar. None of them is completely selfless although they appear to be. Each of them has some benefit attached to it, even if it is not something that can be tangibly realized. Being a "good citizen" gives a person a sense of self-righteousness, they feel better about themselves and neglect feeling any guilt that may have resulted from a different choice. They also are indirectly contributing to a healthier community, if their decision affected a small community then they may feel that contribution more. The unethical explanation is similar, the avoidance of guilt and feeling of self-righteousness are major draws to not acting in an opportunistic manner. Lastly, acting under the philosophy of "good things come to those who wait" is simply a mantra of delayed gratification. The person opting to avoid the opportunistic choice is doing such simply because they think they will receive some benefit in the future. Because of the above reasoning, I would say that each of the three possibilities share many similarities and are not all that different.

Monday, September 10, 2012

The Supermarket as an Organization

The Supermarket as an Organization
While I was a student in high school and my early years of college I worked in several departments of a chain supermarket store. This store was a locally owned regional chain that operated about 20-30 locations in a small area in New England. I was with the company for about 5 years and worked in a variety of positions and gained a solid understanding of the company's operations, at least at the retail level. 

The company was privately owned and had a clear hierarchy system. Each store had several departments. For the sake of simplicity in this post I will define three although there were many more. There was the "Front End" department, consisting of the cashiers, customer service managers, and clerks. There was a deli department in which there were associates, an assistant manager, and a manager. Also, there was a grocery department which had a similar hierarchy to the deli.

 At the store level, associates reported to assistant department managers and department managers with managers having greater oversight and flexibility. An informal hierarchy also existed between part-time associates and full-time, non-managerial associates. Full-time associates in most departments had an unspoken form of power over part-time associates. Department managers then reported to a store assistant manager and a store manager. At this point a bilateral hierarchy develops. Department managers report to store leadership as well as corporate department heads. Every department had a head at the corporate level which issued company-wide department operating procedures. In addition to corporate department heads, there are also a variety of corporate executives who managed other operations of the company. Finally, the top of the hierarchy was a company president/CEO.

There were many intricate relationships that each store maintained. Departments within every store needed to work to coordinate sales, budget, number of employees at any given time, and any issues with customers that might arise. Individual departments within any given store also needed to maintain relationships with their counterparts at other stores. For instance, if the deli department was running a sale on American cheese and experienced a higher volume of customers than projected, the department would pick up extra cheese from another store location. In order to do this a variety of transfer forms had to be filled out and the department manager would need to organize an employee to go and pick up the inventory. Individual departments needed to maintain communication with the store manager in order to develop budgets and inventories. Departments also needed to maintain relationships with their suppliers. This occurred at both the store and company level. The company would decide what brands and suppliers would be contracted by the individual stores, an example of a hub decision. The individual department managers would make decision on how much of each good to purchase every week, an example of a spoke decision. There was a large amount of autonomous decision-making at the individual department level.

One example of transaction costs that occurred at the company came in the form of coordination costs. The transaction resulting from a customer's purchase of a sale item has many coordination costs behind it. There is the cost of the company heads determining what sales to run on a given week which costs labor hours, there is the cost to the stores of setting up displays for the sale items, and there is also a large cost incurred when a store runs out of a sale item and must acquire more from another store.

Wednesday, September 5, 2012

Daniel Kahneman Introduction

Daniel Kahneman

A nobel laureate and current professor at Princeton University, Daniel Kahneman is credited with being one of developers of the field of behavioral economics. In a landmark 1979 paper on decision-making, he developed a theory as to why people will often make the less-rational decision in a given situation rather than the optimal choice. Kahneman revolutionized the field of economics by beginning to look at it not as a completely rational system, but one that was susceptible to human error and irrationality.
            Kahneman’s work was groundbreaking in combining aspects of several fields of the social sciences. By taking a multi-faceted approach to economic study he granted much greater insight into human decision-making and motivation. One of his most famous developments was his work on “prospect theory” with Amos Tversky. The theory is essentially a variation of the expected utility theory assuming conditions of risk. Through research they found that people underweight options that are merely probably as compared to options that are certain.
Before I was assigned this alias I wasn’t familiar with Kahneman; however, I have read several books centered on behavioral economics. Freakonomics and Superfreakonomics by Steven Levitt both provide an elementary look into incentives-based decision-making and actions. The aforementioned books allowed me to gain an accessible look into a quite complex branch of economics and covered interesting topics. Kahneman's work will be very relevant to the material we cover in class. Studying how humans interact and weigh choices is a large part of how organizations operate. 

 Works Cited
"Daniel Kahneman: Behavioral Economics Founder." TED: Ideas Worth Spreading. TED, n.d. Web. 5 Sep 2012.
"Prospect Theory." Behavioural Finance. N.p., n.d. Web. 5 Sep 2012. <>.