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Loyola Marymount University - BADM 4950 - Study Guide - Midterm

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Loyola Marymount University - BADM 4950 - Study Guide - Midterm

School: Loyola Marymount University
Department: Business
Course: Busn&Socl Rspnsblty Glbl Econ
Professor: Daniel Jacobs
Term: Fall 2016
Tags:
Name: BADM 4950 Exam 2 Study Guide
Description: These notes cover what will be on our next exam.
Uploaded: 10/31/2017
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background image ● Prisoner’s ​ ​Dilemma​:​ ​in​ ​jail​ ​w/​ ​accomplice​ ​-​ ​betray​ ​accomplice​ ​or​ ​stay​ ​silent  ○ If ​ ​betray​ ​&​ ​they​ ​don’t,​ ​free​ ​&​ ​3​ ​yrs  ○ If ​ ​both​ ​betray,​ ​both​ ​2​ ​yrs  ○ If ​ ​both​ ​silent,​ ​both​ ​1​ ​yr  ○ * ​ ​When​ ​indiv​ ​incentives​ ​are​ ​misaligned​ ​with​ ​group​ ​incentives,​ ​group​ ​always​ ​loses  ● Types ​ ​of​ ​goods  ○ Excludable ​:​ ​possible​ ​to​ ​prevent​ ​others​ ​from​ ​cons/using/benefitting​ ​from​ ​good  ○ Non-excludable ​:​ ​impossible​ ​to​ ​prev​ ​others​ ​from​ ​cons/using/benefitting​ ​from​ ​good  ○ Rival ​:​ ​one​ ​person’s​ ​cons​ ​of​ ​good​ ​reduces/prevents​ ​simultaneous​ ​cons​ ​by​ ​others  ○ Non-rival ​:​ ​consumption​ ​by​ ​one​ ​person​ ​does​ ​not​ ​affect​ ​cons​ ​by​ ​other    Rival  Non-rival  Excludable  Private  goods  (Cars, ​ ​food,​ ​clothing,​ ​housing)   Club  good  (Satellite ​ ​TV,​ ​cinemas,​ ​health  clubs, ​ ​private​ ​beaches,​ ​love)  Non-excludable  Common  pool​​ ​​resource  (Fishing ​ ​hole,​ ​river​ ​water,​ ​grass  on ​ ​a​ ​shared​ ​field,​ ​cellphone  tower, ​ ​freeway​ ​space)  Public  good  (Street ​ ​lighting,​ ​fireworks,  clean ​ ​air,​ ​free-to-air  television)  ● Tragedy ​ ​of​ ​commons​:​ ​10​ ​farmers​ ​each​ ​put​ ​10​ ​cows​ ​in​ ​shared​ ​field​ ​(“commons”)  ○ Each ​ ​cow​ ​produces​ ​10​ ​gallons​ ​of​ ​milk/wk  ○ 1 ​ ​farmer​ ​adds​ ​+cow​ ​to​ ​herd​ ​-​ ​milk​ ​prod​ ​drops​ ​5%​ ​per​ ​cow​ ​but​ ​farmer​ ​gets​ ​more  ○ Farmer’s ​ ​indiv​ ​dec​ ​had​ ​neg​ ​conseq/shared​ ​cost​ ​for​ ​other​ ​farmers-​ ​“​externalities​”  ○ *If ​ ​every​ ​farmer​ ​has​ ​same​ ​incentive,​ ​outcome​ ​can​ ​be​ ​bad​ ​–no​ ​more​ ​field​ ​at​ ​all  ● 2 ​ ​forms​ ​of​ ​tragedy:​ ​​ ​individual​ ​gain​ ​produces​ ​collective​ ​loss  ○ Common ​ ​pool​ ​resource​:​ ​overconsumption​ ​of​ ​resource  ■ Grass ​ ​is​ ​non-excludable​ ​and​ ​rivalrous  ■ Consume ​ ​as​ ​fast​ ​as​ ​you​ ​can​ ​before​ ​others​ ​take​ ​yours  ● ex. ​ ​water​ ​rights​ ​(“use​ ​it​ ​or​ ​lose​ ​it”)  ○ Public ​ ​goods​:​ ​non-contribution​ ​to​ ​public​ ​good  ■ Like ​ ​red​ ​cards,​ ​ex.​ ​pollution​ ​causes​ ​harm​ ​to​ ​ppl​ ​w/o​ ​them​ ​agreeing​ ​to​ ​it  ■ Positive ​ ​conseq​ ​for​ ​the​ ​polluter,​ ​neg​ ​conseq​ ​for​ ​society  ● Solving ​ ​tragedy​:​ ​not​ ​about​ ​greed/human​ ​nature​ ​-​ ​problem​ ​is​ ​about​ ​systems​ ​of​ ​incentives  ○ To ​ ​solve​ ​tragedy,​ ​change​ ​the​ ​incentive  ○ Approaches: ​ ​rules,​ ​markets,​ ​self​ ​governance  ● Rules ​:​ ​command​ ​and​ ​control-​ ​limit​ ​#​ ​of​ ​cows​ ​on​ ​field,​ ​#​ ​of​ ​fish​ ​you​ ​can​ ​catch,​ ​etc.  ○ Upside: ​ ​solve​ ​the​ ​tragedy​ ​-​ ​strong​ ​gov’t​ ​can​ ​enforce​ ​rules  ○ Downside: ​ ​difficulties/cost-​ ​how​ ​many​ ​cows​ ​can​ ​field​ ​hold,​ ​monitor/enforce​ ​rules?  ● Market ​:​ ​assign​ ​“property​ ​rights”​ ​for​ ​private​ ​ownership  ○ Upside: ​ ​users​ ​have​ ​local​ ​knowledge,​ ​change​ ​incentives​ ​to​ ​abuse​ ​own​ ​property  ○ Downside: ​ ​fairness​ ​and​ ​costs​ ​-​ ​how​ ​to​ ​cut​ ​up​ ​field?  ■ Monitor/enforce ​ ​property​ ​rights​ ​(fences) 
background image ■ Some ​ ​resources​ ​can’t​ ​be​ ​partitioned​ ​(e.g.​ ​air,​ ​fisheries)  ● Self-governance ​:​ ​users​ ​set​ ​own​ ​rules​ ​with​ ​their​ ​own​ ​penalty​ ​system,​ ​ex.​ ​Cooperatives  ○ Upside: ​ ​users​ ​may​ ​have​ ​better​ ​local​ ​knowledge  ○ Downside: ​ ​cooperation-​ ​collective​ ​action​ ​problem​ ​among​ ​users  ● Role ​ ​of​ ​humans​:​ ​a​ ​blip​ ​in​ ​geological​ ​time​ ​but​ ​developed​ ​totalitarian​ ​agriculture  ○ Expand ​ ​pop,​ ​destroyed​ ​half​ ​of​ ​the​ ​forests,​ ​20%​ ​of​ ​coral​ ​reefs,​ ​87%​ ​of​ ​wetlands,  emitted ​ ​billion​ ​tonnes​ ​of​ ​carbon,​ ​cause​ ​the​ ​extinction​ ​of​ ​species  ● Why ​ ​care​ ​about​ ​envir​:  ○ 1) ​ ​Preserve​ ​species/genetic​ ​diversity​ ​b/c​ ​it​ ​might​ ​be​ ​useful  ○ 2) ​ ​Protect​ ​the​ ​provision​ ​of​ ​ecosystem​ ​services  ○ 3) ​ ​Ethical​ ​reason-​ ​responsibility​ ​of​ ​stewardship  ● Graedel’s ​ ​Grand​ ​Objectives​:  ○ Maintain ​ ​existence​ ​of​ ​human​ ​species  ○ Maintain ​ ​capacity​ ​for​ ​sustainable​ ​development​ ​and​ ​stable​ ​systems  ○ Maintain ​ ​diversity​ ​of​ ​life  ○ Maintain ​ ​aesthetic​ ​richness​ ​of​ ​planet  ● Tradeoffs ​:​ ​human​ ​development​ ​vs.​ ​environmental​ ​protection,​ ​preservation​ ​of​ ​species​ ​vs.  rights ​ ​of​ ​individuals​ ​of​ ​that​ ​species,​ ​rights​ ​of​ ​tribal/indigenous​ ​peoples​ ​vs.  ● What ​ ​causes​ ​envir​ ​impacts​:​ ​emissions/extraction​ ​&​ ​land​ ​transformation  ○ Physically ​ ​changing​ ​land/ocean/habitat​ ​at​ ​rate​ ​faster​ ​than​ ​species​ ​can​ ​adjust​ ​to  ■ Ex. ​ ​Deforestation,​ ​trees​ ​moving​ ​uphill  ○ Changing ​ ​balance​ ​of​ ​substances​ ​in​ ​nature​ ​at​ ​rate​ ​faster​ ​than​ ​can​ ​be​ ​metabolized  ■ Ex. ​ ​more​ ​carbon​ ​dioxide,​ ​more​ ​toxins,​ ​analogous​ ​to​ ​alcohol​ ​poisoning  ● → ​ ​How​ ​to​ ​reduce​ ​impacts​:​ ​reduce​ ​emissions/extraction​ ​&​ ​land​ ​transformation  ○ Impact ​ ​=​ ​Population​ ​x​ ​Affluence​ ​($/person)​ ​x​ ​Technology​ ​(Impact/$​ ​spent)  ● Kuznets ​ ​curve​:​ ​as​ ​ppl​ ​become​ ​wealthier,​ ​they​ ​reproduce​ ​less  ○ “Envir ​ ​Kuznets​ ​curve”:​ ​as​ ​ppl​ ​become​ ​wealthier,​ ​they​ ​lower​ ​per-capita​ ​env​ ​impact  ○ Demand ​ ​for​ ​envir​ ​quality​ ​incr​ ​by​ ​more​ ​than​ ​incr​ ​in​ ​wealth  ○ Decline ​ ​in​ ​wealth​ ​may​ ​lower​ ​demnd​ ​for​ ​envir​ ​quality​ ​by​ ​more​ ​than​ ​income​ ​change  ○ Globally, ​ ​are​ ​impacts​ ​only​ ​shifted​ ​(exported),​ ​not​ ​reduced?  ● Quadrants ​ ​of​ ​envir​ ​strategy  Competitive ​ ​Advantage  Identify  and reduce risks​​ ​-​ ​across​ ​value  chain, ​ ​reduce​ ​regulatory​ ​burden/​ ​liability,  speed ​ ​products​ ​to​ ​market  Reduce  operational costs​​ ​-​ ​reduce​ ​envir  expenses/input ​ ​costs/disposal​ ​fees/labor  & ​ ​capital​ ​costs  Create  intangible value ​​-​ ​enhance​ ​brand  value/loyalty, ​ ​connect​ ​w/​ ​consumers’  emotions, ​ ​raise​ ​workforce​ ​productivity  Increase  revenues​​ ​-​ ​product  differentiation, ​ ​meet​ ​consumer​ ​demands,  avoid ​ ​tradeoffs  ● Risk ​ ​reduction​:​ ​proactive​ ​envir​ ​precaution​ ​is​ ​cheaper​ ​than​ ​envir​ ​cleanup/lawsuits  ○ Ex. ​ ​BP​ ​explosion/spill,​ ​SoCal​ ​gas​ ​leak  ○ Red ​ ​reg​ ​burden:​ ​avoid​ ​future​ ​more​ ​costly​ ​regulation,​ ​EPA​ ​ban​ ​on​ ​microbeads​ ​CA  ● Operational ​ ​cost​ ​reduction​:​ ​mat/energy​ ​(buy)​ ​→​ ​firm​ ​→​ ​waste​ ​(buy,​ ​​sell​)​ ​&​ ​prod​ ​(sell) 
background image ○ Porter ​ ​Hypothesis​:​ ​$10​ ​bills​ ​lying​ ​on​ ​factory​ ​floor-​ ​finding​ ​improves​ ​envir/profits  ■ Crit: ​ ​firms​ ​in​ ​capitalist,​ ​competitive​ ​market​ ​are​ ​built​ ​for​ ​efficiency  ● PH ​ ​assumes​ ​that​ ​firms​ ​systematically​ ​ignore​ ​profitable​ ​opp  ■ Rejoinder: ​ ​mrkt​ ​failures​ ​exist-​ ​monopolies,​ ​asymmetric​ ​/imperfect​ ​info  ● Lead ​ ​to​ ​imperfect​ ​markets  ○ McKinsey ​ ​curve​:​ ​energy​ ​eff​ ​gap-​ ​neglected​ ​opp​ ​for​ ​indv/co​ ​to​ ​save$​ ​by​ ​improv  energy ​ ​eff  ■ Barriers ​ ​to​ ​adoption:  ● Awareness 
● Agency
 issues​:​ ​dec-makers/owners​ ​often​ ​don’t​ ​benefit​ ​from  improvmnts, ​ ​users​ ​don’t​ ​have​ ​authority/capital​ ​to​ ​install​ ​imprvmts  ● Financing  ​​hurdles,​ ​preference​ ​for​ ​​short-term​​ ​returns  ○ Capital ​ ​costs​​ ​to​ ​engage​ ​in​ ​profitable​ ​invstmts​ ​could​ ​be​ ​lower​ ​for​ ​envir​ ​firms  ■ 1) ​ ​Soc​ ​resp​ ​investing-​ ​have​ ​access​ ​to​ ​investment​ ​$​ ​targeted​ ​to  sustainable ​ ​firms  ■ 2) ​ ​Banks’​ ​environmental​ ​screening​ ​for​ ​liability  ■ 3) ​ ​Bad​ ​environmental​ ​news​ ​punished​ ​on​ ​stock​ ​market  ○ Labor ​ ​costs​:​ ​young,​ ​skilled​ ​(→​ ​valuable)​ ​empl​ ​would​ ​rather​ ​work​ ​for​ ​a​ ​green​ ​co  ● Intang ​ ​val​:​ ​revenue​ ​→​ ​open​ ​new​ ​mrkts  ○ Improve  rep​​ ​→​ ​improve​ ​sales  ■ Difficulty: ​ ​cust​ ​often​ ​don’t​ ​know-​ ​3rd​ ​party​ ​endorsements/ratings​ ​help  ○ Green  purchasing programs​:​ ​EPA​ ​Comprehensive​ ​Procurement​ ​Guidelines,  win ​ ​gov’t​ ​contracts,​ ​better​ ​chance​ ​of​ ​selling​ ​to​ ​gov’t​ ​if​ ​you’re​ ​a​ ​green​ ​co  ○ Supply  chain transparency​:​ ​publish​ ​checklists​ ​of​ ​envir/soc​ ​req​ ​for​ ​suppliers  ■ Required ​ ​by​ ​many​ ​universities  ● Selling ​ ​green​ ​prod:​ ​differentiating​ ​prod​ ​based​ ​on​ ​some​ ​envir​ ​quality-​ ​high​ ​eff,​ ​alt​ ​fuel  (electric, ​ ​hydrogen,​ ​biofuel),​ ​non-toxic,​ ​renewable​ ​resources/energy  ○ Benefits: ​ ​​emo​-​ ​warm​ ​glow,​ ​​identity​-​ ​“I​ ​care​ ​about​ ​pandas,”​ ​​functional​-​ ​dual​ ​func  ○ Problem: ​ ​​lemons​ ​mrkts   ■ Causes: ​ ​asymm​ ​info​ ​(lemon​ ​cars-​ ​can’t​ ​tell​ ​at​ ​time​ ​of​ ​purch),​ ​no  corroboration ​ ​of​ ​claims,​ ​no​ ​redress​ ​of​ ​fraud  ■ Effects: ​ ​free-riding​ ​on​ ​brands​ ​→​ ​no​ ​trust​ ​of​ ​sellers,​ ​decr​ ​qual/price,  welfare ​ ​losses​ ​for​ ​all  ■ Green  lemons​:​ ​every​ ​sust​ ​feat​ ​in​ ​“green”​ ​prods​ ​suffers​ ​from​ ​lemons​ ​prob  ■ Must ​ ​communicate:​ ​1.​ ​Env​ ​ben​ ​is​ ​real,​ ​2.​ ​Env​ ​ben​ ​is​ ​worth​ ​paying​ ​for  ● How ​ ​to​ ​comm​ ​greenness​:​ ​regulations/warranties/guarantees,​ ​3rd​ ​party​ ​end,​ ​voluntary  prog/certifications, ​ ​branding/reputation  ● Green ​ ​brands:​ ​env​ ​b​ ​diff​ ​to​ ​comm-​ ​xp​ ​&​ ​ID​ ​ben:​ ​“warm​ ​glow”​ ​from​ ​doing​ ​right​ ​thing​ ​→  feel ​ ​good​ ​about​ ​who​ ​they​ ​are​ ​&​ ​what​ ​they​ ​purch-​ ​brands​ ​help​ ​accomplish​ ​that  ○ Brands ​ ​comm:​ ​info,​ ​identity,​ ​emotion  ● 6 ​ ​signs​ ​of​ ​greenwashing​:  ○ 1. ​ ​​Hidden trade-off​​ ​(most):​ ​focus​ ​on​ ​only​ ​one​ ​type​ ​of​ ​impact  ○ 2. ​ ​​No proof 

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School: Loyola Marymount University
Department: Business
Course: Busn&Socl Rspnsblty Glbl Econ
Professor: Daniel Jacobs
Term: Fall 2016
Tags:
Name: BADM 4950 Exam 2 Study Guide
Description: These notes cover what will be on our next exam.
Uploaded: 10/31/2017
12 Pages 23 Views 18 Unlocks
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