Solved: A firm has an unprofitable factory Managers decide

to close
A firm has an unprofitable factory Managers decide to close

A firm has an unprofitable factory. Managers decide to close the factory, but only after operating
it for an additional six months to meet existing contractual obligations. They can inform workers
immediately or just prior to closure. If they tell workers immediately, the typical worker has a
choice: try to line up a new job that will start when the factory closes or get a new job
immediately. If the typical worker gets a new job immediately, avoiding unemployment, the firm
will have to use temporary employees, who are inefficient. The payoffs of this outcome are
$40,000 for each worker and -$10 million for the firm. If the typical worker lines up a new job
that will start when the factory closes, the worker will experience a short period of
unemployment, but the firm will be able to wind down its operations efficiently. The payoffs of
this outcome are $38,000 for each worker and -$5 million for the firm. If the firm closes the
factory without warning, the typical worker will experience a long period of unemployment. The
firm will be able to wind down its operations efficiently, but will create a costly public relations
problem. The payoffs of this outcome are $30,000 for each worker and -$8 million for the firm.
Illustrate this game (between the firm and a typical worker) by drawing a tree and solve it by
reasoning in reverse. Is there a better outcome than the equilibrium? How might the firm and
worker achieve it?

A firm has an unprofitable factory Managers decide to close

ANSWER
https://solvedquest.com/a-firm-has-an-unprofitable-factory-managers-decide-to-close/

Reach out to freelance2040@yahoo.com for enquiry.

Powered by TCPDF (www.tcpdf.org)