MODULE 5:

Strategic
Decision Making
Presented by:
MAN. ECO Group 5
 The Reporters:

BEANO
IMPORTADO

Rona Jessa
MANAID
AYENG
Mercylyn
Phoebe
AMORADO

Jefrielynne

LOPEZ

AY-AY Morella
DIANZON
Czarina GADIA

Jared
Aila
Objectives:
APPLY GAME THEORY TO
MAKE DECISIONS IN
ENVIRONMENTS WITH A
SMALL GROUP OF PEOPLE OR
FIRMS, INCLUDING
NEGOTIATION AND PRICE
WARS BETWEEN TWO FIRMS.

APPLY AN ETHICAL
UNDERSTANDING AND
PERSPECTIVE TO BUSINESS
SITUATIONS
 D UC T IO N
INT R O
R A T EG I C
TO S T
I S IO N -
DEC
MAK I N G
 HISTORY OF
GAME THEORY
HISTORY OF
GAME THEORY
1838
Antoine Augustin Cournot utilizes
underlying theoretical principles that
would soon evolve to become game
theory (Arrow, 2003)
HISTORY OF
GAME THEORY
Cournot's model
First to recognize the interdependece of
the firms in an oligopoly (Salvatore, 2015).
Held that each firm in a duopoly holds its
output constant current level.
Each firm ends up selling one-third of the
total industry output.
HISTORY OF
GAME THEORY
Ernst Zermelo
Studied chess which led to the earliest form of
game theory problems
Postulated that a two-person, sequential
game with perfect information and no random
chance must have a winning strategy for one
player or the game must end in a draw
(Schwalbe, & Walker, 2001)
HISTORY OF
GAME THEORY

Ernst Zermelo
Was the first to translate
critical thinking from games of
leisure to economic problems
HISTORY OF
GAME THEORY
Early 20th Century

John von Neumann

1928 - Minimax Theorem - Often thought
to be the true start of game theory
1944 - with Oskar Morgenstern - they
published The Theory of Games and
Economic Behavior (Arrow, 2003)
HISTORY OF
GAME THEORY
Strategy of Poker, Business, and War

Written by John Mcdonald during

1950
translated game theory into a
popular science manual
HISTORY OF
GAME THEORY
The Theory of Games and Economic
Behavior

Written by John Nash

Nash equilibrium - a situation where each
player of a game is using his or her best
strategy given the strategy chosen by
each player (Salvatore, 2015)
Strategic Games:
Game Theory
 Strategic
Games

Games that emphasize long term

planning, analytics, and skillful
thinking in order to achieve victory
The player is the key factor for
the game to end or to reach a
conclusion
 Game
Theory

Analyzing the strategies within

competitive scenarios
Done to know which is the
best strategy to use for the
person
Terminologies
 Player
individuals tasked with
making decisions
TERMINOLOGIES
USED WHEN Strategies
STUDYING A the choices that the
COMPETITIVE player does
MODEL OR GAME
Payoff
the outcome of the
strategy that the player
does
 Zero-sum game
if one player’s gain comes
about only at an expense of
TERMINOLOGIES equal magnitude of other
USED WHEN player(s)

STUDYING A Nonzero-sum game

COMPETITIVE if the gains and losses of all
players are not equal in
MODEL OR GAME magnitude

Dominant strategy
if a strategy of a player
doesn't change
When each player is playing his or her
optimal strategy, with respect to
each other players’ strategy, the
game is said to be in a Nash
equilibrium.
OLIGOPOLY MARKET
STRUCTURE
 Oligopoly
Market
Structure

The general category describes

markets or industries that consist
of a small number of firms whose
actions directly affect one
another’s profits
Oligopoly firms are interdependent
 Characteristics
of an Oligopoly

an industry dominated the industry has

by a small number of some barriers to
large firms, entry, and,

firms sell either identical interdependence is the most

or differentiated significant characteristic of
products, the oligopoly market
 INTERDEPENDENCE AS THE
MOST SIGNIFICANT CHARACTERISTIC
IN OLIGOPOLY
INTERDEPENDENCE Firms operating under conditions of
oligopoly cannot act independently
AS THE MOST of each other
SIGNIFICANT When the number of competitors

CHARACTERISTIC IN is few, any change by the firm will

effect the fortune of their rivals
OLIGOPOLY effectively
PRICE LEADERSHIP
 Done Through:
PRICE Dominant Price Leadership
LEADERSHIP Barometric Price Leadership

Collusive Price Leadership

When a company
controls the price
of a product in a
market.
If a price leader increases
the price, the competitors
will follow

If it decreases, the
competitors will also
decrease their price
 GAMES IN
ECONOMICS
SEQUENTIAL-MOVE GAME

SIMULTANEOUS-MOVE GAME
Sequential-
move game
a strategic game in which
players take turns knowing the
opposing move

strategies of players depend on

the previous move done by their
opponent
Simultaneous-
move game
The opposite of a sequential-
move game

strategies are played at the

same time and players do not
know their opponent's previous
choice
Seque
move ntial
games
sequential
move games
When you respond to a competitor’s decision,
you are playing a sequential move game
One makes the first decision and the second
player respond.
Players take turns making strategic decisions and
then observe their opponents’ choices before
making their own.
QUESTION:

What do people who are

dating, businessmen,
politicians, and military
leaders have in common?
ANSWER:

Each player would like to

know what the other
players would dobefore
they read a decision.
APPLICATION:
sequential
move games
Sequential move games are simply games in
which the order of movement is important.
In this instance, one player will usually have
an advantage over the other, but which
player has that advantage depends on the
game structure.
sequential
move games
Players in a sequential move game are
assumed to be “rational,” which means that
they favor higher payoffs over smaller
payoffs.
sequential
move games
To fully understand a sequential move game, we must
make use of a technique known as backward induction.

We need to look at the actions that each player can

make in order from the later actions until the earlier
actions.
Essentially, we work backward until we get to the
top of the game tree.
ETHICAL UNDERSTANDING AND
PERSPECTIVE TO BUSINESS SITUATION

a. Sequential move games can be used in business by

economists who are analyzing a specific business condition
to predict the moves that companies will make.
b. To strategically monitor and analyze the various features
and competitive behaviors inside their relevant economy.
c. Hypothetical scenarios are used to offer various events
in order to imitate real-world settings and forecast a
player's reaction.
SIMUL
MOVE TANEOUS
GAMES
 Simultaneous
Move Games

• The opponents’ strategy is

unknown at the time you choose a
strategy.

• The player has a trickier task of

figuring out what the opponent is
likely going to do.
UNDERSTANDING You and I are trying to determine
whether or not to increase our
SIMULTANEOUS sales by expanding our business
MOVE GAME to a second location in a
EXAMPLE neighboring town.
QUESTION:

So, how does the

game turn out?
ETHICAL UNDERSTANDING AND
PERSPECTIVE TO BUSINESS SITUATION

a. Simultaneous move game can be used in

decision making in strategic situations.

b. Different situations are presented through

simple games that set up hypothetical
scenarios meant to simulate real-world
conditions.
priso
dilem ner's
ma
 Prisonner's
Dilemma

Prisoner’s dilemma is the most used

illustration of a simultaneous game.

Describes a situation where,

according to game theory, two
players acting strategically will
ultimately result in a suboptimal
choice for both.
Implications of Prisoner's Dilemma

The prisoner’s dilemma elegantly shows that when everyone

pursues their own self-interest, the outcome is worse than if

they had both cooperated.

The “dilemma” faced by the prisoners here is that whatever

the other does, each is better off confessing than remaining

silent.
NASH EQUILIBRIUM

It is named after Nobel winning economist, John Nash.

It is a set of strategies, one for each player, such that no

player has incentive to change his or her strategy given

what the other players are doing.

It is also when a player’s strategy is optimal.

APPLICATION:
ETHICAL UNDERSTANDING AND
PERSPECTIVE TO BUSINESS SITUATION

a. Sequential move games can be used in business by

economists who are analyzing a specific business condition to
predict the moves that companies will make.
b. To strategically monitor and analyze the various features
and competitive behaviors inside their relevant economy.
c. Hypothetical scenarios are used to offer various events in
order to imitate real-world settings and forecast a player's
reaction.
 PR IC E
A TION
R IM IN
DISC MA
DI LE M
Price Discrimination
Dilemma

giving a different rate to

different consumers or
purchasers based on differences
in demand.
 First- Degree Price
Forms of Price Discrimination

Discrimination
Second- Degree
Price Discrimination

Third- Degree
Discrimination

QUESTION:

How to identify the Price

Discrimination Dilemma
theory to Sequential Game?
Price discrimination
dilemma
This action gave the meaning of Sequential
Move Game because:
They do not make decisions simultaneously.
The decision affects the outcome and decisions of
the both companies.
The Globe company took advantage and revised the
offer that the PLDT made to their customer.
QUESTION:

How to identify the Price

Discrimination Dilemma
theory to Simultaneous
Game?
Price discrimination
dilemma
This action gave the meaning of Sequential Move
Game because:

Players choose a strategy at approximately

the same time without knowing the other
player's strategy
ETHICAL UNDERSTANDING AND
PERSPECTIVE TO BUSINESS SITUATION

a. Widespread in various online and marketplaces,

even among businesses with a leading position.

b. It can attract customers to buy larger

quantities of their items and Increase the Profit
 IS ING
DVE RT
A M A
DIL EM
ADVERTISING DILEMMA

Advertising is a means of communication with the users

of a product or service.
Dilemma is a situation in which a difficult choice has to be
made between two or more alternatives, especially the
equally undesirable ones.
Advertising Dilemma is a situation wherein a player must
choose which goods or services they will advertise.
APPLICATION:
UNDERSTANDING ADVERTISING DILEMMA IN
MAKING ADVERTISEMENTS AND QUALITY
DECISIONS
a. In connecting the advertising dilemma to the simultaneous
move, one-shot games, it can also be used to analyze
advertising and quality decisions.

b. An important issue in evaluating the consequences of

advertising is to recognize where the increase in demand
comes from.
APPLICATION:
ADVERTISING
DILEMMA
This action gave the meaning of Sequential Move
Game because:

Both firms have an incentive to cheat on the

agreement on whether to advertise your
respective firms or not.
Both firms make decisions at the same time or,
at the very least, they don't know their rival's
decision prior to making their own.
ETHICAL UNDERSTANDING AND
PERSPECTIVE TO BUSINESS SITUATION

a. Often firms have better information about their products

than the consumers. This advantage may give firms an
incentive to make false claims about the merits of their
products to capitalize on consumers’ lack of information.
b. Advertising regulation, which encourages truth in
advertising, usually is enforced by civil suits. Under Section 43
of the Lanham Act, false and misleading advertising is
prohibited.
 INING
RGA
BA
BARGAINING
In the social sciences, bargaining or haggling is a type
of negotiation in which the buyer and seller of a good
or service debate the price or nature of a
transaction. If the bargaining produces agreement on
terms, the transaction takes place.
 Bargaining is associated
commonly with bazaars and
other markets where
centralized regulation is
difficult or impossible.
Dongxiangs bargaining for
sheep in China's Gansu
province
Spice market
Djerba, Tunisia
 AT EG I C
STR
S O F
VIEW ING
B AR GA IN
STRATEGIC VIEWS
OF BARGAINING
A type of bargaining works best when the
participants can be reasonably certain that the
game's rules will be honored and that the parties
will be bound by the rules.
It focuses more on the rules of the game and the
timing and commitment of the bargaining.
 BARGAINING AS A
SIMULTANEOUS-MOVE GAME

BARGAINING AS
A SEQUENTIAL-
MOVE GAME

ETHICAL UNDERSTANDING AND

PERSPECTIVE TO BUSINESS SITUATION

Considering bargaining is largely a way of

acquiring and presenting information in a
compelling manner, dishonest communication
provides opportunities for unethical behavior.
NO N -
T EG I C
S TR A
W S O F
VI E ING
R GA IN
BA
NON-STRATEGIC VIEWS
OF BARGAINING
A type of bargaining situation that does not focus
on the explicit rules of the “game” when
bargaining. As it is the alternative of the agreement
that determines the term of agreement.
Anything you can do to increase the chances of the
bargain to succeed, might it be decreasing the
gains of your own to improve the success rate of
the agreement going through.
Example of the
Non-Strategic
Views of In 1985, Texaco, an oil company, was found
guilty by a Texas Jury for interfering with
Bargaining Pennzoil’s attempt to buy Getty Oil. Texaco
was then fined $10.5 billion but appealed the
verdict and began negotiating with Pennzoil.
In 1987, Texaco filed for bankruptcy. Pennzoil
was unable to hold on to Texaco’s assets.
Texaco was also freed from the
responsibility of paying interest and
dividends. A year later, Texaco and Pennzoil
settled the case and it ended up with
Texaco having to pay only $3 billion. Texaco
successfully used bankruptcy as a way to
reduce its liabilities by 70%.
ETHICAL UNDERSTANDING AND
PERSPECTIVE TO BUSINESS SITUATION

The non-strategic bargaining approach would often

be used by organizations or companies when “bailing
out”. If the company is already in a bad situation, they
could lessen their liabilities by a big margin by just
showing the opposing company agreements that on
paper could really benefit them, but it would lessen
the liability the struggling company has.
 Thank you
for listening!
GROUP 6

Module
6
PRESENTED BY: GROUP 6
Today's Agenda

1 Introduction of Uncertainty. 3 Explain the Auctions.

2 Discuss Making Decisions with 4 Identify the Problem of Adverse

Uncertainty. Collection.

5 Identify the Problem of Moral

Hazard Insurance.
 Members:

Sierra, Crystal Kaye R.

Mahaba, Cenbell Grace D.
Toledo, John Kenneth R.
Villaruz, Aubrey Joy B.
Goles, Charity Grace C.
Velasco, Ivy Cielo C.
Zamora, Norielle C.
Santos, Jirose R.
Santos, Janus F.
Let's begin!
INTRODUCTION
IVY CIELO VELASCO
UNCERTAINTY

Uncertainty is defined as doubt.

A state of limited knowledge where it is

impossible to exactly describe the existing
state, a future outcome, or more than one
possible outcome.
MDM Company June 1, 2021

A. Making decisions with uncertainty

Random Variables and Probability
The mind is just like a
muscle — the more you
exerciseAit,random variable is simply a
the stronger it gets and
way of representing
the more it can expand.
numerical
outcomes that occur with
Idowu Koyenikan
different probabilities.
MDM Company June 1, 2021

A. Making decisions with uncertainty

Price Uncertainty
The mind is just like a
muscle — the more you
There
exercise it, is a chance that the price of an
the stronger
assetitwill
getschange.
and It is important to
the more it can expand.
be able to support the asking price
for
Idowu Koyenikan a customer to accept it.

JANUS SANTOS
MDM Company June 1, 2021

A. Making decisions with uncertainty

Minimizing Expected Error Cost
The mind is just like a
muscle — the more you
This
exercise it, approach is helpful when one
the stronger it gets and
alternative would work well only
the more it can expand.
under certain conditions, and you
are uncertain
Idowu Koyenikan about whether the
conditions hold.
MDM Company June 1, 2021

A. Making decisions with uncertainty

Risk and Uncertainty
The mind is just like a
muscle — the more you
exercise
Theit, main difference between risk
the stronger it gets and
and uncertainty is that risk is
the more it can expand.
measurable while uncertainty is
Idowu Koyenikan
not measurable or predictable

CRYSTAL KAYE SIERRA

MDM Company June 1, 2021

A. Making decisions with uncertainty

Decision-making under risk and uncertainty
The mind is just like a
muscle — the more you
exercise it, 1) Certainty
theSometimes weand
stronger it gets have enough facts and
the more it can
evidence expand.
to know the possible results of a
decision.
Idowu KoyenikanThese
are the most conducive
situations for decision-making because
the outcomes are quite obvious.
MDM Company June 1, 2021

A. Making decisions with uncertainty

Decision-making under risk and uncertainty
The mind is just like a
muscle — the more you
exercise it, 2) Risk
the stronger
Risk it gets
is where andare unsure of what can
you
the more it can expand.
happen, but you know the likelihood of a
Idowu Koyenikan particular outcome.
MDM Company June 1, 2021

A. Making decisions with uncertainty

Decision-making under risk and uncertainty
The mind is just like a
muscle — the more you
exercise it, 3) Uncertainty
the
In stronger
case ofitan gets and
uncertain environment, you
the more it can expand.
can’t predict the outcomes as you have no
information
Idowu or data available. You have
Koyenikan
no control over what might happen and
don’t even know the options you have.
MDM Company June 1, 2021

A. Making decisions with uncertainty

Process of decision-making under risk and uncertainty
The mind is just like a
muscle — the more you
1)it,Decision-making under risk
exercise
the stronger
There areittimes
gets andwhen you need to make
the more it can expand.
decisions even when you don’t have
adequate or credible information or when
Idowu Koyenikan
the information obtained from different
sources doesn’t match up
MDM Company June 1, 2021

A. Making decisions with uncertainty

Process of decision-making under risk and uncertainty
The mind is just like a
muscle — the more you
2) Decision-making
exercise it, under uncertainty
the stronger
Despite it gets anddata crunching and
all the
the more it can expand.
predictive technology, businesses these
days have to deal with a lot of uncertainty
Idowu Koyenikan
and the ‘what if’ scenarios.
MDM Company June 1, 2021

AUCTIONS
The mind is just like a
muscle — the more you
exercise
Anit,auction is a sales event wherein
the stronger it gets and
potential buyers
the more it can expand.
place competitive bids
on assets or services either in an open or
Idowu Koyenikan
closed format.
MDM Company June 1, 2021

B. Auctions
Oral Auctions
The mind is just like a
muscle — the more you
Oral auctions
exercise it, in which bidders shout out
the stronger
prices, or it gets and
submit them electronically, are
theforms
more itofcan expand.
ascending-bid auctions. The
highest bidder wins the object and pays
Idowu Koyenikan
the value of her bid.
B. AUCTIONS
The Auction Process

Before the start of an auction,

potential buyers are usually allowed a
preview period to check the items on
sale and examine their condition.
B. AUCTIONS
The Auction Process

The preview period may be

announced as being on the
evening before the day of the
auction or a few hours before it
starts.
B. AUCTIONS
The Auction Process

Once potential buyers are done

viewing all the items and are
interested in placing their bids,
they must register with the
auctioneer.
B. AUCTIONS
The Auction Process

The registration process requires

the buyer’s details like phone
number, address, and identification
such as a passport or driver’s license
number.
B. AUCTIONS
The Auction Process

Each registered bidder is given

a bidder card with a number
that is used to identify all
participants.
MDM Company June 1, 2021

B. Auctions
First price auction:
The mind is just like a
muscle — the more you
exercise
A modelit, wherein the buyer pays exactly
the stronger it gets
the price and bid on any given
they’ve
the more it can expand.
advertising impression.
Idowu Koyenikan

NORIELLE ZAMORA
B. Auctions
First price auction:

First-Price
Auction Example
1. Bidder A = $3
2. Bidder B= $5
3. Bidder B = $4
MDM Company June 1, 2021

B. Auctions
Second-price auction:
The mind is just like a
muscle — the more you
exercise it,
A model wherein the buyer pays
the stronger it gets and
$0.01 more than
the more it can expand.
the second-highest
bid for an ad impression.
Idowu Koyenikan
B. Auctions
Second-price auction:

Second-Price
Auction Example
1. Bidder A = 3$
2. Bidder B = 5$
3. Bidder C = 4$
MDM Company June 1, 2021

B. Auctions
Bid Shading
The mind is just like a
muscle — the more you
exercise it,
Bid shading
the stronger is what
it gets and advertisers use to
the more
win it can expand. at the lowest price.
the impression
Idowu Koyenikan
MDM Company June 1, 2021

B. Auctions
Header bidding
The mind is just like a
muscle — the more you
exercise
It isit,an advanced programmatic
thetechnique
stronger it gets and
wherein publishers offer
the more it can expand.
inventory to multiple ad exchanges
Idowu Koyenikan
simultaneously before making calls to
their ad servers.
MDM Company June 1, 2021

B. Auctions

The mind is just like a

muscle —
Price the more
Floor: you minimum price
The a
exercise it,
thepublisher
stronger it getswill
and accept for its
the more it can expand.
inventory- ignoring all bids
below that price.
Idowu Koyenikan
MDM Company June 1, 2021

B. Auctions

The mind is just like a

Price
muscle — the Ceiling/Clearing
more you
exercise it,
Price:
the stronger The final price paid
it gets and
the more it can expand.
for
Idowu Koyenikan
an impression.
MDM Company June 1, 2021

B. Auctions
CPM
The mind is just like a
muscle — the more you
Cost-per-thousand-impressions,
exercise it, or”
Cost
the Per it
stronger Mile” on the Google Display
gets and
the more it can
Network. expand.
CPM is a fixed price
advertiser
Idowu Koyenikan bid or pays for each ad
impression multiplied by 1000
B. Auctions
CPM
MDM Company June 1, 2021

B. Auctions
eCPM
The mind is just like a
muscle — the more you
Stands
exercise it, for ‘effective cost per mile or
effective
the stronger cost-per-thousand
it gets and
the more it can expand.
impressions. Both eCPM and CPM
illustrate
Idowu Koyenikan the ad revenue generated
by the publisher from 1000 ad
impressions.
B. Auctions
CPM
MDM Company June 1, 2021

B. Auctions
Bid Rigging
The mind is just like a
muscle — the more you
exercise it,
A form of collusion
the stronger it gets and in which competing
the more itcollude
parties can expand.
to determine the winner
of a bidding process.
Idowu Koyenikan

AUBREY JOY VILLARUZ

MDM Company June 1, 2021

B. Auctions
Bid Rigging
The mind is just like a
muscle — the more you
Types:
exercise it,
the stronger
- Bid it gets and
suppression
the more-itBidcan rotation
expand.
- Complementary bidding
Idowu Koyenikan
- Phantom bidding
MDM Company June 1, 2021

B. Auctions
Common Value Auctions
The mind is just like a
muscle — the more you
exercise it,
A situation where the value of an
theobject
stronger it gets
for saleand
is the same for
the more it can expand.
everyone. However, bidders have
different
Idowu Koyenikan private information and
estimate its true value.
MDM Company June 1, 2021

B. Auctions
Common Value Auctions
The mind is just like a
muscle — the more you
exercise it,
Example:
the stronger it gets and
the more itan
Auctioning can expand.

oil lease
Idowu Koyenikan
MDM Company June 1, 2021

C. The problem of adverse collection

Insurance and Risk
The mind is just like a
muscle — the more you
is a threat for the insurance company, who
exercise it,
insure against the policy wordings. These
the stronger it gets and
types of risks
the more it can expand.have the potential to cause
financial loss such as property damage or
Idowu Koyenikan
bodily injury may occurs.

JIROSE SANTOS
MDM Company June 1, 2021

C. The problem of adverse collection

Insurance and Risk
The mind is just like a
muscle — the more you
Examples:
exercise it, fire, earthquake losses, or
theeven
stronger it getswhen
liability and an insured is found
theresponsible
more it can expand.
for causing bodily injury,
death,
Idowu or
Koyenikan property damage to 3rd
parties.
MDM Company June 1, 2021

C. The problem of adverse selection

Insurance and Risk
The mind is just like a
muscle — the
Insurance more you
premiums are calculated based on
exercise
three it,
factors:
•the
Thestronger
chanceitthat
getsaand
certain insurance risk will
therealized.
be more it can expand.
• The severity
Idowu Koyenikan
of the damage if the insurance
risk is realized.
• The number of risks the insurer is assuming
liability for.
MDM Company June 1, 2021

C. The problem of adverse collection

Anticipating Adverse Selection
The mind is just like a
muscle — the more you
exercise
Describe it, the problem of distinguishing a
the stronger it gets and
good feature from a bad feature when
the more it can expand.
one party to a transaction has more
information
Idowu Koyenikan than the other party.
EXAMPLES:

1 used cars EXAMPLE 1 EXAMPLE 2

2 health insurance

3 private finance

EXAMPLE 3
MDM Company June 1, 2021

C. The problem of adverse collection

Screening
The mind is just like a
muscle — the more you
exercise
Screeningit, refers to a strategy that is used
the stronger it gets and
to combat adverse selection by filtering
the more it can expand.
out false information and retaining only
the
Idowu true information.
Koyenikan

CENBELL GRACE MAHABA

MDM Company June 1, 2021

C. The problem of adverse collection

Screening
The mind is just like a
muscle — the more you
exercise it,
Example: The
the stronger it gets and
autothe more it can expand.
industry
Idowu Koyenikan
MDM Company June 1, 2021

C. The problem of adverse collection

Signaling
The mind is just like a
muscle — the more you
exercise
Signalingit, is the idea that one party
the stronger it gets and
(termed the
the more it can “agent”) credibly
expand.
conveys some
Idowu Koyenikan
information about itself
to another party (the “principal”).
MDM Company June 1, 2021

C. The problem of adverse collection

Signaling
The mind is just like a
muscle — the more you
Example: Automobile Companies
exercise it,
the stronger it gets and
the more it can expand.
Idowu Koyenikan
MDM Company June 1, 2021

C. The problem of adverse collection

What Is Adverse Selection?
The mind is just like a
muscle —selection
Adverse the more refers
you generally to a situation
inexercise it,
which sellers have information that buyers do
the stronger it gets and
not have, or vice versa, about some aspect of
the more it can expand.
product quality. In other words, it is a case where
asymmetric information is exploited.
Idowu Koyenikan

JOHN KENNETH TOLEDO

MDM Company June 1, 2021

C. The problem of adverse collection

Internet sales
The mind is just like a
muscle — the more you
exercise it,
Internet Sales means
the stronger it gets and all sales of Tickets
over the
the more Internet,
it can expand. or via mobile or
smartphone
Idowu Koyenikan application.
MDM Company June 1, 2021

C. The problem of adverse collection

Internet sales
The mind is just like a
muscle — the more you
exercise it,
Example:
the stronger it gets and
The app/game
the more it canthat
expand.
we install on our
Idowu Koyenikan
phones/gadgets.
MDM Company June 1, 2021

D. The Problem of Moral Hazard Insurance

The mind is just like a

A muscle
moral— hazard
the more you occurs when one
exercise it,
party in a transaction has the
the stronger it gets and
opportunity to assume additional
the more it can expand.
risks
Idowuthat
Koyenikannegatively affect the other

party.
MDM Company June 1, 2021

D. The Problem of Moral Hazard Insurance

The mind is just like a

For muscle
example, when
— the more you a corporation is
exercise it,
insured, it may
the stronger take
it gets and on a higher risk
the more it can expand.
knowing that its insurance will pay
the associated costs.
Idowu Koyenikan
MDM Company June 1, 2021

D. The Problem of Moral Hazard Insurance

Moral Hazard
The mind is just like a
muscle — the more you
Aexercise
moralit,hazard is an idea that a party
the stronger itfrom
protected gets and
risk in some way will act
the more it can expand.
differently than if they didn't have that
Idowu Koyenikan
protection.
Example: Insurance
CHARITY GRACE GOLES
MDM Company June 1, 2021

D. The Problem of Moral Hazard Insurance

Adverse Selection
The mind is just like a
muscle — the more you
It is a problem that arises from
exercise it,
information asymmetry
the stronger it gets and or “hidden”
the more it can expand.
information.
Idowu Koyenikan
Example: Marketplace
Thank you for listening!

Have a great day ahead.

 REFERENCES:

UNCERTAINTY
https://dictionary.cambridge.org/us/dictionary/english/uncertainty
https://en.wikipedia.org/wiki/Uncertainty
https://www.yourdictionary.com/uncertainty
A. Making decisions with uncertainty
https://drive.google.com/drive/folders/1O1cP_zIfA8QA9xz9GabMWQq2DznEZF-W?
fbclid=IwAR3IMC8RcG_bpemtE507QxaI-wWv_wrWuart-C3zUF5LBzYha6-lq1VtQrI
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0168583
https://financial-dictionary.thefreedictionary.com/Price+uncertainty
: https://present5.com/chapter-17-making-decisions-with-uncertainty-managerial-economics-2/?
fbclid=IwAR24NCNoybxnjCc6rlkPsxq4IG_DYrf4pEmuKVGeCY5bOgLgkAF9H7K95t8
 REFERENCES:

B. Auctions
https://corporatefinanceinstitute.com/resources/knowledge/finance/auction/?fbclid=IwAR3DtcM73c-
AwDQp743UFdJysHfbNav0xhQJK_QBLO66EoK4TQZKYAp-gCY
https://www.britannica.com/topic/auction
https://harappa.education/harappa-diaries/decision-making-under-uncertainty-and-risk/?
fbclid=IwAR2q3sV4dKTykFGH1Iq_ocjeCJixB5hwj2HBJUJInlTQ_VmZgy-3z7bAOPw
https://setupad.com/blog/google-adsense-or-monetization-platform-how-to-choose/
https://setupad.com/blog/google-ad-manager-vs-adsense-complete-guide/
https://setupad.com/blog/cpm-vs-ecpm/
https://setupad.com/blog/price-floor-optimization/
https://setupad.com/blog/first-price-vs-second-price-auction/
https://www.geoedge.com/first-price-vs-second-price-auctions-publishers/
 REFERENCES:

Kenton, W. (2021, September 28) Bid Rigging.

https://www.investopedia.com/terms/b/bid-rigging.asp
Gan Integrity (2021). What is bid-rigging?
https://www.ganintegrity.com/compliance-glossary/bid-rigging/
Kagel, J., Levin, D. (2001, October). Common Value Auctions and the Winner’s
Curse: Lessons from the Economics Laboratory.
https://www.asc.ohio-state.edu/kagel.4/CVsurvey.short.PDF
C. The problem of adverse collection
Insuranceopedia. (2020, September 15). What is an insurance risk? - definition from Insuranceopedia.
Insuranceopedia.com. Retrieved October 1, 2021, from
https://www.insuranceopedia.com/definition/2430/insurance-risk#what-does-insurance-risk-mean.
Adverse Selection: A Primer. (2017, August 15). Money, Banking, and Financial Markets.
Retrieved from https://www.moneyandbanking.com/commentary/2017/8/13/adverse-
selection-a-primer
 REFERENCES:

https://corporatefinanceinstitute.com/resources/knowledge/other/screening/
https://www.yadayadayadaecon.com/concept/signaling/
https://www.investopedia.com/terms/a/adverseselection.asp
https://www.investopedia.com/ask/answers/120114/how-does-facebook-fb-make-money.asp
D. The Problem of Moral Hazard Insurance
https://www.investopedia.com/ask/answers/09/moral-hazard.asp
https://www.investopedia.com/terms/a/adverseselection.asp