MPE 781/981- Economics for Managers
MPE 781/981- Economics for Managers

MPE 781/981- Economics for Managers
Trimester 1, 2015
Assignment: Economics Case Study
Due on the 4th of May ( Monday, 11:59 pm), 2015.
I. Assignment Overview: This assignment is based on an article published
in The Economists’ Voice titled ‘The Power of Awards’, by Bruno S.
Frey ad Jana Gallus
, in 2014. The article is already attached to this assignment
question. Please read the article carefully before attempting this
exercise. You will also need to draw on other resources available through the
library as well as external resources. Please note that you need to provide
clear references for your sources when citing research and data.
II. Learning Objectives: This assignment is designed to encourage
you to think about the application of concepts learned in this unit in a
real world scenario. This assignment, indeed, is interesting as it explains
how the existing economic theories can explain the implication of the power
awards, in particular, how awards provide incentives to individual members
of an organisation or promote certain norms in the society/organisation. We
hope that this assignment will expand the horizon of your thoughts.
III. Assessment: Your score on this assignment contributes towards
40% of your final score for this unit. Based on the attached Rubric, your
assignment will be graded on your use of appropriate economic theory and
concepts, clarity of exposition and overall quality of your answers. Although
you can work in group, this is not a group assignment and you must
submit answers individually.
IV. Submission: This assignment must be submitted electronically on
CloudDeakin (CD) Dropbox area by all students by 11:59pm on the due
date. No hard copy is required. Print your name and student ID clearly
on the first page of your answers. Please check the Academic Honesty and
Misconduct section in the Unit Guide. Submitting your answers automatically
implies that you have read and accepted the Plagiarism and Collusion
Declaration, and that the submitted answers are entirely your own work.
V. Questions: Answer all questions. Limit the total word count of
your assignment to less than 3,000 words. You are encouraged to provide
necessary graphs, figures and tables with data wherever possible, which are
not subject to word limit. Please be careful in implementing referencing
1. In your own words, summarise the article. What is the main message
of this article? [8 marks]
2. According to Authors, “Where performance can only be vaguely determined,
awards have a comparative advantage over monetary incentives.”-
in light of the article and based on your own research, please explain
why the authors suggest so. Can you provide a counter example of
the above statement? What is the di?erence between the Monetary
Compensation and Awards in relation to designing of an incentive
mechanism? [8 marks]
3. Suppose you are a CEO of a garments company called ‘XYZ’. In your
company, there are ten mangers and one thousand workers, who are
working under ten di?erent sections. Your objective is to maximise the
profit by increasing the performance of each section. Explain how do
you design an appropriate incentive mechanism to achieve your objective.
Do you provide the same incentive to both managers and workers
or di?erent incentives to di?erent levels of hierarchy ?[ 8 marks]
4. Each year we celebrate the achievement of eminent Australians through
the Australian of the Year Awards. Explain what is the main purpose
of such award and how does it influence our community? Can you
also provide two additional real world examples (other than the examples
mentioned in the attached article) where awards have significant
impacts in increasing welfare of the society? [8 marks]
5. In 2006 Nobel peace prize is awarded to Muhammad Yunus and Grameen
Bank; and in 2007 Nobel peace prize is awarded to Intergovernmental
Panel on Climate Change (IPCC) and Albert Arnold (Al) Gore Jr..
Can you explain what global norms are promoted by these awards and
how these norms may a?ect the welfare of the world? [8 marks]
Econ. Voice 2014; aop
Bruno S. Freya,* and Jana Gallusb
The Power of Awards
Abstract: Every economist worth his or her salt will tell you that monetary
compensation is more efficient than all other forms of rewards. Awards have
only received scant attention in the economics literature. Yet, they are ubiquitous.
They can take many forms and include titles, prizes, orders, medals, and
still other types of decorations. We outline the distinguishing characteristics of
awards, especially in comparison to monetary rewards, show the potential risks
and emphasize where awards are particularly useful.
Keywords: awards; incentives; intrinsic motivation; money; performance pay.
DOI 10.1515/ev-2014-0002
1 Introduction
Every economist worth his or her salt will tell you that monetary compensation
is more efficient than all other forms of rewards. Money is fungible and therefore
yields most utility to the recipient. It can be applied marginally, such that the
desired performance can (in theory) be directly induced. A second type of material
reward is non-monetary and takes the form of fringe benefits such as a company car
or a particularly attractive office. These incentives are less efficient but can nevertheless
be widely observed. This can at least partly be explained by the tax-related
advantages they provide. More recently, intrinsic motivation has been considered
as a work incentive. A fourth category – awards – has received only little attention
by economists. Exceptions are Hansen and Weisbrod’s article in the Journal
Bruno S. Frey was Professor of Economics at the University of Zurich and Distinguished
Professor of Behavioral Science at the University of Warwick. He is now Professor of Economics
at Zeppelin University and Research Director of CREMA. His research interests include the
economics of awards, the economics of happiness, and cultural economics.

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