1. People respond to incentives (something that induces a person to act). Those incentives change the cost and benefits of actions and hence make people behave in a certain way. To change behavior, you have to change incentives (on the macro level, a policy that does not change incentives is likely to fail). Good incentives are created by rewarding good performance or punishing bad performance. Yet, aligning incentives is not easy and normally involves tradeoffs. For instance, charges were brought against Sears Automotive in 1992 for recommending unnecessary auto repairs by their mechanics, due to following a compensation scheme that provided incentives for sales personnel to sell unnecessary repairs to receive larger commissions. Sears Auto tried to fix the problem by separating those responsible for recommending repairs from those responsible for doing them into two divisions. However, the two divisions began colluding, where the service division paid the recommending division for repair recommendations. Sears then adopted a flat rate for mechanics pay, but it led to shirking (for more details, see https://www.nytimes.com/1992/06/12/business/accusation-of-fraud-atsears.html; https://managerialecon.blogspot.com/2009/08/what-do-tonsillectomies-have-incommon.html). What is your suggestion for Sears Auto (and others in the industry) to fix the problem of unnecessary repairs?

2. Assume you hired a manager to run the business you own, and that you can focus on completing your degree. You pay the manager a $70,000 salary a year. Is this enough incentive for the manager to do what is best for you? Is there a better way in your view to restructure the manager's incentive in this case? Please explain.

3. In Chapter 1 case opening (headLINE) in the textbook, the Amcott manager was fired because he did not recognize the time vale of money. Please explain. Also, do you agree with this analysis?

4. Assume that we are developing a managerial catalog that includes general recommendations to improve managerial decision making and outcome. Based on your study of this module/chapter, what is your recommendation/advice to managers (anyone directs resources to achieve a stated goal) to include in this catalog?

5. Various surveys indicate different characteristics of "an effective manager", such as being a good leader and knowledgeable, maintaining regular contact with everyone on the team, ability to coordinate and delegate appropriate tasks, fairness in performance evaluation, ... etc. In your view, what is the most important characteristic of an effective manager? Why?