ECO 550 1&2

Discussion 1

Instructions

Review the three scenarios below. Look for which, if any, of these scenarios presents an example of post-investment holdup
.

#2 would be an example of post-investment holdup

1. Your firm conducted a search for a new chief financial officer and hired a highly qualified candidate with a yearly salary of $250,000. After six months, the person left to join another firm.

2. Your firm has an exclusive contract to assemble automobile seats for a number of luxury models. Almost 100% of the materials are imported and, of those, over 50% include parts manufactured in China. All of the prices on the parts from China increased by 25% when the United States imposed tariffs on China. Your company has informed all of its customers that increased cost must be passed on for your firm to continue supplying the seats. All of your customers reluctantly agreed to pay the additional cost.

3. Your company took note of your progress toward your MBA, and when the director for customer services left the company, you were asked to take over as interim director. You were encouraged to apply for the full-time position once you got your MBA. You served for 13 months, at which time your company was acquired by another company and your position was abolished.

In your discussion post, address the following:

· Identify which of the above scenarios, if any, are an example of post-investment holdup.

· Choose one of the scenarios above. Define the following and explain each within the context of the chosen scenario:

. What is the sunk, or stranded, cost?

. What is the contract?

. Was the contract breached?

. What are the damages?

Discussion 2

Instructions

The focus of this discussion is on understanding the differences between economies of scale and economies of scope. What are the key differences? Use these concepts to determine whether gains from economies of scale or gains from economies of scope were the principal reason behind a merger or acquisition.

Also see the help provided in the discussion preparation.

Instructions

Select one of the mergers and acquisitions below. Consider whether the merger/acquisition was about scope or scale economies.

· Sirius XM acquired Pandora.

· The acquisition of Credit Karma by Intuit.

· The merger of Strayer University and Capella University to form SEI.

For your chosen case, address the following 
in your discussion post:

· Explain how economies of scale and scope differ.

· Describe how growth in the case you selected is created from either an economy of scope or scale.