Decentralizing Decision Rights Marries Authority with Local Knowledge

question 41

Multiple Choice

Decentralizing decision rights marries authority with local knowledge.This would seem to be a good thing,but a problem that may arise is that:

• A)local management may conserve central management's time and effort.
• B)local knowledge may allow local managers to tailor prices and services to suit local needs.
• C)lack of local incentives may mean that local managers do not work to maximize firm value.
• D)local managers may have too strong a corporate identification.

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Definitions:

Adverse Selection

A situation where asymmetrical information leads to transactions between parties where the high-risk party is more likely to participate than the low-risk party.

Moral Hazard

A situation in economic theory where one party takes more risks because they know another party bears the cost of those risks.

Product Failure

A situation in which a product does not meet the expectations of consumers or fails to perform as intended, leading to its commercial failure.

Antilock Brakes

A safety system in vehicles that prevents the wheels from locking up and ensures the driver maintains steering control during an emergency braking situation.