Midterm study notes
1. Rational model consisted of utility maximization, opportunity cost, and cost
- Utility max- means always trying to maximize your benefits. And
- Opportunity cost- considering our next alternative options.
- Cost benefits analysis- is when we compare/weigh the costs and
benefits and then make decision based on our findings. It also
suggests a good example of a rational decision will be one that
benefits us most and cost us least.
o Cost benefit also includes the equation V= 0*R-C-S
The more info the less risk. The more risk the less likely
we are to do something. Also the higher the Switching
cost the less like we are to do something.
The quasi-rational model is one in which decisions are influenced by with
the 7 key concepts.
1. Over confidence- when we success persists our confidence goes up.
We attribute our success to our selves, and not the preparation we
did. We then seek less info on future decisions and we persist and
this leads to failure. EX: Napoleon
2. Illusion of control – unrealistic belief we can influence events. EX:
3. Regret avoidance – we tend to lower our expectations to avoid regret.
EX: Milan flight
4. Fairness theory – making decisions based on what is morally
conceived as fair instead of just by cost benefit analysis. EX: Landlord
5. Loss aversion – Engaging in high-risk behavior to avoid the
experience of loss relative to a reference point. People strongly prefer
avoiding losses than acquiring gains. EX nick leeson
Marketing companies – offer free trials so when you have
the product it’s harder to quit it.
6. Escalation of commitment – a threat to the ego can make people
persist in making bad decisions.
7. Procrastination- we tend to procrastinate when tasks are harder and
more complex. Breaking things up to smaller parts could reduce
Acronym: OIRFLEP - ReoFlip 2. The concept of employment relations systems framework refers to the
system that john Dunlop developed to show the interacting actors that affect
Employment relations. These actors are not autonomous, rather they are
influenced by each other and they together set the rules, so this tells us there
is a system of interaction. The system is harmonious when they cooperate
and conflictual when they don’t. They system is also stable because the actors
have a shared ideology.
- This system consists of 3 actors; the GOV, MGMT, and UNIONS.
- They are influenced by 5 external environmental factors. Econ, pol,
legal, social, geo, and tech. (Acronym - EPLSGT)
- These actors and factors have inputs and produce outcomes through
specific conversion methods.
(Remember actors have internal inputs that are converted by
mechanisms like CA or HRM policies, which produce outcomes like
wage changes, strikes or unemployment. These actors can also be
influence by external factors like legislation that bands strike or
economics that affects supply and demand and there by affecting wages
or employment rate.)
KKM added strategic choice to Dunlop’s traditional model.
Strategic choice - Actors formulate strategies to step out of environmental
constraint. Government policies that affect economy or regulation and in turn
affect employment levels, which affects union rates.
Human agency - Human behavior, social and community influence on the
three actors which then affects outcomes. Ex: Occupy wall street
Firm effects – managerial strategies or HR policies that may affect outcomes
Some criticism of the traditional Dunlop model was that it did not adequately
predict outcome since it did not take into consideration the strategic choice factors. 3. Explain some of the key principles of the Classical school and discuss the implications for
employment relations scholarship. Explain the meaning of the term invisible hand. From the neo-
classical perspective, what are the main factors influencing the relative bargaining power of workers
relative to management? What differences did institutiona