problem 1:

a) What do you understand by the term agency problem?

b) What is meant by the term moral hazard and adverse selection?

c) How do the terms in (b) above complicate the ‘agency problem’?

d) What are the diverse broad types of contracts that exist?

e) Make recommendations for the kind of contract in each of the given conditions:

• Research contract between an advanced weapons designer/manufacturer and the army for the feasibility study of deploying a robot-soldier in different combat situations.
• Sales contract between a mobile operator and a call centre for the sales of mobile phone packages.
• Market survey for a car company trying to gauge customer satisfaction for its first-time buyers–work will comprise calling fixed number of customers and having them answer predetermined problems from a problemnaire.

problem 2:

a) Describe the term ‘offshoring’.

b) Why are western countries afraid of offshoring?

c) How do western countries get profit from offshoring?

d) Gartner predicted that the trend for 2008 was going to be near shoring. What is meant by the term near shoring?

e) What advantages does near shoring give as opposed to offshoring?

f) How do you think the Mauritian BPO Industry will be influenced by the trend of nearshoring predicted by Gartner and what must it do to protect itself?