Team Production Benefit through Gift Exchange

The articles here are very interesting, especially the third one in regards to the power of altruism. I found it interesting to know that a study conducted revealed that for children, the propensity to help other reduces if they are rewarded with a gift. This shows the true nature of children, wherein people try to do good, or act ethically even without any monetary compensation. The example where the number of absence days given to firefighters being limited also shows a similar theme. When there was no penalty to their pay if they took a leave, people had an ethical reason, for the good of the society to not skip work and only take leave when actually sick. When this was changed to having their pay docked, people no longer took their work as a social good and instead only for monetary reasons. Thus during times of holiday, such as Christmas the number of sick leaves rose. This is due to people placing a dollar amount on their work done and during special times would rather take a pay cut. Such thinking over the years has reduced the altruistic nature of people and makes them more money orientated. Recently there has been a shift into moving to an altruistic way. Many companies have recently allowed people to work from home and take sick leaves without a pay cut. Contrary to what many people thought, the number of holidays taken actually reduced. This is because people had the ethic and self-motivation to work and contribute through team production even though they could have taken a holiday without any pay cut. The reason why people do this can is because they feel obligated, or motivated to do their work. People who work more will have better chances of an increased salary, promotion or bonus at the year end. Thus, the trick is to make acting for the greater good, ie team production should also be beneficial to the individual.

One of my classes which I am currently taking, BADM 395 encourages students to participate in a manner that promotes team production through gift exchange. Here, the teacher provides a question bank out of which questions in the midterm and final exams come from. It is difficult to solve each question on your own and then study, but as per the teacher's recommendation, if people collaborate then studying becomes easier. The professor told us that us that we can and should collaborate with our classmates to get the answer the questions. For proof that collaboration works, our professor told us that when students exchanged study material, the % of students who got A's increased. Compared to a year where there was to communication and collaboration between students and thus only one student managed to do well in the class and get an A, thus making it harder.

One example that I can think of regarding team production through gift exchange is that off getting rewards for referrals. There was this scheme for a product where a person got $100 dollars for providing the referral to another person who signs up to the service. The sign up cost $15 and took 5 minutes to complete. In such a setting, the person will not sign up or if he is newly signing up has no reason to use the referral code as he is not getting any value added. On the other hand, the other person also gets nothing since his referral code was not used. Here both parties are in losses. Similar to the article where the kids pull the strings to get candy and then divide it, here also there is value in team production. If the first person offers the other some incentive, such as $30 out of the $100 then the person would most likely use the referral code. Here through simple gift exchange, the production of both individuals increased.

Team production and effort can also be detrimental in certain situations when there is a share the spoils mentality as mentioned in the article titled, "How to get the rich to share the marbles". When there is group effort or collaboration, sometimes some people do not put in as much work. Their work will be done by the other people to make up as, in the end they all receive the same benefits. Thus innovation and extra effort will be stagnant. This is why modern workplace has incentives set up. If there is no incentive for doing better work or helping the poor, it will not happen. Thus the only way to get the rich to share the spoils and help the poor is to make it in their best interest to do so. Referring to the altruistic nature of humans, for some that is enough and thus people who are wealthy donate their wealth to charity and other organization for the benefit of others. For some people, thus feeling of altruism is lower and thus there should be incentives to stimulate them to help those in a lower position.

Managing Future Income Risk

Currently being a senior, I have started to think about managing my money and how I spend it as I will be graduating soon. Since I am yet to find a full time job, there remains a high level of uncertainty regarding my future and what income I may get, if any at all. As an international student, there are other concerns I face, such as sending money back home to India, and the possibility of earning a significantly reduced salary if I have to work in my home country. (the starting salary and standard of living is much-much less in India compared to the United States.

Some of the decisions I have made thus far have been to hopefully better manage my future income risk. When I initially joined the University, I was an undeclared major in the division of general studies (DGS) and was hoping to either major in Finance or Architecture, as those two fields were where my passion was. However, during my first year I learnt that Architecture majors have a tough time finding a job. The unemployment rate for architecture has been steadily increasing and to attain the complete architecture degree, one requires around 4 years of additional study and mentorship training after competing the bachelor’s degree. Finance majors also, on average have a higher starting salary than Architecture majors and all these factors combined led to pursue Finance. Thus to get accepted into the college of business and study Finance, I may a decision that will hopefully be better and carries less risk for my future income.

The average salary for a Finance graduate from the University of Illinois is around $55,000-$60,000. In order to hopefully get a higher salary or better chance at landing the job, I had interned at various financial services companies during my three summer terms. Again, the decision to intern rather than spend the summer doing other activities was to reduce my future income risk, by trying to get a leg up in terms of experience compared to other students.

Yes, I have accumulated a certain amount of debt to pay form my tuition costs and living expenses. My parents have been able to finance a part of my college tuition, but the remainder is through student loans. I have worked at different places on campus, such as in the student-dining hall in my first year and as lab assistant during my junior year to earn money and reduce the debt owed. Although these jobs did not pay to well, it was a way to reduce my current expenses in college and thus save money for the long term.

With the above being said, I have taken many of decisions that although are detrimental to reducing my future risk, were choices to enjoy in the here and now. Every time I indulge in activities that are just for fun. For example, for our last thanksgiving in college we are deciding to go out of campus and spend the week at Las Vegas.

Yes, I have an older brother who graduated from Michigan State University. He was majoring in hospitality business and although got a well paying job in the Michigan area, decided to pursue his passion for music. This came as a huge shock to all of us, because pursuing a career in music has a lot of risk financially. Earning a steady and stable income takes longer initially and more so in this career path. Finding his niche in the music industry itself took a year and now that he’s narrowed down his path he can manage his priorities better.

To remain financially independent my brother has taken to recording voiceovers for various commercials.
On average he also performs twice a month at the Jazz clubs and lounges in and around New Delhi through which he can live a comfortable lifestyle.
However to maintain an even more comfortable standard of living he wishes to move to the commercial capital of the country in Bombay where the Indian equivalent of Hollywood is located, where he would find more opportunities to build a better platform for himself as a professional singer.
One positive I take back from his life is to follow your passion. Future income risks can be managed with a passionate drive backed by a plan along each step of the way.

Reflection Post

Reviewing all the blog posts that I have written in this class so far, it is evident that they all share a common theme. The connection is that they are all about economics, and more specifically about the economics behind the decisions faced by individuals in groups and teams.

For our first post, I wrote about my experiences working for an organization. The discussion was based more on the organizational structure of the firm and the transaction costs incurred during the hiring of a new employee. The main discussion was regarding the level of authority individuals have compared to the managers and what is an optimal level to balance the quality of work with timelines. The other was comparing the transaction costs of hiring externally vs hiring through an intern pool. All these points focus on finding the right balance or the best solution for the organization as a whole, instead of looking at individual benefit. The second week's post was connected to the individual’s behavior. I talked about the example of picking up money from the street and the opportunity cost of doing so. I then moved onto a more ethical approach as to why people indulge in opportunistic behavior. The post on team organization is connected with the other prompts, as it is also about teamwork, and how a well-organized team is highly functional. Connecting it to the previous post, a well-organized team depends on the structure of the organization, and in turn the team. The structure is thus highly important in forming a functional team that leverages all its members and resources to produce the optimum output. The last post I made was about the Illini Bucks system, and how the system could be used for various reasons on campus.

Aside from the prompts itself, the blog posts were very closely related to some of the themes as discussed in class. The example I gave regarding the behavior when one finds a wallet in the post on opportunistic behavior closely resembles the coordination games we discussed in class wherein each player has the choice of keeping or returning the wallet, and how over the long run, if there is coordination, the total outcome is better as compared to when there is no coordination. I did not notice this connection earlier, as we had still not studied many of the coordination games. But after looking at the post again, I could easily relate the two concepts of opportunistic behavior and coordination. The Illini Bucks post is also a parallel to the transfer pricing we learnt in class. The pricing is also based on the market movements of demand and supply, which is a pure economic concept.

Yes, I feel my writing process has definitely improved since starting to write these blog posts. The reason for this is because of the additional time I spend in writing the blog posts. Before even beginning to write, I read the prompt and think about the topic in detail. I try to gather and organize my thoughts and roughly outline the flow of my blog post before even starting to write. Initially, I had skipped this step and started to write the post as soon as I read the prompt. By reading the prompt first, thinking about what I will be writing helps to make the post be better organized. In addition, I also read some of my classmates posts before starting to write my own, so that any thought or points I may have missed will also be covered by me. I think because of the change in my process, the blog posts have more detail in them and are organized in a better way. If the prompt is closely related to what we have studied in class, I also read the class material to better understand the concepts and try and relate the posts with some of the material learnt in class.

I feel the prompts are already very good. They are not too specific or broad in nature, which allows us to write about the intended topic, but gives a variety so that each post can be uniquely interesting. Many of the post also require us to give examples of our own experiences, which make the discussion more interesting and relatable. I would like to see a bit more of a direct connection to the concepts taught in class as that would supplement the learning material.

Illini Bucks

I feel the University issuing Illini Bucks, which have the sole purpose to being able; move ahead in lines would be a very interesting experiment. If each student received an equal amount of allocation, there would definitely be cases where the Illini bucks are traded among the students. First, we will have to see the potential uses for the Illini bucks and accordingly see the demand for the product.


I can think of many uses Illini bucks could have especially in a college setting. During registration, using Illini bucks you could register earlier or get into certain classes, which are more popular. This would especially be helpful as people have different registration dates according to major, number of credits, etc. Some people would thus have a greater need for the Illini bucks than other. Me personally, as a senior with honors status can register before other and thus would not need to use Illini bucks for the sake of registration. I could, in this instance sell the Illini bucks for money or trade it in some other way. This however would have been very useful to me in freshman year when I wanted to register for classes such ATMS 120, which would get full before my registration date even started.

Another use for Illini bucks would be to reserve rooms or technology in from the University Library. Rooms are always booked out and sometimes people do not show up because there is no limit on how many times you can book a room. With the use of Illini bucks, it would be more equitable to book library room for group study. One way to use illini bucks would be using 1 illini buck per reservation. This would reduce the number of false bookings made. Similarly reserving concert ticket, or other speaker events and programs where registration is required is mostly currently done on a first come first serve basis. This does not place a value to how much a person wants to attend to the said program and thus can book without consequence.

Currently, i find myself having to wait a long time to loan out technology because there a number of people ahead of me in line. I recently wanted to loan out a Chromebook from the undergraduate library, but was told 2 people were in line before me and thus would take two weeks. The use of Illini buck would be very useful here. Since my laptop had broken down, I would have paid a high number of Illini bucks to get the Chromebook. This leads us into the pricing of the Illini bucks. The university already has a credit system in place for dining hall, where meals, laundry etc can be purchased. Thus implementation would be simple. The price would depend on the demand for the use of illini bucks. How many people would need to move ahead in lines? I reckon quite a few. Certain polls would have to be conducted to fix a dollar value to the Illini bucks. Thus is the price is too high, no one would use the illini bucks. People would just remain with the current system of lines. Only in dire circumstances people would resort to using illini bucks if the price is too high. Since the price would be so hight, the use would be very less, thus prices would reduce in the long run. If the price is too low, then people wold get a lot of illini bucks and registration would become more competitive. This would increase the price to reach an equilibrium price based on the market demand and supply of illini bucks.