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You are the manager of a retail electronic store Recently

Ethics And Moral Hazard

You are the manager of a retail electronic store. Recently,  you purchased 200 What -A-Sound portable CD players from a whole saler in a going out of business sale. The units cost you $80 each, about half of the normal cost of other brands that you sell for $260. You expected to sell these units at the regular price and earn an above normal profit. After your purchase, you discovered that the units were poorly constructed and would probably last about a third as long other major bands.
Customers often ask for a recommendation when considering the purchase of a protable CD player. If you tell them the truth about the What-A-Sound model, you may have difficulty selling the units, even if you offer a steep discount.
a. What will you tell a customer who asks about these units?
b. What are the short run and long run implications for yourcompany's profits if
(a) you conceal the quality of the units and sell them at their regular prices or
(b) reveal the quality problem? If you were to choose alternative b, what options might you consider in an effort to minimize the effect of these units on your profits?

Apr 25 2018 Read more Less More

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