Consider the following contractual relation between B and S. B's value of the widget, denoted by v, is uncertain at the time of contracting. Assume that v will be either $90 or $150 or $170 with an equal probability. S's cost to produce the widget is $100 (c = $100). S's reliance expenditure is $10 (e = $10). Contract says that S is to deliver a widget to B at p = $130. Assume that B promises to pay S the contract price $130 (not paid in advance). Assume that if the contract is not completed, reliance expenditure has no value. Note: I will clarify the timing of the model again. Initially, B and S sign the contract. S chooses reliance e. Then, B observes the actual value of v, and decides whether to breach or not. If B breaches the contract, S does not incur the production cost $100 at all. The presumption is that for S, there are two types of costs, (1) the cost he incurs before B's breach decision that is captured in e, and (2) the extra cost he should incur to complete the contract that is captured in c. (a) Describe the efficient performance / breach decision by B. (b) Assume that the court awards expectation damages for breach of contract. Suppose that v turns out to be $90. Will B want to breach or perform the contract? Explain your answer.
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Consider the following contractual relation between B and S.
B's value of the widget, denoted by v, is uncertain at the time of contracting. Assume that v will be either $90 or $150 or $170 with an equal probability.
S's cost to produce the widget is $100 (c = $100). S's reliance expenditure is $10 (e = $10).
Contract says that S is to deliver a widget to B at p = $130. Assume that B promises to pay S the contract price $130 (not paid in advance).
Assume that if the contract is not completed, reliance expenditure has no value. Note: I will clarify the timing of the model again. Initially, B and S sign the contract. S chooses reliance e. Then, B observes the actual value of v, and decides whether to breach or not. If B breaches the contract, S does not incur the production cost $100 at all.
The presumption is that for S, there are two types of costs, (1) the cost he incurs before B's breach decision that is captured in e, and (2) the extra cost he should incur to complete the contract that is captured in c.
(a) Describe the efficient performance / breach decision by B.
(b) Assume that the court awards expectation damages for breach of contract. Suppose that v turns out to be $90. Will B want to breach or perform the contract? Explain your answer.
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