The following is a case study using a recent event: CVS versus Walgreen: an inte
ID: 1178140 • Letter: T
Question
The following is a case study using a recent event:
CVS versus Walgreen: an interesting recent case involves two pharmacists CVS and Walgreen. Rather than a situation where the two indulge in a competitive battle against each other over advertising or a price war, they battle against each other on the services offered. In the early June 2010, Walgreens announced that it would " no longer participate in new and renewed benefit plan from its rivals (CVS) drug benefits unit" ( CNN money, June 7 2010). The main grievance of Walgreens was CVS Caremarks maintenance choice plan started requiring patients that have chronic medical conditions to fill their prescription at CVS pharmacies only rather than giving them the choice to fill it at Walgreens (or other pharmacies). As a result of this announcement both companies shares fell- CVS fell 8% and Walgreens fell 2.7%. As a response CVS in couple of days decided to drop Walgreens from its pharmacy benefits plan, which would force some of its benefits customers to pay a much larger amount to get their drugs from Walgreens. Leading to a potential loss of customers for Walgreens. As a result CVS shares fell 1.5% and Walgreens fell 3%. Eventually, about a week later the two pharmacies decided to end their war, coming to a compromise agreement the financial terms of which were not disclosed. As a result both firms saw their stock values increase.
Briefly comment on this example as an application of the prisoners dilemma game.
Explanation / Answer
we provide a pedagogical tool to make the experience of students in an Economics course more enriching, exciting and rewarding. We promote the idea of using examples from current events that are happening or have just taken place and relating them to economic concepts. This would involve the instructor researching and adding examples and case studies from real life events as they unfold. This would mark a change from using examples and case studies that are described in standard texts as they tend to be older and out of date, and are unable to excite students or hold their attention for very long. We provide examples and descriptions of a few examples and case studies that have been developed for MBA economics classes. We note that students are a lot more excited and are able to relate much more easily to current and up to date examples and some may have even experienced the events described in the examples. This leads to a positive externality for the class.
There has been a multitude of new thinking and research about various teaching methods that can be used for economics courses, both for undergraduates and for graduate MBA courses (see Becker and Watts (2005) and Becker, Watts and Becker (2006)). The traditional chalk and talk methods as a pedagogical tool in all subjects have become less and less popular as students become more and more demanding about teaching methods that are more in tune with the 21st century technological revolution. A traditional "chalk and talk" pedagogical style tends to make students less and less interested in the happenings of the classroom and more likely to let their minds wander away to other thoughts. With the advent of smartphones and the use of laptops in the classrooms, students have every opportunity to tune out their boring "same old same old" professor and hop onto the internet where they can easily peruse the happenings of the day, catch up with their friends on Facebook, Twitter and other social media or could just carry on a text message conversation with their friends, some of whom might be sitting in the same classroom. In addition to this being a problem for all courses, economics courses have the rather unsavory reputation of being dry, boring, impossible to understand, too math and graph oriented, too abstract with little real life applications etc. The last comment is especially galling as the principle ideas of economics have everything to do with business, and it is really not too difficult to come up with hundreds of examples of applications of each economic concept. If you open the pages of any Business news website, or periodical you will find a lot of events happening right then that demonstrate some application of an economic concept.
Mark Maier and Scott Simkins (2009) in a fundamental piece of pedagogical work called Just In Time Teaching (JITT) provide insights into the use of student assignments that students have to look at, grasp the concepts of the questions and finish in just a few hours before class starts. Despite the obvious thoughts of slap dash work and corner cutting by students, the pedagogy actually helps students develop skills of introspection and persistence as well as innovation of thought. The idea behind this is really simple and practical: when students enter the real life and are employed, they will face innumerable just in time assignments. They will have to process the information and come up with strategies and solutions in just a few hours. Students in a classroom realize this, and the excitement of having a project or homework that resembles a real life work assignment at least in terms of the time available makes students more eager to engage in their coursework. Following the JITT innovation, in this paper we explain the process of using cases and examples that are currently taking place in the real world and relating them as applications of an economic concept that is being taught in class. Current text books in economics both at the undergraduate level and at the MBA level have increased the use of examples and cases to help students grasp an economic concept and to illustrate its use in the real world. A brief scan of the latest texts in both Principles of Economics and MBA Economics courses reveals the following examples and cases: LeBron James choosing not to attend college (opportunity cost), outsourcing to China (international trade), Pricing Tickets for Broadway shows (price discrimination), FCC Auctions (Economics of information and uncertainty) and the managerial perils of Asian chipmakers at the height of the tech boom (perfect competition). Unfortunately none of these examples can be called "just in time" i.e. the stories in them have all taken place quite a while back. Thus, students find it difficult to relate to the examples and cases because they are not current, and they have either forgotten about it or they have never heard of it. We can thus understand their complaint that economics concepts have few real life examples. It is not that the concepts have few applications; it is that the students have no interest in an example that is not current. Students would be much better served if instructors use as applications to economic concepts current events that can easily be looked up and that students are aware of or still remember because it occurred in the not too distant past. This would require periodic update of examples by the instructor, rather than relying on examples provided by the textbook author. In this paper we describe a few applications that are described by stories and events that have just occurred or are currently occurring, are fresh in the minds of the students and will remain interesting to students for at least a few more months. We relate these stories to economic concepts that are taught in a standard undergraduate or MBA economics class, and provide anecdotal evidence of enhanced student participation and interest.
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