Introduction: Company UA announced its competition in establishing its new billion dollar aircraft-repair base by selecting a town. The bid was for prize of 7,500 jobs which pays $25 per hour. City O offered $154 million and city D offered more than twice the amount. City L offered $300 million.
Company UA selected city I which bidded $320 million from 93 cities competiting with eachother. The company UA walked away from the massive center almost nearing to bankruptcy which left the local governments out of money with no new tenants. The city is just equipped with 12 elaborately hangar bays and company UA outsourced its maintenance to a southern firm.
To determine: The ethical, legal and economic implications of bidding wars and find who pays for such giveaways and can local voter be involved in such bidding and is there a limit on these incentives.
Explanation of Solution
Implications of bidding wars:
Finding the right location is one of the most important aspects for running a successful business because right location selection will help in reducing tons of expenses. Locating the exact or suitable location for a company is not an easy task and many companies compete with eachother in bidding wars to win a certainlocation which will give high competitive edge. However these bidding wars has its own implications with respect to economic, legal and ethical side.
A state has to generate enough employment opportunities for its citizens for the flow of goods and production. So, it has to allow signification number of companies to enter and open business and so the tax imposes on the companies are low. It will attract more number of companies to enter in. But these tax exemptions are imposes on the fellow cititzens of the states which will be a significant drawback.
With company UA spread of incentives offered by every state and cities has a downside. City O and city L had got advantage in losing the bidding. The bidding is conducted by the government and so local voters are not made to involve in the bidding.
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Chapter 8 Solutions
Principles Of Operations Management
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