About 1,000 Allstate employees accept buyout

Alltel had offered a buyout for some of its workers in order to cut the costs and improve operations. These costs were mostly created by Katrina and other hurricanes last year. The number of employees were higher than expected; Allstate planned on only 700 of the 6,800 eligible workers to accept the voluntary buyout. Allstate will also be limited the types of insurances it offers in hurricane- and earthguake-prone regions.

This can be explained by both short run curves and long run curves cost curves. The short run cost curve shows how it was better for Allstate to stay open even when it lost $1.55 billion. However this lose is not greater than their total revenues, so they should not shut down. This situation can also be viwed using a long run cost curve. Allstate needed to trim some of its workers so it could run more efficiently because it had it was past the MES and moving up the diseconomies of scale. So the buyout allowed Allstate to move more toward the MES. This will help Allstate as it tries to become the leading personal-lines insurance provider; it is currently second behind State Farm.