Claire and Jay are visiting a competitor’s business. The competitor wants to buy Pritchett Closets, but Claire and Jay have a different idea. The new company is focused on creating smart closets that can pick outfits for the person based on the weather and their current size. They have great technology, but they don’t have the manufacturing capabilities to fulfil all their orders. Pritchett Closets, on the other hand, has the manufacturing space, but they haven’t invested much in technology. Claire proposes that they merge instead.
Haley is at a staff meeting. She’s worried that she hasn’t had enough good ideas lately. Her fear is that this will lead her boss to believe that she isn’t working hard on behalf of the company. Haley signals that she’s a good worker by suggesting that Gloria sell a family recipe to the company (NERP). Gloria has long held the recipe secret. The recipe is an example of private technological knowledge. The recipe is valuable to Gloria because of the family tradition. The recipe is valuable to NERP because it could give them an edge in the lifestyle industry. Will Gloria sell? (Note: Jay also makes a fantastic joke about the value of a bachelor’s degree that can be used for discussion on human capital)
Phil has plans to give Haley the perfect git for her 21st birthday – a new car. He has spent months doing research and planning without actually going in to a dealership. His work has been online and he landed an incredible deal. But Jay is convinced that he can do better. In this scene, Phil is sad because Jay made his deal fall through but Jay has a surprise. Jay did some hard core negotiating and beat that unbeatable deal…. or did he? Buying a car is different from many other markets. The price on the sticker is rarely what people pay. Instead, both buyer and seller go in to the transaction with the understanding that they will negotiate the price and features of the car.
After receiving a nomination to a major closet expo, Jay receives a phone call who expects to be full of congratulatory remarks. He instead finds the dial tone from a fax machine that has misdialed the number the intended. Jay, who isn’t the most technologically savvy member of the family, wonders why anyone might still be using a fax machine.
There’s a lot going on in this clip. The main focus is on Claire and Jay. Pritchett Closets (which Jay founded and Claire runs) has been selected to participate in the Expo Internationale du Closet! Both Claire and Jay are over the moon excited. But why? Participating in this event exposes them to an international market. They can expect a big increase in demand for their product. The second focus is on Manny. Manny has moved out but found that there are certain things about living at home that he really misses. This is something that a lot of people discover when they move out. These early lessons in personal finance can be tough!
Gloria and Jay are looking to sell her family’s sauce to a larger company. They each use a different tactic to make the product more appealing. In doing this, they’re trying to increase the demand for the sauce. Unfortunately, they don’t coordinate their strategies in advance and Jay blows the deal. In fact, there’s a lot of information that Gloria has hidden from Jay. She has long had a surplus of sauce that she has been keeping in storage lockers across town. Gloria has likely paid a lot of money for all of the storage. What do sellers usually do when they have a surplus? Are Gloria’s past actions consistent with traditional economic principles of rationality? Consider sunk cost and marginal costs. (Note: this scene is an example of adverse selection. Gloria knows that her product is no good but they are trying to signal not only that it’s good but also that it’s special, almost magic)
It’s Halloween. Jay and Gloria usually coordinate their costumes. Use this scenario to setup a payoff matrix for picking costumes. Gloria and Jay are the players. What choices would you like to give Gloria? What choices would you like to give Jay? What are the payoffs for each possible outcome? What’s the most likely outcome given your matrix? There isn’t a single correct answer. Just have fun with it and discuss.
Jay has a great new invention that he believes will revolutionize the closet industry. It’s a sock dispenser. In competitive industries, product differentiation can lead to short term profits – especially for early adopters. Why is Jay concerned that his son, Manny, has a new friend who has seen this idea?
Jay got new glasses that make him look like an old man but they work really well. So well that he realizes that Gloria’s family members in Columbia are wearing his old clothes. Notice that Gloria says that they sometimes send the clothes back. In the US, people frequently donate clothing to people in less developed countries. Many economists argue that this is counterproductive and leads to a surplus of clothing in these countries. That surplus can hurt markets and cost jobs.
Mitchell complains to Jay about Cam being too nice, and Jay complains to Mitchell about Gloria not liking his dog butler. Jay notes that they are both with people who are very different and that maybe that makes their relationships better.