Haley is in a bind and can’t decide who she should spend her life with. Should she stick with Arvin, the successful scientist who has his life together, or should she go with Dylan, her high school boyfriend who is full of fun? Every decision we make, whether we realize it’s economics or not, has tradeoffs. There’s only so much time in our lives and we must make decisions. One of the difficult parts of “matching” is finding the right rate to minimize conflict and maximizing our happiness. Happiness, in this case, is known as interdependent. Her happiness will eventually be a function of her own utility, but also her spouse’s utility.
See more: assortative mating, interdependent utility functions, matching, opportunity costs, tradeoffs
Claire and Cam want to flip a house, but Phil and Mitch are against it. Phil pretends he is for it leaving Mitch to put his foot down, but eventually Mitch decides to play the good cop as well and leave Phil to put the brakes on the house. If Phil and Mitch had agreed before hand to both be against the plan (cooperate), they could have come to the best outcome, but it was in Phil’s best interest to deviate and act like he supports Claire and Cam, leave Mitchel to take the full cost of the outcome. Mitchel then decides to defect as well and they are now both supporting a project they don’t believe in. This scene represents a more common version of prisoner’s dilemma in which both Phil and Mitchell would be better off cooperating, but they each have an incentive to defect.
See more: game theory, incentives, interdependent utility functions, prisoner’s dilemma, sequential moves
It’s Thanksgiving. For the first time, Claire is leaving the cooking to Phil…. or is she? She’s not. She made a fallback turkey, just in case Phil’s doesn’t work out. This demonstrates fallback position. Economists who study the family suggest that a person will stay in a relationship as long as the in-relationship utility is higher than the fallback position. While Claire isn’t considering leaving Phil for her fallback turkey, this clip can be used to discuss fallback positions. Claire has entered into a contract with Phil in allowing him to cook the family turkey. She will remain in that contract only as long as the benefit of eating Phil’s turkey is greater than the utility of eating her own turkey.
See more: fallback position, interdependent utility functions, marriage, risk, risk aversion, trust
Cam and Mitchell own a duplex, which they would normally rent to someone so that they could earn a bit of extra income. This time around, Cam’s sister, Pam, needs a place to stay while pregnant, so Cam offers it to her rent free. This has put a bit of a strain on Cam and Mitch’s relationship because Cam’s sister has stayed longer than they planned and they need the money from the rental.
See more: cost of capital, implicit cost, interdependent utility functions, opportunity cost, personal finance, rental income, tradeoffs
Mitch is working on a big case about the rights of vulnerable workers. In it, he argues that a company is preying on the lack of options available to people who are homeless and hiring them for extremely low wages. He believes that this is a violation of labor laws and tries to get the notice of the press. At the same time, Cam is stealing the spotlight as a successful high school football coach who is openly gay.
Traditional economics holds that trades which are voluntary (such as employment) are mutually beneficial. As such, some might argue that the company isn’t taking advantage of its workers since the workers benefit from the employment opportunity. Political economics suggests that you cannot ignore the power inequality between the company and the workers. When a large power imbalance is present, exploitation is possible.
A second use of this clip comes from the role of spouses in the household production model. The happiness of each individual party is important, but the other partner’s utility enters the utility function of each individual. This interdependency is important because it explains why some partners may opt for a decision that doesn’t maximize their own utility, but instead do so because it maximizes their partner’s utility.
See more: altruism, externalities, income inequality, interdependent utility functions, labor law, living wage, negative externalities, political economics, private benefits, social costs, specialization, structural unemployment
Its Halloween and Gloria often ties to coordinate her costume with Jay, but he usually just accepts whatever Gloria picks for him. At this point in their marriage, he’s tired of being the “ugly” sidekick while Gloria goes as some beautiful character. The two would like to coordinate their outfits so that they are both happy, but what they may not be able to match correctly. Consider this a modern version of the Battle of the Sexes game.
See more: Battle of the Sexes, choices, coordination game, game theory, interdependent utility functions, payoff matrix, preferences, utility
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.
See more: charity, donations, efficiency, emerging markets, gift giving, growth, interdependent utility functions, preferences, utility
Cameron gets Lilly a job as a child actor, but Mitchell is not excited about it and says no. Cameron doesn’t understand why Mitchell thinks he should have the final say in household decisions. Theoretically, decision making in the household production model tends to lean toward the spouse with greater access to resources (which Cam notes in the clip), but it doesn’t mean that partner gets to make all of the decisions. The unitary model assumes one spouse makes all the decisions as a social planner, but the bargaining model means that decisions are shared between partners.
See more: access to resources, bargaining power, household labor supply, household production, interdependent utility functions
After Mitchell quit his job, Cameron went to work to support them. Both Mitchell and Cameron think their partner is happy with this role reversal, but both are miserable and want to return to their original arrangement. Neither wants to say anything to other, because they are focused on maximizing their combined utility rather than their own, but they aren’t share their disutility.
See more: added worker effect, division of labor, household labor supply, household production, interdependent utility functions, labor supply, preferences, specialization, unemployment
Mitchell complains to Jay about Cam being too nice, and Jay complains to Mitchell about Gloria not liking his dog butler. In the beginning of the scene, the two complain about the actions of their partners and how it imposes a cost on them that they feel their partner is not considering. Jay loves his dog butler, but he also doesn’t want to upset his wife. Cam spends a lot of time helping people and animal, but Mitchell feels it is sometimes a burden.
Jay notes that they are both with people who are very different and that maybe that makes their relationships better. The concept of interdependent utility functions is that people maximize combined utility of a household/relationship even though that means they way not be maximizing their own individual utility functions.
See more: assortative mating, gains from trade, gains to marriage, interdependent utility functions, matching, preferences, utility
When the kids are back in school, it means that Phil and Claire go into production mode to make sure everyone is out of the house on time. In this one-on-one aside, Phil is under the impression that both he and Claire get up at 7 in the morning to start taking care of the kids. Claire informs him that she actually starts her day as a stay at home mom at 6 in the morning. Because Claire has a comparative advantage in getting the kids ready for school in the morning, Phil gets an extra hour of sleep. In the household model of labor supply, partners often divide the tasks based on specialization, not necessarily on equitable terms.
See more: comparative advantage, division of labor, household production, household labor supply, interdependent utility functions, labor supply, specialization
In an earlier scene, Mitchell bumps his daughters head on a doorframe, but then begins to worry that he may not be ready to have a child. Mitch sees how much Lily likes Cam and how good of a caretaker he is and begins to worry that he is a worse parent, but Cam reassures him that they are both great parents because they complement each other. Their decision to specialize in particular tasks allows them to complete more work together and both recognize they wouldn’t accomplish nearly as much if each had to go it alone.
See more: comparative advantage, complements, division of labor, household production, household labor supply, interdependent utility functions, labor supply, specialization
Phil has decided that decisions that can’t come to a resolution should be solved by flipping a coin. Phil has gotten one of those special coins for disputes between him and Claire. The two have been arguing for an hour about whether to be cremated and after being unable to land on a decision, Phil opts to flip the coin. As a final dispute, the two flip the coin to determine how they should spend their retirement account. Unfortunately for the kids, the coin decides that they spend it on a beach condo. Typical either-or-decision making involves a careful consideration of costs and benefits, but interdependent decision making may not be so easy.
See more: cost benefit analysis, decision making, either-or-decisions interdependent utility functions, tradeoffs