Lily lost her first tooth and got $100 from the Tooth Fairy. Cam and Mitch are trying to convince her that the Tooth Fairy made a mistake and she should give the money back, but Lily wants to keep the money until Hayley tells her this would almost certainly put her on Santa’s naughty list. Now Lily has to decide what she values more: $100 or Christmas presents.
See more: opportunity cost, rationality, tradeoffs
Cam and Mitch have decided to get Jay and Gloria a special gift off registry for their new baby’s nursery. Mitch seems concerned that they will not appreciate it.
See more: altruism, gift giving, imperfect information, irrationality, rationality
Phil has to decide whether to leave his own firm and start his own with two old co-workers, but he only has a limited amount of time to decide. He remembers that he is not good under pressure by recalling a time that he bought an alpaca because it was the last one and he panicked.
See more: choices, cost benefit analysis, irrationality, rationality, tradeoffs
Phil finds gift certificates to a spa that he and Claire had won in a charity auction in a drawer, but they expire today. He wants Claire to use them because otherwise their money just goes to charity, but Claire doesn’t know how she will. Phil is falling victim to the sunk cost fallacy, while Claire is thinking in terms of the additional costs and benefits of using the certificates.
See more: irrationality, opportunity cost, rationality, sunk cost, tradeoffs
Haley works for a lifestyle company with a history of selling dodgy products. The latest one is stickers. Her boss wants them tested but can’t use animals. So, she uses the next best thing – her assistants. But first, she has some really important questions to ask. This clip demonstrates the importance of labor law and regulations. Without regulations that are enforced, some employers might require workers to complete dangerous tasks. Even with regulations, this still happens. How does this clip show that Haley’s boss knows about the danger and about the regulations but doesn’t care?
See more: entrepreneurism, incentives, labor law, product differentiation, rationality, regulation, safety, testing
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.)
See more: adverse selection, advertising, asymmetric information, demand, information economics, marketing, preferences, product differentiation, profit, rationality, sunk cost, supply, tastes and preferences
Cam and Mitch have been married 3 months, but it seems like their honeymoon will never end. Cam continues to give Mitchell flowers even though he clearly doesn’t enjoy them as much as he used to. He may have loved the first bouquet, but eventually he may start to hate them.
See more: diminishing marginal returns, gift giving, inefficiency, preferences, rationality, utility