Understanding cost

Learning Objectives: Opportunity cost reasoning
Lecture handout: Understanding cost*

The key aim of the session is to understand the economic concept of opportunity cost.

The Hamilton Real Estate case is used as the first session on the Harvard MBA course on negotiation. It was written by Deepak Malhotra who has a recent book called ‘Negotiating the Impossible‘. You can follow him on Twitter @Prof_Malhotra.

I believe this case demonstrates our inherent reluctance to lie. However:

In the debrief it’s important to realise when someone is being evasive. I good example of this is in the US version of The Office, where Andy has to repeat the same question to Angela 3 times before he gets to the truth. (Season 5, Episode 12, from 9:22 – 10:13). ‘Better Call Saul’ has a nice example of the sunk cost fallacy:

Group activity:

  • Malhotra, Deepak, “Hamilton Real Estate: BUYER”, Harvard Business School Case No. 9-905-052, January 2005 (£)
  • Malhotra, Deepak, “Hamilton Real Estate: SELLER”, Harvard Business School Case No. 9-905-053, January 2005 (£)

These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 2 of ‘Economics: A Complete Guide for Business‘.
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