Understanding cost
| Lecture handout: Understanding cost* |
Textbook Reading: Chapter 2 (Intro and Section 2.4, pp. 39-34 and 59-63)
The aim of this session is to understand the economic concept of opportunity cost.
Group activity:
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I believe that the case discussion demonstrates our inherent reluctance to lie. However:
2 of the bestselling Holocaust memoir authors of the golden age of misery memoirs were both fakes, and they actually met each other at a conference and claimed to remember each other from the time. neither had ever been to Nazi-occupied Europe
— Ed West (@edwest) September 11, 2020
Here is a more recent example of obtaining copyright for the use of a photograph:
William Greenbladt, a photojournalist, who took this photo of the McCloskey’s pointing guns at protestors sent them a $1500 bill because they lifted the photo and used it as a Christmas card. pic.twitter.com/EpdRSp19Hx
— Michael Cali (@cali_photo) November 5, 2020
In the debrief it’s important to realise when someone is being evasive. I good example of this is in the U.S. 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:
- Further reading: Steele, Jeffrey, “The Origins of EVA”, Chicago Booth Magazine, Summer 1998
And here’s a good post on the downsides of using EBITDA as a measure of profitability:
EBITDA is a terrible measure of profitability.
Yeah that's right. You heard me.
Here's why 👇
— The Secret CFO (@SecretCFO) August 31, 2022
| Learning Objectives: Opportunity cost reasoning, basic principles of negotiation.
Focus on diversity: 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. |