Life in Pieces — Discounts & Sunk Costs

Tim tries to host a guys night and things don’t seem to be going his way. Beyond the awkwardness of just the two of them, the big pay per view fight lasts only a couple of seconds. While the two did get to watch the fight, which had a knockout, it wasn’t quite worth the hundred dollars they paid. Tim notes that he may be able to turn it off and get his money back. With a lot of experience goods, it’s not necessarily the actual outcome of the action that people care about. Tim and Matt did see a fight, so why is he so focused on getting his money back?

A second quick econ line occurs later when they sit down for dinner. Even though Tim isn’t eating any tacos, he notes that the cook is cheaper since he expects Matt to eat 25 or 26 tacos. This form of bulk discounting represents second degree price discrimination. With this pricing mechanism, the hope is to induce customers to purchase more than they would have (law of demand) even though making an additional taco doesn’t have the added cost of another cook.

2019 0

Brooklyn 99 — Boyle Can’t Quit

Boyle’s new food truck isn’t going well at all. He’s losing a lot of money and he can’t seem to change things around. Jake suggests Boyle does what he’s good at and just quits, suggesting that Boyle’s the average price Boyle charges for food is below even his average variable costs. Boyle took out a huge loan and he needs to help pay it back, which may mean that his prices are between the average fixed and average variable costs, in which case he should keep producing even though he’s losing money.

2019 0

Seinfeld — Bottle Arbitrage

Newman gets the bright idea to take bottles from New York (where the deposit refund is 5 cents) and return them in Michigan for 10 cents. Kramer stops him quickly and let’s him know that this isn’t a good idea because he’s not thinking about the costs of transporting them. Newman quickly realizes he can get a truck at no cost from the post office, which makes the arbitrage scheme profitable.

The full clip comes from Economics of Seinfeld.

2018 0

Spongebob — More Drive Thrus

After accidentally creating a large hole in the wall of the Krusty Krab, a customer mistakes the hole for a drive thru window and places and order. Mr. Krabs, being a the savvy businesscrab that he is, quickly adds a menu and microphone system to facilitate the drive thru. It becomes so popular people are waiting in line and causing a huge traffic jam (could use this to talk about a negative externality too!) in Bikini Bottom. The police visit and threaten to issue Mr. Krabs with a ticket and then the mayor comes in to complain as well, but Mr. Krabs has a solution. Adding a second drive thru to reduce the line, but that doesn’t work out too well. Watch what happens as diminishing marginal returns sets in.

Thanks to Erin Yetter (Twitter) for both the clip and the description!

2018 0

A Series of Unfortunate Event — Library Operating Hours

Olivia is frustrated with the administration because they only allow the library to be open for a short amount of time. She rightly notes that it doesn’t actually cost anything for the library to be open longer, partly because her salary is paid regardless of the number of hours. The administration, though, has used the money for personal reasons and doesn’t understand why it needs to be open longer. Olivia argues that the marginal cost of operating the library is zero, which implies that operating the library is only one large fixed cost.

Thanks to Brittany Pifer for the scene recommendation!

2018 0

Business Insider — Robotic Kitchen

This Boston restaurant (Spyce) uses robots to cook food for customers and can cook your meal in 3 minutes or less. Customers order from electronic kiosks at their table and a screen displays which robot station is preparing the diner’s dish. The woks are designed in a way to ensure consistency. The only labor used in the kitchen is the “garden manager” who is responsible for adding toppings and ensuring presentation. The bowls are priced at under $8.

Thanks to Peach for the clip suggestion!

2018 0

Das Racist — Combination Pizza Hut And Taco Bell

If you haven’t driven by YUM!’s combination stores, they are a site to see. A family of picky eaters can stop by a location and grab a combination (depending on the pairings) of pizza, tacos, fried chicken, fish, or burgers. The combination of stores varies depending on the area, and some even have three-in-one:

This song (and accompanying picture) can serves a great introduction to the concepts of product differentiation and economies of scope. The YUM! brands have a large presence in major categories in the fast food market:

4. KFC — 20,404 locations
7. Pizza Hutt — 13,728
11. Taco Bell — 6,500

Thanks to Rob Szarka for the recommendation.

2018 0

World Economic Forum — Alibaba’s Automation

A look inside the robotic warehouse of Alibaba in Huiyang, China. The robots pick up the physical items and deliver them to the workers who are in charge of sorting the orders before shipment. The robots can carry about 1100 pounds of good around the warehouse floor all while not bumping into other robots because of a laser guidance system.

2018 0

Business Insider — Self-Driving Garbage Truck

Volvo has recently unveiled self-driving garbage trucks in Sweden that are designed to be operated by only on single garbage collector. The trucks match the pace of the garbage collector to allow for differences in worker characteristics. This is just one of the many ways in which automation improves the efficiency of tasks.

2018 0

Horrible Bosses 2 — Child Labor

Nick, Kurt, and Dale start up production on their new product, the Shower Buddy. After hiring some workers, they decide to hold a day where employees can bring their kids to work. It turns out that the kids actually started working on the factory floor and are enjoying it. At first blush, it seems like this shouldn’t be happening, but when Nick finds out how productive they have been, he walks away to change the sign instead.

2018 0