The Toys That Made Us — Two Part Tariffs for Barbie

 

When designing the pricing model of Barbies, Mattel looked to Gillette’s pricing model for razors and razorblades, which is a form of second degree price discrimination that utilizes two part tariffs as a way of maximizing profit from group buyers. The doll (or razors) are sold at very low prices, but the accessories (or razor blades) are the main drivers of profit for the firm. This model allows the company to sell a lot of base products at near marginal cost, but then charge high prices for the accessories, which are a critical component of the overall product.

Downsizing — Private vs Social Perspective

 

 

A scientist has created a way to solve overpopulation: shrinking people down to a fraction of their size and having them live in small communities. The movie shows a man (Matt Damon) at a company lecture and consulting with a realtor for a home in a small community. The interaction between the two demonstrates the personal and social tradeoffs of a positive externality. The family shrinking themselves down is doing it for personal reasons, namely to save on living expenses and to no longer work, but there are social benefits at play as well. Having everyone shrink to a fraction of their size can help alleviate overpopulation and reduce human waste.

Thanks to Amanda Yaya for the suggestion

A League of Their Own

 

Dottie decides to quit right before the World Series, and her coach isn’t too happy about it. One of the most salient topics taught in a section on behavioral economics is the idea of ignoring sunk costs. When things get boring or tough, a rational agent may decide to quit. Dugan believes that baseball is a great separating equilibrium and that it shows who’s tough and who isn’t. If baseball were an easy game then the it wouldn’t be a beneficial signal to everyone watching.

Thanks to Jose Fernandez for the reference!

Shawshank Redemption — Cigarettes as Money

In this short scene, Red pays an inmate to smuggle contraband with cigarettes. Cigarettes are used as money a lot in prison and it is shown throughout this film. This scene can be shown to talk about medium of exchange, commodity money, bartering, etc.

Thanks to James Tierney for the clip and description.

Jurassic Park — Coupon Day at the Park

This clip has both the idea of an inelastic good and the idea of price discrimination. I suggest using it when teaching elasticity and then also using it when you teach price discrimination and talk about how they connect!

Here’s the page from the book.

Thanks to James Tierney for the clip and description!

Shawshank Redemption — Crowding Out

In this scene, cheap inmate labor provided by Shawshank crowds out private investment. The Warden ends up getting bribed to make sure he does not bid on a contract that the private investor needs to have. This can be shown to students to talk about how programs that are meant to help the economy can crowd out private investment. It can also lead into a discussion on corruption and greed.

Thanks James Tierney for the clip and description!

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