A Series of Unfortunate Events – Paid in Coupons

The Baudelaire orphans have been sent to the Lucky Smells Lumbermill and are being forced to work on the production floor. After a grueling morning of “log day,” the workers are given an entire five minutes for lunch, but the Baudelaire’s come to find that lunch consists of gum. Frustrated, they wonder if they can use their wages to buy something else, but it turns out that the Lucky Smells Lumbermill pays their workers in coupons rather than actual currency. The coupons don’t have any value since the workers don’t have any money to go out and buy things anyway. The workers also don’t have power to leave or demand better conditions because Lucky Smells is the only place to work in town.

When a single firm controls the labor market in a region, they are said to have monopsony power in the market. Monopsonies can pay workers below competitive wages because workers are unable to find alternative employment opportunities. In this case, the Lucky Smells Lumbermill pays them almost nothing since the coupons can’t really be redeemed anywhere.

A Series of Unfortunate Events – Aunt Josephine’s Risk Tolerance

The Baudelaire orphans have been sent away to live with their Aunt Josephine. They’ve been told how formidable and fierce she is, but it turns out that Aunt Josephine is incredibly risk averse. She has disconnect the doorbell and the telephone because someone may be electrocuted if they have a faulty pacemaker, even if no one in the house has a faulty pacemakers. Risk averse individuals are willing to give up some benefits (in this case, doorbells and phone calls) in exchange for avoiding possible negative consequences (electrocution).

Family Guy — Volcano Insurance

A traveling salesman sells Peter an insurance policy to protect his home against a volcano eruption. He convinces Peter “a volcano is coming this way” despite the fact that Peter lives in Rhode Island, far away from any active volcanoes. He convinces Peter to purchase the policy by using the gambler’s fallacy and convincing Peter that Rhode is “due for one.”

If this were actually true, the premiums associated with this policy would be extremely high and likely be the same as the cost that an actual volcano would inflict on the town. Insurance markets function on the interaction between uncertainty, risk aversion in consumers, and risk neutrality for firms. If some horrible event were guaranteed to occur imminently, there would be little incentive to sell insurance.

Thanks to Alex Marsella for the clip submission and most of the summary!

Kitchen Nightmares – Marginal Touches

Chef Ramsey stops at a Scottish restaurant to help a struggling chef. What he finds is a restaurant where each employee makes a marginal change to the dish before it is sent on its way. A single dish may be modified by 7 different people, but it isn’t clear exactly how much of a contribution each is making. While each may add some benefit with their labor, the additional cost of waiting to send the dish out (and the cost of such a large staff) is part of the reason Chef Ramsey is there to help. The labor costs of the restaurant are $4,500 each week, but they aren’t even breaking even.

Thanks to Alex Marsella for the clip suggestion!

The Simpsons — Grease Business

When Homer finds out from Apu that there is a local business buying old grease, Homer sets out to be rich. He buys $30 worth of bacon, feeding it to the dog, in order to harvest the extra grease and sell it. He spends hours frying up bacon only to earn 68 cents. He doesn’t seem bothered by his losses since his wife (Marge) paid for it. There’s one problem Homer hasn’t realized yet; Marge gets her money from Homer.

Thanks to Alex Marsella for the clip suggestion and summary!

The Office — Automated Assitant

A new phone system can replace many of Pam’s tasks. She normally spends her day connecting incoming calls to different sales people and departments, but this new phone system will make it so that anyone calling Dunder Mifflin can dial directly to the department they want. She thinks she still has value at putting our candy, but then realizes a vending machine can do that as well.

Jim swoops in to save Pam and play the role of Michael Scott, the branch manager. Jim is in love with Pam and doesn’t want to see her fired, so he acts like Michael and tells the salesman that they aren’t interested. He’s almost busted, but luckily gets away with it.

Thanks to Richard McGrath for the clip submission!

Community — Market Price

Troy and Abed are sitting at dinner in a fancy restaurant when the bill arrives at the end. Troy initially offers to pay for dinner because it was Abed’s birthday, but is shocked by the final total since so many things on the menu must have been listed as “market price.”

Restaurants often list menu items as “market price” because they may include item (like lobster or fish) that have a constantly fluctuating price. Instead of printing new menus to account for changing prices, restaurants will just list it at “market price.”

Thanks to Luke Starkey for the clip submission.

Friends — Joey Loses His Insurance

Joey finds out that he hasn’t been working enough lately, so the Screen Actors Guild is canceling his insurance. He’s quick to point out the moral hazard involved in insurance because now he has to be more careful!

Later in the episode, he comes down with a hernia after working out. Since his insurance has lapsed, he doesn’t have enough money to go to the doctor to get it looked out. Luckily, Joey is able to find a part as “dying man” and he ends up getting his health insurance back.

Thanks to Isabel Ruiz for the clip suggestion!

The Simpsons — MoneyBART

The local little league team has a new coach, and she plans on using statistical analysis to improve their chances of winning. She tracks player tendencies and digs into the work of Bill James to bring a Moneyball approach to the Isotots. Bart laments that she has taken the fun out of the game, which begs the question of the team’s objective function. Are sports teams win-maximizers or should some teams focus on having fun?

At the end of the segment, Bart has a choice to make. Should he take the statistical approach to win the game or should he swing and try to preserve his hot streak. The hot hand fallacy is the belief that previous observations are correlated with upcoming observations. This fallacy leads us to believe batters “get hot” even though the probability of the next hit is independent of the previous ones.

Brooklyn 99 — Moneyball

Captain Holt and Lieutenant Jeffords want to streamline the department and improve efficiency across the precinct. Jeffords is concerned that Capt. Holt is getting to greedy and can’t make many more improvements, but Capt. Holt believes he’s taking a Moneyball approach to the department. The film is his favorite and he finds the statistical analysis beautiful.

While he may be improving efficiency through his new statistical approach, the two should be concerned about diminishing returns. Productivity can increase with revised strategies, but additional productivity may require a significant increase in cost. In order to determine the optimal outcome, the two should focus on marginal analysis.

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