Block 4 Class Summary
Day 1
Data and Decisions
We started day 1 of block 4 with our final Data and Decisions class. We reviewed categorical variables which wouldn’t be included in the exam but useful context for life anyway! Some of us encountered them in the Kaiser team exercise if you did that one.
We did a brief review of content through the course and final thoughts from Reed on readiness for exam tomorrow.
Class reps Rahul and Vinay presented Reed with his class gift (a bottle of wine). The “Stats are noisy” T-Shirt is coming tomorrow.
Microeconomics
After POA’s and lunch we had our second to last Econ class where we jumped into Industry Dynamics and Short and Long run equilibriums in Competitive markets.
We reviewed the Plywood and Semiconductor articles first to set the context. These demonstrated the concepts of boom and bust and how once capacity is shut down it can take time, money and effort to get it back when things boom back. Perhaps the Semiconductor industry can teach the plywood industry some things about managing through the swings and in how to message to the market.
The concept of LATC is introduced (Long Run Average Total Cost) which includes the cost of capital (or capital charge). This is an important consideration when contemplating additional investment in an industry to evaluate the likelihood of making a profit in the long run (also equivalent to calculating NPV). If an investment has an annual operating profit greater than the capital charge or a positive NPV then it will yield an economic profit and so would be a good investment. This could be considered the Entry decision. Conversely if it is negative in the long run the firm will want to exit – although there is the possibility of operating in the negative in the short term if the firm believes the long run is positive and it has the funds available to manage through the short term. We revisited the Aluminum Shelter case to evaluate it along with the LATC.
Reminder – These concepts are illustrated through competitive markets where firms are price takers and only choose qty’s. Therefore in the short run any firm operating in the market will choose a qty based on price where MR = MC (per our earlier learning). In the long run Price will equal LATC and is considered to have reached the Long Run Equilibrium at this point.
The 2 graphs provided in Sven’s Executive Summary are important to understand conceptually.
Finally we discussed how these concepts can also be applied to Oligopoly markets and evaluating how many fringe firms are likely to enter or exit a market. This is where there is some new algebra to learn and put into practice to calculate this.
Financial Accounting
Our last class of the day is our final Financial Accounting class. We reviewed some concepts of Stockholder Equity which were included as part of the exam.
We reviewed key concepts from across the course and covered final exam preparation.
Class reps Isis and Vincent presented Sunil with his class gifts – a beautifully engraved compass and some fun items.
Day 2
Building Trust Based Relationships
Day 2 started off a bit differently – we are back with Trust Based Relationships. This class I dare to conclude was actually a bit of light relief for many from the quant focus we have had so much of lately, even though for many it required going quite deep into personal stories and reflection that maybe we haven’t thought about for a while and therefore the emotion that goes with that.
We practiced how to listen for emotions with a partner whom everyone now has a special connection with after staring into their eyes for 2 whole minutes (without laughing!). Then in trios we observed how well others listened and critiqued them referring to the table on effective listening skills.
Data and Decisions
Exam day – we did it – will say no more.
Microeconomics
This was the class after the exam – I probably should say no more than that but will summarize a little of the content from the few notes I managed to take down.
The main topic was auctions. There are multiple types of auctions including
- 2 sided auctions (such as electricity markets)
- English auctions (these are ascending and Sequential)
- Dutch auctions (these are descending and Sequential)
- Sealed bids (these are Simultaneous)
- Multi Unit (such as IPO’s)
We had a live auction in the class for the money jar.
In an English Auction it is the dominant strategy to stay in the auction as long as the bid is less than your valuation.
In a second price sealed bid auction with private values it is a dominant strategy to bid your valuation, since if you win you will pay less than your valuation.
Assume that bidders seek to maximize their surplus from participating in the auction.
In Sealed bid auctions there is always a trade off between winning the bid and the size of the surplus. This is where the Winners curse comes in – often the winner of an auction will have overpaid relative to valuation, in order to secure the win.
Final word – avoid collusion by effectively designing the auction.
Final, Final Word – Aditee managed to teach Sven something – that the probability of winning a bid with 5 bidders is 1/5. Apparently he had never thought of that! Congrats Aditee!
And class reps Andrew and Amulya presented Sven and Sara with their class gifts.
Day 3
Building Trust Based Relationships
Session 2 for this block and today’s class continued in the same vein as yesterday with a focus on Empathy in addition to listening. We partnered and trio-ed up again for more in depth sharing, although it may have been less fun than yesterday since it’s the last day and we just want to be done.
Financial Accounting
We did the final exam. Lauren printed cheat sheets for everyone and Chris brought Tequila for everyone for after class.
And that finally brought us to the end of Block 4 and Term 1.
Stay tuned to start all over in January (after a small thing called the Micro Econ exam next weekend).