BLOCK 3 CLASS SUMMARY
Day 1
Financial Accounting/Data & Decisions/Micro Economics
Day 2
Financial Accounting/Data & Decisions/Micro Economics
Day 3
Data & Decisions/Micro Economics/Financial Accounting
Day 1
Financial Accounting
Introduction of LIFO/FIFO
Reference Kroger and Macy’s articles on impacts of LIFO vs FIFO and overall inventory management.
Discussion on adjustments such as Depreciation changes and “Earnings Managements”.
Reference google article on changing server expected product life to change depreciation charges.
Introduced Accounts Receivable and estimates of Bad Debt.
Be prepared to practice these new concepts on LIFO/FIFO and AR/Bad Debts in homework assignments.
Data and Decisions
Started Regression Modelling Section - Reed described how there are 2 main areas of statistics and this is the second. The first was focused on Hypothesis testing and experiments. Regression is used more for forecasting and prediction.
Review of Chapters 19 and 20 - Linear Patterns and Curved Patterns - need to know how to read scatterplots and fit lines to data both linear and non linear. Understand residuals. Perform transformations of data using logs.
Be able to interpret the lines and intercepts!
Completed in class team assignment - Horsepower.
Micro Economics
Reviewed the 4 different Market Groups. Block 3 focused on Oligopoly (particularly homogenous).
Had fun playing the Airline Simulation game. Demonstrated a Duopoly and how selected prices would collapse down to the Nash Equilibrium over time.
Introduced the concepts of the Cournat model which is Capacity/Qty competition model and the Bertrand model which is price competition based. Competing firms will have a Best Response Function.
There is some new algebra to learn in particular for Courat and Nash Equilibrium (follow on from demand function 4 step process) - recommend reviewing slides for this.
Day 2
Financial Accounting
Finished discussion on LIFO and Tax Implications and Inventory Management.
Introduced PPE and Depreciation topics.
Data and Decisions
Review of Chapters 21 and 23 - preparing simple and multiple regression models.
Remember to always plot your data!
Exam Discussion - Reed advised the exam will be more focused on inference rather than pure computation, will need to apply intuition. Expect more questions aligned to the team assignments. Exam will cover material up to block 3 only. Exam will be in class, open book and can use laptop. Review sessions, practice materials will be made available.
Micro Economics
Reviewed Spotify and Starbucks articles.
Spotify illustrated an Oligopoly with Homogeneous goods - there were many substitutes and nobody dared raise their prices.
Discussion on understanding which Oligopoly game your playing - Cournat or Bertrand.
Discussion on measurement of industry concentration (Concentration and HHI ratio) and new merger guidelines in 2023.
Moved discussion onto differentiated markets. Illustrated by Cord Cutters article. Introduced concept of loyalists and switchers. Horizontal differentiation and vertical differentiation.
Introduced game theory concepts. Assumes rational behaviour. Comprised of simultaneous games (think soccer penalty)and sequential games (think Chess).
New in class problem set distributed. Solved question 1 a Patent Race and 2 Strategic situations. Discussion on Dominant strategy vs dominated strategy.
Day 3
Data and Decisions
Focus on review of Chapter 24 and the Wine case to illustrate building of a multiple variable regression model.
Completed 2nd block team assignment on Home Prices.
Micro Economics
Game Theory Continued - Prisoners Dilemma, Tradegy of the Commons and Bertrand trap.
Reviewed the 1-100 number game - winning number was 25 for the group. Some people selected 1 which is the ultimate answer. Demonstrates how to play your best response to what you think others will do.
Reminder game theory assumes rational thinking and that everyone knows/understand the rules of the game. If they don’t irrational outcomes may occur.
Beware of over confidence bias - we all think the answer we pick is right - we were all overconfident in the 1-100 number game.
Review of Opec and Palm Oil articles - illustrate collusion and search for alternatives respectively.
Continued In class problem set - problem # 6 - The Entry game - Fresh Harvest vs Daily Baguette, use of a game tree (not decision tree) and a payoff table to solve. Discussed concept of double marginalization. Some more new algebra here that presumably needs to be learned!
Solve remainder of problems on your own. Solutions to all problems are now posted on B Courses.
Final topic of the day was on the Trust Game - if you didn’t see the simulation I highly recommend it - here is link…Trust Simulation
Also recommend reviewing this topic of trust in games some more on your own - we went through it fast and rushed in class.
Exam Discussion
Exam dates extended to include Friday and Monday (so Dec 8th-11th). Window once opened is 24 hours to resolve stress of uploading time. You must still complete exam in allotted time however. This is likely to be 3 hours. Honor code applies.
Financial Accounting
The bottom line here is that we were all tired and not much was sinking in at this point. There is something on Bonds and Coupons to be learned. We went over some basic concepts of Finance and time value of money (PV and FV). That is the extent of my notes - except that Vincent also made Sunil get marker on his shirt and so likely owes him a new one.
Exam Discussion
Exam in class during Block 4. Use quizzes and homework review to prepare. Chen will hold reviews. A cheat sheet of formulas etc will be allowed. If you finish before the 3 hours you can leave!
If you read this far - thank you.