You know what they say about prison snich's

Due to the Nash equalibrium, it is always safer and more profitable for companies to break there collusive agreements, or for a couple of prisoners to rat eachother out. Since the outcome of blowing the whislte on your partner in crime is more beneficial to you then not doing so, the nash equalibrium suggests that people would rat each other out. The penalty of not doing so could be very detrimental if your partner rats you out. The main thing that makes the Nash equalibium a tricky thing though, is that it assumes that neither party has any way of knowing for sure what the other party is doing, or will do. Its based on which course of action hurts you the least assuming your partner acts in their own best interests.

When life gives you is lemons, make a junk yard.

I found the concept of lemons (junk used cars) to be an interesting concept. Since its hard for the average buyer to be able to tell the difference between a decent used car (which they would be willing to pay more for) and a lemon ( a piece of crap that might break as soon as they drive off the lot), what tends to happen is for lemons to flood the market. Since buyers cant destinguish between a $10000 quality used car and a $1000 pile of rust, they lower there to say 5k. This goes to undervalue good cars and overvaule bad ones. This creates an incentive for people with junk cars to sell for more then they're worth and for people with good cars not to sell, becasue they wont get the amount that their car is actually worth. Eventually, lemons take over the market and it becomes theoretically impossible to find a good used car.

Profit.

In class this past week we talked about how companies sometimes choose to opperate inefficiently. Why would a company intentionaly choose to do business in such a manner? Well, the simple answer is profit. At times, producing and selling at what is technically the market equilibrium and the most efficient point is actually less profitable for a business then opperating slightly under the efficient level. And as can be expected, a firm will generaly choose whichever route leads to the most profit. Afterall, a company's main objective is to make money, not neccessarily opperate efficiently.

I've got parkplace and boardwalk.McDonalds owes me $1 million

In class we began talking about monopolies. I've never come to a personal conclusion as to whether or not I think they are good or bad. As far as for consumers and potential businesses, it's rather obvious that monopolies are horribble, they allow no room for other firms and they have the priviledge of setting the market prices. However, I dont think it's right for government intervention to completly dissasemble monopolies, because it seems to violate property rights. Perhaps theres a happy medium somewhere in the middle, something like Wall Street, an entity that anyone can weasle into, and if the entity goes bad it drags everyone along with it.

Exit Market, Stage Right.

So we were begining to discuss how firms enter and exit markets. This is seen all the time, particularly with companies leaving markets, especialy given our recent economic circumstances. When the money to be made in a market dries up, firms shut their doors. If I were running a business, I think the hardest part for me would be deciding if I should shut down for good, or if I should just hang in there and hope the market picks up soon. As far as entering markets goes, it seems like things like that fluctuate alot. One day it seems like theres money everywhere in the car department, the next day everyone wants in the electronics business. So I sort of think that the best approach would be to find a market that you know would be sustainable, and simply jump into it at a beneficial time.

Failure to plan is planning to fail...or so I've heard.

I think the idea of short term variables and long run variables are intersting. They both need to be taken into account in order for a business to be successful, but certain variables can only be thought of from certain perspectives. The idea of a "plant" is such a variable. Certain companies would die overnight if they had no plant, however in long term planing it seems that not much can be said about the plant as it is tied directly to fixed costs in the short term. So even though the plant's cost's arn't counted for long term investing, if the plant ceased to exist the company would fail. A very important aspect of the company planning phase which seems to be well understood in order to be met with success.

Another would be gold rush...

Just a quick blurb on something thats been plauging my mind recently (mainly due to the nonstop comercials about it), why would one want to buy gold now? Gold is being advertized as the recession proof asset thats perfect for short and long term investors due to its relative stability and security and that we should all buy it right now because its dollar value has never been higher. It sounded like a good idea to me at first but I started thinking, and I began to wonder, if its more expensive now then its ever been...why would I want to buy it now. Its one thing to invest in something and expect it to turn you a profit but generaly one buys low and sells high. Ive never really heard of people buying high and then riding their investment to the ground. Also, if gold is desirable for its resiliance and stability, so that one could fall back on it in times of economic hardship, why would I want to buy gold during an economic hardship? Seems like those who didnt already have gold going into the recession already missed the boat on this one and should wait for prices to come back down. I could be wrong, just a thought.