Gottheil Author Updates

Author Updates

Welcome! Here is a collection of additional examples, stories, and updates to the text that I have assembled since the publication of the book. I will add to this collection periodically, so stop back. These updates are also included in the Online Study Guide. Let me know what you think.

-- Fred Gottheil

Blood Providers Battered by Perception of Competition: Turf Protection Overtaking Notion of Caregiving

Since bottling its first drop of plasma 50 years ago, the blood bank industry has cut an almost sanctified public profile. It's disaster relief. Fuel for Hospitals. Giver of life. But somewhere along the line, America's most wholesome nonprofit enterprises became infected with politics and competitive fever. The big players - regional blood banks and the American Red Cross - started acting more like big businesses as battles sprung up nationwide over control of the blood supply. Some unleashed aggressive pricing strategies or predatory marketing tactics. The motives? To retire debts and guard turf. [More] (Updated 3/19/99)

Pampers Reportedly Prevent, Treat Rash

You no doubt can't remember, but a major discomfort in your young life as a 6-month-old was diaper rash. That rash is caused partly by wetness, which causes irritation and abrasion of the baby's bottom, which leads sometimes to sores that could require medical attention.

Well, Proctor & Gamble, at last, comes to the rescue. Maybe too late for you but P&G says it has developed the first diaper medically proved to prevent and treat rashes. If you're excited, so is P&G! The company thinks parents would be willing to pay 50 percent more than they do for regular pampers. .[More] (Updated 2/23/99)

Stock Repurchase: What is it and Why?

When people discover a corporation with particularly good prospects, it may be a smart idea for them to buy into the corporation, that is, to buy some of the corporation's stock. But what may be a smart idea for people may also turn out to be a smart idea for the corporation itself. After all, the corporation is always looking out for the best possible investment it can make. Why not, then, invest in itself? If others think it's a good place to invest money, why shouldn't the corporation think so as well? That is to say, why shouldn't the corporation buy its own stock? The answer is that many corporations do precisely that! Such corporate investment is called "stock buyback" or "repurchase." The corporation goes onto the stock market to buy its own stock from stockholders in the belief that it will gain more by investing the corporation's money in buying the stock than it would gain by using the corporation's money elsewhere, such as increasing production or investing in capital expansion.[More] (Updated 2/23/99)

Coke Takes the Bottled Water Plunge

After watching rival Pepsi's spectacular success in capturing market share in the high- growth industry of bottled water, Coca-Cola belatedly but finally is jumping into the business. Its own bottled water, Dasani, will appear on the market sometime in early summer.

For Coca-Cola, it's better late than never. For years, it insisted that consumers - having access to zero-cost water at home - would be unwilling to buy bottled water. How wrong can a company be about a product? For several years, Coca-Cola stood idly by as Pepsi's Aquafina and other bottled-water players developed and competed in this fastest growing beverage market. Coca-Cola simply could not afford to remain on the sidelines. Bottled water was cutting into its soft-drink market and forced the world's most successful soft drink company to finally change its mind. [More] (Updated 2/23/99)

Price of Cheap Gas: Laid-Off Oil Workers

Let's review the derivation of marginal revenue product of labor (MRPL).

The equation is MRPL = MPPL multiplied by the price of the good. Let's specify the laborer and the good. Applied to the oil industry, it reads: MRPow (oil workers) = MPPow multiplied by the price of oil. What happens, then, to the MRPow curve when the price of oil falls? Look at Exhibit 4, Chapter 15. The MRPow curve shifts to the left when the price of oil falls so that - assuming the supply curve of oil workers remains unchanged - the number of oil workers demanded falls. [More] (Updated 2/23/99)

How the Interest Rate on Government Securities is Determined

As you read this chapter, the federal government's marketable securities - its IOUs, or new debt obligations - are offered in the form of its Department of the Treasury's bills (T-bills), notes (T-notes) and bonds (T-bonds). These IOUs are distinguished from each other by their length of maturity. T-bills are issued with 3-, 6-, or 12-month maturities. T-notes maturities range from 2 to 10 years, while T-bonds mature in more than 10 years.

Government sells these IOUs, hoping to pay as low an interest rate as possible. Makes sense, doesn't it? If you sold your own IOUs, that is, borrowed money, wouldn't you want to pay as little as possible? Buyers of government IOUs, on the other hand, hope to collect as high an interest rate as possible. That makes sense too. After all, if you accept the government's IOU, that is, loan it money, wouldn't you want to get as much as possible?

Well, what interest rate does the government pay, and how is that rate determined? Here's where the auction comes into play. [More] (Updated 2/4/99)

Another Illustration of Velocity

How about this? Suppose you were in a class of 100 students taking Economics 101 this semester and each student, aware that careful reading of the textbook was essential to a good grade, wanted a book of his or her own. That would mean 100 textbooks would be needed to serve 100 students. But suppose the students were spread over 5 semesters so that this semester had only 20 students enrolled. These students would need only 20 textbooks. Suppose, after the final exam, they sold these 20 textbooks back to the campus bookstore who sold them as used books to the 20 new students enrolled in next semester's class, and who at the end of their semester, resold it to the same bookstore who sold it again as used books to the class of the third semester, and so on. Sound familiar? Now what can we say about the relationship between textbooks and students in the 5-semester scenario compared to the 1-semester scenario? [More] (Updated 2/4/99)