Solve this simple math problem (you may not get it right :D)

[thefinder]

Both $90 and $100 make sense, depending on how you look at it.

BTW, pure OT: mind revealing your id @erji.net, chesebert?

 

[Wmcmanus]

Quote:

Originally Posted by Wmcmanus /img/forum/go_quote.gif Wrong! If he has an infinite supply of headphones then he can make a reorder from the manufacturer to replace the one pair that was lost (stolen really) for the same $80 that it cost him to begin with. Thus, his own inventory quantity is not ultimately affected by this event, and he has no opportunity cost of a lost sale. Stated differently, he will still be able to sell just as many pairs of headphones to legitimate customers as he could have before. The guy who gave him the fake $100 bill was not a legitimate customer to begin with so he couldn't have made a sale to him in any event. Once he restocks that unit at the same $80 price, he's back to square one and has the ability to sell just as many headphones as the market demands at his $90 price point. Think I'm wrong? Ask Hedroom or Jan Meier or Todd what they do when they run out of inventory of Audio Technica, Sony or Grado headphones that are not limited production headphones? They simply reorder more of them. The point is they can have as many on hand as they need to have to meet ALL of the demand that they have from legitimate customers at any given (seller chosen) price point. In other words, they have an infinite supply so they never have a "lost volume" situation. For your answer to make any sense (in terms of the $10 part of it), the seller in question would have to be the headphone manufacturer. But even then, it wouldn't be because of the reason you have proposed. In fact, quite the opposite. They don't have access to an unlimited supply because they can only manufacture so many headphones given their capacity restraints. So if they got ripped off on a sale, they would in fact have an opportunity cost in terms of the lost profits. But it's because their production capacity is finite, not infinite, as you would argue. Getting back to the case at hand, the only additional cost that the headphone seller would incur in this instance would be the cost of placing the additonal order (to restock the lost/stolen unit) and any shipping costs associated with this. But this would be assuming facts, and you've said not to. So the answer is $90 whether he's a headphone retailer or just a dork.

I still think that I'm all over this one like ugly on ape, and I wonder if the good Cheese Bread could honor me with a reply.

 

[jjcha]

Quote:

Originally Posted by Wmcmanus /img/forum/go_quote.gif I still think that I'm all over this one like ugly on ape, and I wonder if the good Cheese Bread could honor me with a reply.

Wayne, think of it this way:

Buyer returns to seller and says, "I'm so sorry. I didn't realize it, but that bill I gave you was a fake. I'd like to compensate you - how much do I owe you?"

That's one scenario.

Here's the other scenario:

A cop returns to seller and says, "We caught the person passing out those fake bills. Unfortunately, the headphones you've sold him were trashed, so we just dumped them. We found a bunch of real cash to give back to the folks he's been ripping off - how much do you need to compensate you for your loss?"

My point is that these two situations are different, which is why the question was flawed in the first place.

Best,

-Jason

 

[Wmcmanus]

Jason, the answers would be $90 and $90 in the 2 scenarios you have proposed.

There was no lost profit whatsoever if he's a retailer who can reorder the same item at the same cost (or as the OP has said, he has an infinite supply). This is why I'd like to see his answer to my post because what I've said is in response to the "answer" that he insists is right, even though I've clearly proven it to be wrong, and based only on the facts that he has provided (both in the initial post and also in his supposed answer which has a glaring error of logic for the "lost profits" idea to hold any water... the "infinite supply" means no lost profit on the pair that essentially got stolen).

 

[jjcha]

Quote:

Originally Posted by Wmcmanus /img/forum/go_quote.gif The answers would be $90 and $90. There was no lost profit whatsoever if he's a retailer who can reorder the same item at the same cost (or as the OP has said, he has an infinite supply). This is why I'd like to see his answer to my post because what I've said is in response to the "answer" that he insists is right, even though I've clearly proven it to be wrong, and based only on the facts that he has provided (both in the initial post and also in his supposed answer which has a glaring error of logic for the "lost profits" idea to hold any water... the "infinite supply" means no lost profit on the pair that essentially got stolen).

$90 in the first case? You sure about that? The guy accidentally gives the seller a fake $100 and goes home with the headphones and 10 bux only needs to give back 90 to make it all good?

Best,

-Jason

 

[Wmcmanus]

Quote:

Originally Posted by jjcha /img/forum/go_quote.gif $90 in the first case? You sure about that? The guy accidentally gives the seller a fake $100 and goes home with the headphones and 10 bux only needs to give back 90 to make it all good? Best, -Jason

Yup. $80 to replace the headphones and $10 to give the seller his money back. There is no other problem for a seller who can reorder the same pair of headphones for $80 before the next customer demands a pair at his selling price (whatever that might be set at). Here, I'm assuming that the seller has sufficient inventory to meet the demands of any other customers who present themselves before his reordered item arrives. This is consistent with the "infinite supply" notion that the OP includes as part of the rationale for his "lost profits" idea. In fact, it's just the opposite. Lost profit situations occur when there is a stock out because the seller has a finite number of items to sell. This is why his answer makes zero sense.

 

[jjcha]

Quote:

Originally Posted by Wmcmanus /img/forum/go_quote.gif Yup. $80 to replace the headphones and $10 to give the seller his money back. There is no other problem for a seller who can reorder the same pair of headphones for $80 before the next customer demands a pair at his selling price (whatever that might be set at). Here, I'm assuming that the seller has sufficient inventory to meet the demands of any other customers who present themselves before his reordered item arrives. This is consistent with the "infinite supply" notion that the OP includes as part of the rationale for his "lost profits" idea. In fact, it's just the opposite. Lost profit situations occur when there is a stock out because the seller has a finite number of items to sell. This is why his answer makes zero sense.

Hmm. I understand your point about the infinite inventory and all that, but put that aside for a moment. You realize in your answer the buyer gets the headphones for 80 bucks while everyone else who wants to buy them has to pay 90?

Best,

-Jason

Postscript: Just to be absolutely clear, assume the buyer who accidentally passed the fake bill wants to keep the headphones, and will not be returning them. In either scenario, the headphone seller doesn't get the headphones back.

 

[zachary80]

Quote:

Originally Posted by jjcha /img/forum/go_quote.gif Hmm. I understand your point about the infinite inventory and all that, but put that aside for a moment. You realize in your answer the buyer gets the headphones for 80 bucks while everyone else who wants to buy them has to pay 90? Best, -Jason Postscript: Just to be absolutely clear, assume the buyer who accidentally passed the fake bill wants to keep the headphones, and will not be returning them. In either scenario, the headphone seller doesn't get the headphones back.

I don't know why you would put aside the infinite supply. Perhaps we should put away the $10 change too?

I would say he owes him $100, unless you want to reward his honesty. $10 (counterfeit change / stolen) $90 (headphone cost)

That does not mean that the seller lost $100 though. It means that rather than losing $90, he is now making $10.

 

[jjcha]

Quote:

Originally Posted by zachary80 /img/forum/go_quote.gif I don't know why you would put aside the infinite supply. Perhaps we should put away the $10 change too?

Because infinite supply is irrelevant where the seller does not retain possession of the headphones. It's just not a meaningful factor when the seller cannot even attempt to mitigate the loss.

Quote:

Originally Posted by zachary80 /img/forum/go_quote.gif I would say he owes him $100, unless you want to reward his honesty. $10 (counterfeit change / stolen) $90 (headphone cost) That does not mean that the seller lost $100 though. It means that rather than losing $90, he is now making $10.

The difference between +10 and -90 is -100. It does mean the seller has an economic loss of $100.

Best,

-Jason