Season 5, Episode 7: Teaching game theory? Sharks are notorious for playing hardball in ultimatum games, as seen in this negotiation. Solomon Fallas has developed a red solo cup that doubles as a shot glass and is asking for $300k in exchange for 15% of his company. Daymond makes him an offer almost immediately: $300,000 for 20%. Then comes the ultimatum – Solomon has to decide at that moment, or the offer is off the table. Solomon chooses to reject the offer, thinking others will make better offers (the perceived benefit of this choice outweighs the perceived cost). This seems rational at the time, since Daymond is sending a strong signal that he thinks the sharks may compete over the 180Cup. However, the other sharks drop out of the bidding. Daymond clearly thought 20% of the company was worth a $300k investment, but now, he refuses that deal. Why? With no competition, he can set his price, but he also has to consider the credibility of his ultimatum. Daymond and the other sharks are in a repeating game of sorts. New entrepreneurs enter the tank each week, but they have had the opportunity to review the sharks’ strategies with previous players. If Daymond were to rescind his ultimatum for Solomon, subsequent players may not believe future ultimatums and adjust their game strategy accordingly.

Season 6, Episode 10: Complementary and substitute goods in production can sometimes be tricky to teach, since there are subtle differences from complements and substitutes in consumption. This clip provides an excellent example of both. Cameron Sheldrake finds that the quantity of corn he supplies on the market often exceeds the quantity demanded. In the past, this surplus corn would be discarded, but Cameron has discovered he can use it to make sweet corn tortilla chips. This is a classic example of complementary goods in production. Cameron produces his regular crop, and with the byproduct (in this case, the leftover corn), he is able to produce another good. However, if demand for his tortilla chips increases, it may become more profitable to use more than just the surplus corn to make chips. In that case, he will decrease his supply of corn for his traditional market and increase his supply for the chips. At this point, they become substitute goods in production. Another determinant of supply is the cost of inputs. Cameron mentions that the cost of sweet corn used in his chips is twenty times more than the cost of conventional corn flour used in regular chips. Perhaps this is why we don’t see others supplying this product. This price gets passed on to the consumer. Many consumers will consider this product to be a substitute for regular tortilla chips. With a price of $3.49 per single serving bag vs. $0.99 for regular chips, demand won’t be increasing for this product unless they can differentiate it substantially. Take the discussion to the next level, and ask students for a plausible explanation for why Cameron doesn’t lower the price of his corn to eliminate the surplus. (Hint: think about total revenue and price elasticity of demand.)

Season 5, Episode 6: Eric Child and Spencer Quinn have a product that immediately impresses – FiberFix! Three sharks quickly bid for a deal. Have students keep track of what each shark offers. What are they offering? Does it differ in value? Are they headed toward a different equilibrium price than Eric and Spencer first envisioned? Students should observe that each shark is placing a value on their personal human capital in addition to the dollar amount they offer. Their offers also differ by credit versus equity. More advanced students can calculate the present value of these offers under different sales scenarios and decide if Kevin is correct (time 9:57) when he claims the equity they would retain would be more valuable than a 20% royalty in perpetuity. Kevin cites a $100 million sales scenario. What would be the point at which trading the equity would be the better deal? At the end of the pitch, Lori is the only shark left. Little bargaining power is left in this situation and the price adjusts once again as they search for an equilibrium offer. Each party is trying to extract maximum value (consumer and producer surplus).

Season 7, Episode 8: Your students will find this pitch by a fellow millennial especially motivating. Jeff Overall’s business, PolarPro, is in a very competitive space. After he delivers his intro speech, stop the video (time 1:49) and ask students what type of market structure he is operating in and why. What profit maximizing strategies can he employ in this type of market? Constant innovation and/or economies of scale are critical for success. Why? Innovations in this market are easily copied and accompanying profits quickly competed away. Economies of scale provide a variable cost advantage that will price smaller competitors out of the market. Jeff chose constant innovation as his strategy since he currently lacks the capital investment to lower production costs. An interesting comment by Jeff at 4:25 is sure to spark students’ attention. In Jeff’s case, what would have been the opportunity cost of using his student loan toward books? Immediately following that, a discussion of opportunity costs continues with Jeff’s decision to make higher profits or invest in R & D.

Season 2, Episode 1: Copa Di Vino, owned by James Martin, is the first premium wine sold by the glass. James, currently controls the vertical chain of production: he has a winery, packages his own wine by the glass, and distributes the wine. However the sharks believe that company’s value will be higher if it vertically disintegrates. The sharks are only interested in the intellectual property (patent) that James holds, since he is the sole producer that can package wine in this form. They believe his monopoly power over the packaging will reap the highest profit by licensing it to others. James does not want to split the company and believes it is more profitable as one firm because of the high subjective value he places on his brand. He leaves the tank without a deal.

Season 5, Episode 9: In this clip, Julie Busha explains how she and her husband saved a large sum of money so they could successfully launch Slawsa, a new condiment that is a cross between coleslaw and salsa. Mark Cuban commends her on this and discusses how it’s nice to see someone giving up a little bit now to have more in the future. This is a classic PPF example of future vs. current consumption. The entrepreneur also discusses how she is not taking a salary at this time because she wants to focus her time, energy, and resources into the business. This nicely illustrates the idea of opportunity costs, which are classified as implicit costs in business production decisions. Ask students if this means that she is really working for free and engage them in a discussion of other potential implicit costs.