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 3, Episode 7: In season 2, Kim Nelson, owner of Daisy Cakes, made a deal with Barbara Corcoran. This update on that deal emphasizes how sales have rapidly increased since that time, forcing Kim to move from a small kitchen with 4 ovens to a larger bakery with walk-in ovens. Now, she is able to expand production from baking 8 to 160 cakes at a time. Discuss the difference between fixed costs and variable costs in this clip with your students. Note that in the short-run the small kitchen and 4 ovens were fixed costs, but in the long run they are variable costs. Kim’s deal with Barbara has allowed her to expand her capital and have lower per unit costs due to economies of scale. Ask students to identify other costs involved with operating Daisy Cakes and categorize them as either fixed or variable costs.
Season 3, Episode 11: Students often find production and costs mind numbing. This clip helps connect some of these concepts to the real world. “Wine Balloon,” owned by Eric Corti, produces a wine-preserving product. The product currently sells for $22 and costs $6.50/unit when production is at 700 units. The sharks advise that the potential to cut costs are huge and hence increase revenue. If he produces 100,000 production cost per unit will fall to $2.50. That would be a $4/unit savings! This nicely illustrates economies of scale. Students can be asked to calculate total costs using the average cost formula for both low and high production levels. Other exercises include drawing short and long run output expansion average costs curves and average fixed costs curves.