Lets assume Tim has a health club that is overflowing with members and for arguements sake, there are ten exercise bikes in the club. Now I have a fitness club on the other side of the city that has no customers, I am losing money badly and I have no exercise bikes.
Tim and I are friends and he offers to help me pay my bills for the next three years and tells me that he will try and help me anyway that he can. About 20 months into the three plan, he and I both realize that there are alot of people the live on my side of the city that drive across the city to his club. We figure that he could give up two exercise bikes to get people in my area to go to my gym.
What should Tim do??
a) Sending two bikes to my club will lessen the overcrowding at his gym and people will find parking spots easier. Also my increased profits will lessen the amount he has to subsidize of my losses.
b) What if he sends the two bikes to my gym and I start to turn it around. Maybe I bring in more equipment, start taking customers from Tim and when the current deal ends we are competing against each other?
Maybe this is an over-simplification but I see some inherent conflicts in our agreement.
Read an Early Excerpt from When to Rob a Bank - In celebration of the 10th anniversary of Freakonomics comes this curated collection from the most readable economics blog in the universe. When Freakonomi...
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