Introduction to Game Theory in Finance
Game Theory is a method of modeling the interaction between two or more players in a situation with particular rules and expected outcomes. It is helpful in many fields, but mainly as a tool in economics. Game Theory helps with the fundamental analysis of industries and the interactions between two or more companies. Theoretically, games […]
What was the Labor Theory of Value?
The Labor Theory of Value was one of the early attempts to explain how market prices form. It followed the idea that the main driver for goods’ value is the labor necessary to produce them. Under the theory, the labor hours it takes workers to produce a commodity is the source of its value. The […]
The Value-Added Concept in Economics
The term value-added represents the enhanced value a company adds to its products and services. You probably notice that products sell for more than it costs to produce them, and services charge more than it costs to render them. This is what value-added represents. The essential purpose of any business is to create value that […]
Opportunity Cost in Financial Modeling and Analysis
Introduction Opportunity cost represents the benefits the business misses out on when picking between alternatives. When we have two desirable options, the benefit from the one not chosen is our opportunity cost. These costs are usually the result of bottlenecks in business processes. Therefore, finance professionals use Opportunity Cost analysis to improve the decision-making process […]