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Henrik Wanted to Launch a New Business Focusing on Custom

question 66

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Henrik wanted to launch a new business focusing on custom hockey stick manufacturing-allowing semi-pro hockey players access to similar custom technology that NHL players receive.His potential financial backers kept pushing him to clarify the cost-benefit to his customers since it meant charging 15 percent to 20 percent more for an off-the-shelf hockey stick.They wanted to know his value proposition.


Definitions:

Noise Traders

Investors who make decisions based on random or irrelevant information, often causing market prices to deviate from their true values.

Limits To Arbitrage

Restrictions or impediments that prevent traders from taking advantage of discrepancies in prices between or within markets to make risk-free profits.

Representativeness Heuristic

The reliance on stereotypes, analogies, or limited samples to form opinions about an entire class.

House Money

A term from Behavioral Finance referring to the tendency of individuals to take greater risks when trading with profits from prior trades, viewing it as "play money."

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