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Group Question
Answer the following question based on the information given below.
When I first read about the fascinating ‘Star Wars’ deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.
The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his ‘Star Wars’ film, and Steven Spielberg was making ‘Close Encounters of the Third Kind’. Lucas was worried that his ‘Star Wars’ film might bomb and thought that ‘Close Encounters’ would be a great hit. So he made an offer to his friend Spielberg, “All right, I’ll tell you what. I’ll trade some points with you. You want to trade some points? I’ll give you 2.5% of ‘Star Wars’ if you give me 2.5% of ‘Close Encounters’.” Spielberg’s response was, “Sure, I’ll gamble with that. Great.” Both films ended up as great classics, but ‘Star Wars’ was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.
At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.
A more important factor is information asymmetry: normally, each director would know very little of the other’s film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.
The other problem is skewness preference. Nobody buys a large number of lottery tickets to “diversify the risk”, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.
It is also possible that Lucas simply did an irrational trade. Lucas is described as “a nervous wreck ... [who] felt he had just made this little kids’ movie”. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.
 
Q. Which of the following is true according to the passage?
  • a)
    Steven Spielberg’s ‘Close Encounters of the Third Kind’ was unsuccessful.
  • b)
    The friendship o f Lucas and Spielberg played an im portant role in the trade.
  • c)
    Films made by big companies have greater commercial success.
  • d)
    Steven Spielberg was a gambler.
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
Group QuestionAnswer the following question based on the information g...
The passage mentions that “The Lucas-Spielberg trade was possible because they were friends.” Thus, option 2 is validated.
Option 1 is negated as the passage states that “Both films ended up as great classics, but ‘Star Wars’ was by far the greater commercial success..."
Option 3 is contextually misleading.
Option 4 is incorrect as it misquotes Steven Spielberg.
Hence, the correct answer is option 2.
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Most Upvoted Answer
Group QuestionAnswer the following question based on the information g...
Importance of Friendship in the Trade
The passage highlights the significance of the friendship between George Lucas and Steven Spielberg in facilitating their film point trade. Here’s a detailed breakdown:
Mutual Trust and Understanding
- The trade was feasible primarily because they were friends.
- Their friendship allowed for a level of trust that is often absent in business transactions, especially those involving high stakes and uncertain outcomes.
Knowledge Exchange
- Lucas had spent time observing Spielberg during the making of Close Encounters, granting him unique insights into the film’s potential.
- This personal interaction helped mitigate information asymmetry, which typically complicates such trades.
Emotional Factors
- The passage suggests that Lucas’s emotional state, being described as a "nervous wreck," may have influenced his willingness to trade.
- Spielberg’s presence and the friendship likely provided a level of comfort for Lucas, making the trade less daunting.
Conclusion
- The camaraderie between Lucas and Spielberg was crucial in enabling this unique agreement.
- It emphasizes that personal relationships can play a significant role in business decisions, particularly when navigating significant risks.
In contrast, the other options do not hold true based on the information presented in the passage:
- a) Close Encounters was not deemed unsuccessful; both films became classics.
- c) The passage does not state that films by large companies inherently have greater commercial success.
- d) While Spielberg agreed to "gamble," this label does not encapsulate the essence of their trade, which was rooted in friendship and mutual benefit.
Thus, option b) is the most accurate reflection of the passage's core message.
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When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.According to the passage, what was special about the deal between Steven Spielberg and George Lucas?

When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following weakens what is said about George Lucas in the passage?

When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.From the above statement, the author implies that

When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which word best describes the trade between Spielberg and Lucas?

When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Lucas said to Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. From the above, we can assume that

Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer?
Question Description
Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? for CAT 2024 is part of CAT preparation. The Question and answers have been prepared according to the CAT exam syllabus. Information about Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CAT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer?.
Solutions for Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for CAT. Download more important topics, notes, lectures and mock test series for CAT Exam by signing up for free.
Here you can find the meaning of Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer?, a detailed solution for Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Group QuestionAnswer the following question based on the information given below.When I first read about the fascinating Star Wars deal between Steven Spielberg and George Lucas, my reaction was that this was a simple diversification story. But then I realized that it is more complex than that; the obstacles in the form of skewness preference, adverse selection, and moral hazard are strong enough to make deals like this probably quite rare.The story itself is very simple and Business Insider tells it well. Back in 1977, George Lucas was making his Star Wars film, and Steven Spielberg was making Close Encounters of the Third Kind. Lucas was worried that his Star Wars film might bomb and thought that Close Encounters would be a great hit. So he made an offer to his friend Spielberg, All right, Ill tell you what. Ill trade some points with you. You want to trade some points? Ill give you 2.5% of Star Wars if you give me 2.5% of Close Encounters. Spielbergs response was, Sure, Ill gamble with that. Great. Both films ended up as great classics, but Star Wars was by far the greater commercial success and Lucas ended up paying millions of dollars to Spielberg.At the time when neither knew whether either of the films would succeed, the exchange was a simple diversification trade that made both better off. So why are such trades not routine? One reason could be that many films are made by large companies that are already well diversified.A more important factor is information asymmetry: normally, each director would know very little of the others film and then trades become impossible. The Lucas-Spielberg trade was possible because they were friends. It is telling that the trade was made after Lucas had spent a few days watching Spielberg make his film. It takes a lot of due diligence to overcome the information asymmetry.The other problem is skewness preference. Nobody buys a large number of lottery tickets to diversify the risk, because that diversification would also remove the skewness that makes lottery tickets worthwhile. Probably both Lucas and Spielberg thought their films had risk- adjusted returns that made them attractive even without the skewness characteristic.It is also possible that Lucas simply did an irrational trade. Lucas is described as a nervous wreck ... [who] felt he had just made this little kids movie. Perhaps, Spielberg was simply at the right time at the right place to do a one-sided trade with an emotionally disturbed counterparty. Maybe, we should all be looking out for friends who are sufficiently depressed to offer us a Lucas type trade.Q.Which of the following is true according to the passage?a)Steven Spielbergs Close Encounters of the Third Kind was unsuccessful.b)The friendship o f Lucas and Spielberg played an im portant role in the trade.c)Films made by big companies have greater commercial success.d)Steven Spielberg was a gambler.Correct answer is option 'B'. Can you explain this answer? tests, examples and also practice CAT tests.
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