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Via the Times:
Amazon has been pushing publishers to sign a new round of legal agreements that would guarantee that the Kindle price for their content is always the same or lower than the price on other electronic reading devices, such as the iPad or the Sony Reader. The clause, a variation of a legal concept known as “most favored nation,” would guarantee that Amazon’s customers would always get the best price for electronic versions of magazines, newspapers and books.
If publishers accept Amazon’s contract, what impact does it have on prices of books purchased for the iPad or the Sony Reader? In the existing regime, if Apple negotiates low prices for books, it can undercut Kindle prices for the same books. This makes the iPad more attractive vs the Kindle and stimulates sales of the iPad and profits for Apple. In the new regime (i.e. if publishers accept Amazon’s terms), Apple can no longer undercut Kindle book prices as any price cut they negotiate is automatically passed on to Kindle consumers. Apple has less incentive to negotiate low prices with publishers and publishers have more incentive not to give in. An eBook price war is less likely with Amazon’s policy and consumers are going to see less competition on this dimension not more.
Publishers are complaining that Kindle book prices are too low. They are presumably worried that the Amazon deal is bad for them. But I suggest it is actually good if current prices are really too low as they claim. So they should sign it.
Is it good for Amazon? Higher prices for eBooks will slow down adoption of eReaders. But if prices of eBooks increase and their revenue sharing agreement is generous, there may be more revenue from sales of content. So the net effect depends on how much money Amazon will make off hardware versus the slice of revenue they’ll get from sales of content. And it’s not at all clear that this goes the right way for Amazon. If it goes the wrong way, in a bid to sell more Kindles, the obvious strategy is to cut the price of hardware. Then, the publishers will be even happier they signed the contract with Amazon!
This is one possible scenario. With an industry and technology that is changing rapidly, there are many others. Still, did Amazon think through all this? It’s hard for an outsider to gauge. Iran has recently moved nuclear fuel to an overground facility, within easy reach of Israeli bombs. The theories for Iran’s counterintuitive strategic move range from the “wow, they’re so sneaky and strategic” to the “duh, they did what?!”. Interpretations of Amazon’s move fall into same categories.
Greg Mankiw often says this:
A tax on height follows inexorably from the standard utilitarian approach to the optimal design of tax policy coupled with a well-established empirical regularity.
Becuase this is part of his argument against income redistribution. As I have said before (and see a nice comment there by Ilya) this is based on a misunderstanding of the theory of taxation. It does not matter what the government’s underlying objective is, whether it is utilitarian or anything else. If the government wants to raise money, for whatever purpose, say to provide education or pay the President’s economic advisors or fight wars, it wants to do so in the least distortionary way.
Minimizing the distortions means making use of instruments that are correlated with ability to pay but are exogenous, i.e. unaffected by tax policy. As Mankiw points out (the “well-established empirical regularity”), height is correlated with ability to pay and clearly the tax code does not affect how tall you are. So by conditioning your tax payments (at least partially) on your height, the government can raise the same amount of revenue as a given pure income tax with less distortionary effects on your labor supply.
It has nothing to do with utilitarianism. (And your natural objection to taxing height therefore says nothing about your attitudes toward income redistribution.)
Our favorites were Eins-Zwei-Dry and the 06 Magdalenenkreuz Spatlese. Riesling is a great food wine. The main flavor in the food cancels out the corresponding flavor in the wine so you taste different dimensions with each bite/sip. For instance, I had a Riesling recently with a dish that included a cheesy potato gallette and stewed prunes. The potato brought out the sweetness and the prunes the dryness. Hoping to experiment a bit more with them as there are many categories (Kabinett, Spatlese etc.) which correspond to different densities of the grape (!) and other variables. And the categories correspond to different flavors and sweetness.
I find curling soothing and otherworldly, a sport that Hobbits might play rather than real people. It turns out my new passion is shared by Wall Street traders. Some links:
1. History
2. Basic and Advanced Strategy
3. Want to learn in Boston area? Try the Broomstones Curling Club.
Via Barker:
Several studies have demonstrated some accuracy in personality attribution using only visual appearance. Using composite images of those scoring high and low on a particular trait, the current study shows that judges perform better than chance in guessing others’ personality, particularly for the traits conscientiousness and extraversion. This study also shows that attractiveness, masculinity and age may all provide cues to assess personality accurately and that accuracy is affected by the sex of both of those judging and being judged. Individuals do perform better than chance at guessing another’s personality from only facial information, providing some support for the popular belief that it is possible to assess accurately personality from faces.
Source: Using composite images to assess accuracy in personality attribution to faces” from British Journal of Psychology
For most aspects of personality I would bet that the reason is simply that your face causes your personality. Attractive people are confident and extroverted, unattractive people less so. For other aspects its the other way around. People who are conscientious comb their hair, etc.
But I am often firmly convinced that I can tell how smart a person is just by looking at them. And although I can see a few potential causalities, they seem flimsy to me:
- You invest more in appearance if it is a substitute for intelligence. (But can’t they be complementary? I cling to the belief that my wife sees them so.)
- Investments in appearance are short-term. Smarter people are more patient than that. (Tell that to Fabio.)
- Smart people exude confidence. (Do they? Dumb people may be even more confident.)
Anyway, I don’t usually think that attractiveness is the key signal (not that I can say what is the key signal.) But I can imagine that I am consistenly wrong in my judgments of how smart a person is. If you assume a person is smart then everything they say tends to sound smart. (Why else would you still be reading this?)
In a nice paper, Chiappori, Groseclose and Levitt look at the zero-sum game of a penalty kick in professional soccer. They lay out a number of robust predictions that are testable in data, but they leave out the formal analysis of the theory (at least in the published version.) These make for great advanced game theory exercises. Here’s one:
The probability that the shooter aims for the middle of the goal (as opposed to aiming for the left side or the right side) is higher than the probability that the goalie stays in the middle (as opposed to jumping to the left or to the right.)
Hint: the answer is related to my post from yesterday, and you can get the answer without doing any calculation.
Harold Pollack at the New Republic blog The Treatment has an interesting comparative historical analysis of the current push to include the “public option” in the health bill via reconciliation and a famous vote in 1956 on a House bill to extend federal aid to states to build schools:
The bill would have provided federal aid to the states to build schools. Democrats sponsored the bill, which was popular ten years into the baby boom. For familiar pre-election reasons, Republicans wanted HR7535 to die. They got lucky when Harlem Congressman Adam Clayton Powell dropped a hand grenade into the process by proposed an amendment mandating that grants could only be used by states with schools “open to all children without regard to race in conformity with the requirements of the United States Supreme Court decisions.” Urban liberals could hardly oppose this amendment. Yet its inclusion would doom the final bill by driving away critical southern Democratic votes.
The inclusion of the Powell amendment killed the whole bill. Pollack thinks that the inclusion of the public option would kill the health bill and hence Rockefeller and Obama do not want it included in the reconciliation process. There are many theories for why Powell offered his amendment. He could see that it would cause the collapse of the bill. In the process, it would reveal the hypocrisy of the Democratic leadership of the House and that, to him, was a greater goal than building more schools in the short run. There is no greater goal, like civil rights, at stake in the current health reform so Pollack has a point in suggesting the progressives’ strategy is short-sighted not far-sighted.
People seem to care not just about their own material success but how it measures up to their peers. There is probably a good evolutionary reason for this. Larry Samuelson has shown one way to formalize this idea in this paper.
But here’s a different story and one that is extremely simple. Imagine a speed skating competition with 10 competitors. Suppose that 8 of them skate their heats solo with no knowledge of the others’ times. The remaining 2 also have no knowledge of the others’ times except that they race simultaneously side by side.
Other things equal, each of the two parallel skaters has a greater than 1/10 chance of winning.
Does game theory have predictive power? The place to start if you want to examine this question is the theory of zero sum games where the predictions are robust: you play the minimax strategy: the one that maximizes your worst-case payoff. (This is also the unique Nash equilibrium prediction.)
The theory has some striking and counterintuitive implications. Here’s one. Take the game rock-scissors-paper. The loser pays $1 to the winner. As you would expect, the theory says each should play each strategy with 1/3 probability. This ensures that each player is indifferent among all three strategies.
Now, for the counterintuitive part, suppose that an outsider will give you an extra 50 cents if you play rock (not a zero-sum game anymore but bear with me for a minute), regardless of the other guy’s choice. What happens now? You are no longer indifferent among your three strategies, so your opponent’s behavior must change. He must now play paper with higher probability in order to reduce your incentive to play rock and restore your indifference. Your behavior is unchanged.
Things are even weirder if we change both players’ payoffs at the same time. Take the game matching pennies. You and your opponent hold a penny and secretly place it with either heads or tails facing up. If the pennies match you get $1 from your opponent. If they don’t match you pay $1.
Suppose we change the payoffs so that now you receive $2 from your opponent if you match heads-heads. All other outcomes are the same as before. (The game is still zero-sum) What happens? Like with RSP, your opponent must play heads less often in order to reduce your incentive to play heads. But since your opponent’s payoffs have also changed, your behavior must change too. In fact you must play heads with lower probability, because the payoffs have now made him prefer tails to heads.
How can we examine this prediction in the field? There is a big problem because usually we only observe outcomes and not the players’ payoffs which might vary day-to-day depending on conditions only known to them. To see what I mean, consider the game-within-a-game between a pitcher and a runner on first base in baseball. The runner wants to steal second, the pitcher wants to stop him. The pitcher decides whether to try a pick-off or pitch to the batter. The runner decides whether to try and steal.
When he runs and the pitcher throws to the plate, the chance that he beats the throw from the catcher depends on how fast he is and how good the catcher is, and other details. Thus, the payoff to the strategy choices (steal, pitch) is something we cannot observe. We just see whether he steals succesfully.
But there is still a testable prediction, even without knowing anything about these payoffs. By direct analogy to matching pennies, a faster runner will try to steal less often than a slower runner. And the pitcher will more often try to pick off the faster runner at first base. Therefore, in the data there will be correlation between the pitcher’s behavior and the runner’s. If the pitcher is throwing to first more frequently, that is correlated with a faster runner which in turn predicts that the runner tries to steal less often.
This correlation across players (in aggregate data) is a prediction that I believe has never been tested. (It’s strange to think of non-cooperative play of a zero-sum game as generating correlation across players.) And while many studies have failed to reject some basic implications of zero-sum game theory, I would be very surprised if this prediction were not soundly rejected in the data.
(The pitcher-runner game may not be the ideal place to do this test, can anyone think of another good, binary zero-sum game where there is good data?)
Do you use opt-in or opt-out? That is, do you agree to meet unless one or more of the group calls and says they can’t make it, or do you agree only if enough of you call and say they can make it?
With opt-out each person has insufficient incentive to make the call. If she has already decided not to go, courtesy is the only motive for informing the others. Moreover even if she is courteous, since the call could kill the meeting, if she is not 100% sure she can’t make it, she has a private incentive to wait until the last minute to make the call, just in case.
With opt-in each person has stronger incentives to try to coordinate. Because if I want to go to the meeting and I don’t make the call it might not happen.
So, returning to the question in the title, it all depends on what you want. Opt-out minimizes the chance that the meeting will be cancelled, but probably also at the expense of minimizing attendance.
Continuing our trade theme, in honor of Krugman’s profile in the New Yorker, an old Krugman song -
My parents are visiting from England. My father arrived with a loose molar which had to be removed. We do not know good dentists in the area and my father does not have American dental insurance. We settled on TUFTS Medical School’s Emergency Dental Center for the extraction. Three and a half hours later we were out of there, leaving one molar and $180 dollars in our wake.
My father thinks he now needs an implant so I quickly checked out options:
1. A New York Times ad offered an implant for $1000 (not including the crown).
2. In the U.K. it costs about the same.
3. Given the high prices in the U.K. and U.S., an attractive option is to go to Hungary. A quick search suggested a price of $700 for an implant. So, you can go to Budapest for a bit of a holiday and get your grotty teeth dealt with at the same time.
Why is Hungary so cheap? One nice thing about trade in dentists services is that it largely must be one way: Hungarians aren’t going to Britain to go to dentists! This makes it different from other products like cars which countries export and import simultaneously. This is hard to explain with traditional trade theory. The traditional theory should be adequate for trade in dental services though. Ricardian trade theory suggests differences in technology drive trade patterns. Is that the explanation? Heckscher-Olin’s theory of trade instead assumes technology is the same across countries and differences in endowments drive trade patterns. Is the endowment of dentists large in Hungary? At this point, I’m stuck.
I spent last week at UCSD where the weather was spectacular and academic life seems to consist of going for walks with everybody you know, in sequence.
I am recovering from hamstring tendonitis (the walks helped a lot, as did the weather and especially the company!) so I walk a little slower than usual. I noticed something about how a small group deals with a slowpoke on a walk. It starts out with everybody going at their usual pace and then noticing that I am falling behind. Eventually everybody slows down to my pace, however I am always one or two steps behind.
Its not an equilibrium for the faster walkers to stay even with the slow poke, but it also not an equilibrium for them to walk at a faster speed and increase the gap beyond more than a few steps. Its as if some minimum distance is necessary to remind them that they can’t walk at their natural speed.
I even found myself slightly out front of Joel Sobel when we went for our walk. He has a broken leg.
We tend to think of intellectual property law as targeted mostly at big ideas with big market value. But for every big idea there are zillions of little ideas whose value adds up to more. Little ideas are little because they are either self-contained and make marginal contributions or they are small steppingstones, to be combined with other little ideas, which eventually are worth a lot.
It’s now cheap to spread little ideas. Whereas before even very small communication costs made most of them prohibitively expensive to share. In some cases this is good, but in some cases it can be bad.
When it comes to the nuts and bolts kinds of ideas, like say how to use perl to collect data on the most popular twitter clients, ease of dissemination is good and intellectual property is bad. IP protection would mean that the suppliers of these ideas would withold lots of them in order to profit from the remainder. Without IP protection there is no economic incentive to keep them to yourself and the infinitessimal cost of sharing them is swamped by even the tiniest pride/warm glow motives.
Now the usual argument in favor of IP protection is that it provides an economic incentive for generating these ideas. But we are talking about ideas that don’t come from research in the active sense of that word. They are the byproduct of doing work. When its cheap to share these ideas, IP protection gets in the way.
The exact same argument applies to many medium-sized ideas as well. And music.
But there are ideas that are pure ideas. They have no value whatsoever except as ideas. For example, a story. Or basic research. The value of a pure idea is that it can change minds. Ideas are most effective at changing minds when they arrive with a splash and generate coordinated attention. If some semblance of the idea existed in print already, then even a very good elaboration will not make a splash. “That’s been said/done before.”
Its too easy now to spread 1/nth-baked little ideas. Before, when communication costs were high it took investment in polishing and marketing to bring the idea to light. So ideas arrived slowly enough for coordinated attention, and big enough to attract it. Now, there will soon be no new ideas.
Blogs will interfere with basic research, especially in the social sciences.
When it comes to ideas, here’s one way to think about IP and incentives to innovate. It’s true that any single individual needs extra incentive to spend his time actively trying to figure something out. That’s hard and it takes time. But, given the number of people in the world, 99.999% of the ideas that would be generated by active research would almost certainly just passively occur to at least one individual.
A great random find. Purchased tax free at a New Hampshire state liqour store. Cabernet based Bordeaux from a great vintage and drunk young. Velvety and rich on the palette. Cherry as well as the ubiquitous blackberry. Pepper and celery at the end. Around $25. I’m going to buy it up if I can find it again.
India has proposed a new round of talks with Pakistan. The last meaningful talks in 2007 led to a thawing of relations and real progress till everything was brought to a grinding halt by the terrorist attacks in Mumbai.
What are the payoffs and incentives for the two countries? David Ignatius ar the Washington Post offers this analysis:
“The India-Pakistan standoff is like one of those game-theory puzzles where both nations would be better off if they could overcome suspicions and cooperate — in this case, by helping the United States to stabilize the tinderbox of Afghanistan. If Indian leaders meet this challenge, they could open a new era in South Asia; if not, they may watch Pakistan and Afghanistan sink deeper into chaos, and pay the price later.”
The quote offers a theory for how India might gain from peace but what about Pakistan? Pakistan cannot be treated as a unitary actor. Some part of the elite and perhaps even the general population may gain from an easing of tension and a permanent peace with India. But the Pakistani military has quite different interests. The military dominate Pakistan politically and economically. Their rationale for resources, power and prestige relies on perpetual war not perpetual peace. Sabotage is a better strategy for them than cooperation with India. The underlying game is not the Prisoner’s Dilemma.
Military payoffs have to be aligned with economic payoffs to encourage cooperation. Economic growth can also generate the surplus to bankroll a bigger army. A poor country needs the threat of war to divert valuable resources into defense. But a rich country does not.
- Because I am starved for attention.
- Because I am a showoff.
- Because now that I have invented so many reasons to justify why I am doing it, the cognitive dissonance by itself is a prohibitive exit barrier.
OKCupid is a dating site that has attracted attention by analyzing data from its users and publicizing interesting analyses on its blog. For example, a lot of traffic to their site came from this article on the profile photos that generated the most responses.
Mr. Yagan and three other Harvard mathematicians founded OkCupid in 2004. In its fight against much bigger competitors like Match.com, PlentyOfFish and eHarmony, it has tried a number of marketing techniques, often with little success. But the blog, which OkCupid started in October, has helped get the company’s name out on other blogs and social networks. A post last month that set out to debunk conventional wisdom about profile pictures brought more than 750,000 visitors to the site and garnered 10,000 new member sign-ups, according to the company.
But wouldn’t I worry that (my ideal mate would worry that her ideal mate would worry that…) the clientele this will appeal too is a tad too geek-heavy? (via Jacob Grier)
Roland Eisenhuth told me that when he was very young, the first time he had an examination in school his mother told him that she knew a secret for good luck. She leaned in and spit over his shoulder. This would give him an advantage on the exam, she told him.
Indeed it gave him a lot of confidence and confidence helped him do well on the exam. For every school examination after that until he left for University, his mother would spit over his shoulder and he would do well.
Here are the ingredients for a performance-related superstition. Something unusual is done before a performance, say a baseball player has chicken for dinner, and by chance he has a good game. Probably just a fluke. Just in case, he tries it again. Maybe it doesn’t repeat the second time, but maybe he does have another dose of luck and it “pays off” again. And there’s always a chance it repeats enough times in a row that its too unlikely to be a statistical fluke.
Now once you believe that chicken makes you a good hitter, you approach each game with confidence. And confidence makes you a good hitter. From now on, luck is no longer required: your confidence means that chicken dinner correlates with a good game. And you won’t have reason to experiment any further so there will be no learning about the no-chicken counterfactual.
If you are a coach (or a parent) you want to instill superstitions in your student. My wife has been stressing about our third-grade daughter’s first big standardized test coming up in a couple weeks. Not me. I am just going to spit over her shoulder.
1. Long arm of the Mossad – a brief history and a longer one.
2. The quality of suicide bombers is declining in Afghanistan. Perhaps it is because:
The martyrdom testament videos that are so common in other countries are unknown here. “Such individual recognition,” said the United Nations report, “is largely absent in Afghanistan.” Instead, these suicide bombers are buried secretly at a potter’s field in a wasteland at the foot of a mountain, at Kol-e-Hashmat Khan, a neighborhood of junkyards on the outskirts of Kabul. A policeman on duty there said no one ever visited. Many of the unmarked graves have been dug open by starving dogs, which feast on the remains.
I saw it on the plane yesterday. Very funny, very insightful, somewhat disjointed at the end.
Forgive me for doing the game theorist’s equivalent of spoiling a time-travel movie by pointing out the paradoxes, but the main premise of the story rests on some shaky epistemology.
Nobody ever lies, but what really drives the plot is that everybody is perfectly credulous. Does it follow? Partially: if everybody has always been honest and you cannot conceive of the possiblity that anyone would lie, then yes you should assume that everything you hear is truthful.
But that’s not the same as the truth. Take for example the scene in which Gervais’ character lies to the bank teller. He tells her that he has $800 in his account. She looks up his account on the computer which says that he has only $300. What should she conclude?
She has to consider the possible scenarios that could have led to this contradiction and decide which is most likely. She must believe that he is being truthful and the movie assumes that this leads her to the conclusion that the computer is wrong and he is right. But surely people have often been mistaken even if they have always been truthful. And so another scenario is that the computer is right and he is making an honest mistake.
Indeed it is probably more common that people make honest mistakes than computer records are wrong. So that is the most likely explanation and its what the teller should have concluded. And this kind of inferential dilemma underlies most of the movie.
In a world where everybody is honest but nobody is omniscient, someone who starts lying will sooner be viewed as delusional than a prophet.
Or more generally, does your initial job placement matter for your long-term success? Or does “bad luck” on the job market eventually wash out? A 2006 paper from Paul Oyer looks at this question.
In this paper, I show that initial career placement matters a great deal in determining the careers of economists. Each place higher in rank of initial insti-tution causes an economist to work at an institution ranked 0.6 places higher in the time period from three to 15 years later. Also, the fact that an economist originally gets a job at a top-50 institution makes that economist 60 percent more likely to work at a top-50 school later in his or her career. While it would obviously come as no surprise to find that economists at higher-ranked schools have higher research output, I will present evidence that for a given economist—that is, holding innate ability constant— obtaining an initial placement at a higher-ranked institution leads to greater professional productivity.
He circumvents the obvious endogeneity issue: there may be some measure of your quality that can’t be observed in the data and then lower initial placement is going to be correlated with lower intrinsic quality. The way he gets around this is to compare cohorts in strong-market years with cohorts from weaker years. Suppose that the business cycle is uncorrelated with your intrinsic skill and bad times means worse than usual placement. Then the same quality worker will have worse placement in weak-market years.
In fact, Oyer finds that students who enter the market in weak years are less successful even in the long run. This is evidence that their initial placement mattered.
There remain some selection problems, however. For example, students have choice over which year to enter the market. It could be that, anticipating the worse placements, the best students enter the market a year before a downturn or wait a year after. Also, in bad years the best students might find altogether better alternatives than academia and go to the private sector.
Here’s my idea for a different instrument: couples. It often happens that a student on the market has a spouse who is seeking a job in the private sector. Finding a good job in the same city for both partners is more constraining than a solo search and typically the student will have to compromise, taking their seond- or third-best offer.
If being married at the time of entering the market is uncorrelated with your unobservable talent as an economist, then a difference in the long-run success of PhDs with dual searches would be evidence of the effect of initial placement.
(I would focus on academic-private sector couples. In an academic-academic couple, the two quite often market themselves as a bundle to the same institution and the worse of the two gets a better placement than he would if he were solo. But it would be interesting to compare academic-academics to academic-private.)
(Casquette cast: Seema Jayachandran)
You are a student living in a small room with no closet. All of your clothes sit on the floor. You can never remember if they are clean or dirty, and each day you have to decide whether to do the laundry or just throw something on.
If your strategy in these circumstance is to always do the laundry, you will be doing laundry every day, often washing clothes that are already clean. On the other hand if your strategy is to dress and go your clothes will never get clean.
Instead you have to randomize. If you wash with probability p then p is the probability you will be wearing clean clothes on any given day. Of course you would like p=1, but then you are doing laundry with probability 1 every day. Your optimal p is strictly between 0 and 1 and trades off the probability of clean clothes p versus the probability of washing clothes that are already clean. (The latter is equal to the probability these clothes are clean, p, multiplied by the probability you wash them, again p so it’s p².)
The same logic applies to:
- I’ve been standing here in the shower for what must be a good 30 minutes; singing, sleeping, or absorbed in a proof that doesn’t work and I have forgotten whether I washed my hair. (shower cap nod: David K. Levine)
- Its dark and I lost count of how many intersections I’ve crossed and I know I have to turn left somewhere to get home. (The classic example, due to Piccione and Rubinstein.)
- When was the last time I called my mother?
- etc…
The sound of David Grisman’s mandolin is violet and indigo and generally vibrates in the short-wavelength end of the color spectrum. (wait for around the 1 minute mark, after the intro-noodling.)
1. How did Obama lose his groove? May require free registration at FT
eBay combines a proxy bidding system with minimum bid increments. These interact in a peculiar way. If you have placed the first bid of $5 and the seller’s reserve is $1, then the initial bid is recorded at $1. Your true bid of $5 is kept secret and the system will bid for you (by “proxy”) until someone raises the price above $5.
Now I come along and bid, say $2. That’s not enough to outbid your $5, so you remain the high-bidder but the price is raised. In this case it is raised to $2 plus the minimum increment, say $0.50, provided that sum is less than your bid. In this case it is. But suppose the next bidder comes along and bids $4.75. Again you have not been outbid and so you remain the high bidder but in this case $4.75 + $0.50 is larger than $5, and when this happens the price is raised only to equal your bid, $5.
So, if you are bidding and your bid was not high enough to displace the high bidder but the price didn’t rise by the minimum increment above your bid, then the new price is exactly the (previously secret) bid of the high bidder. If you happen to also be the person selling the object up for sale and you are shill bidding, now is the time to stop because you have just raised the price to extract all of the surplus of the high bidder.
Notice how, as a shill bidder, you can incrementally bid the price up and, in most cases, hit but never overshoot the high bid. (“In most cases” because you must outbid the current price by the minimum increment and you get unlucky if the high bid falls in that gap. A good guess is that the high bidder is bidding in dollar denominations. If that is the case you can guarantee a perfect shill.)
This is discussed in a paper by Joseph Engelberg and Jared Williams (Kellogg PhDs.) The authors have a simple way to detect sellers who using shills in this way and they estimate that at least 1.3% of all bids are shill bids.
Homburg hail: barker.
Joshua Gans on the grade school ritual (a very entertaining read as usual):
This Friday (12th February) is Valentine’s Day. Now before you say, “oh no it isn’t!” I have to beg to differ. That is the day our two youngest children are, near as I can tell, compelled to bring a Valentine’s card to every other person in the class. The school sent home a convenient list of the some 45 names in total that require cards and the instruction that they be prepared for Friday. And by prepared, you can’t just go to the store, buy a pack and put names on it. Nor can you, as I had wanted to do, draw a card on the computer and hit print (quantity = 45). Each requires individual attention. Suffice it to say, this is an exercise requiring many hours and, frankly, if we didn’t have a snow day today (that is, a day whereupon fear of snow = no school for you), it is unclear whether the household could produce the required amount of love.
And of course the parents wind up doing most of the work. I would suggest however that schools will push parents to their limits in terms of busy work whether or not that includes making Valentines. That is, if the Valentine exchange were banned it would only be replaced by some other after-school craft or chore.
What’s surprising is that Valentines has survived this long in US schools. It’s too focal and so too easy for parents to coordinate their outrage against. Whereas yet another assignment to look up native american tribes on the internet just blends in with all the rest.
