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UnitedHealth will “watch and see” how the exchanges evolve and expects the first enrollees will have “a pent-up appetite” for medical care, Hemsley said. “We are approaching them with some degree of caution because of that.”
An interpretation from Think Progress:
Get that? The company packed its bags and dumped its beneficiaries because it wants its competitors to swallow the first wave of sicker enrollees only to re-enter the market later and profit from the healthy people who still haven’t signed up for coverage.
[B]efore Apple launched its own iOS Maps app, Google Maps for iOS was already markedly inferior to Google Maps for Android. Not because Google was incapable of producing a great Google Maps app for iOS but because they didn’t want to make one.
To get out of that bind, Apple has never needed to make a product that’s actually superior to Google Maps. What they’ve needed to do is produce an application that clears two bars. One is that it has to be good enough that your typcial doesn’t-care-too-much phone consumer doesn’t reject iOS out of hand. The other is that it has to be good enough such that if Google doesn’t want to lose the entire iOS customer base it has to scramble and release a great Google Maps app for iOS and not just for Android. Apple’s Maps app easily clears both of those bars. Before the release of iOS 6, the inferiority of Apple’s Google-powered iOS Maps app to Android’s Google maps was a real reason to prefer an Android phone. Today, there is no such reason. Not because Apple Maps is as good at Google Maps, but because Google Maps for iOS is as good as Google Maps for Android.
Airlines that offer this either send travellers an email inviting them to upgrade or travellers can go direct to the airline’s website.Once you’re on their site, rather than them saying, ‘you can pay £400 to upgrade’, you can now say, ‘I’ll pay £300’,” explains Ken Harris chief executive of Plusgrade, the technology company behind the platform. “There may be a minimum upgrade price and there will be an indicator which shows the strength of your offer.” The airline will then email you at least 72 hours before your flight to tell you if your bid has been successful; if not, you retain your original reservation.
Taking things to another comfort level:
Along with upgrades, you can also pay a nominal fee to ensure the seat next to you is not occupied.
To extract surplus and reduce information rents from high types, “low” types must be punished with inefficient allocations. Expect to be seated en masse if you do not purchase an upgrade even if the plane is half empty.
I enjoy my Mother’s cooking all too rarely. This is good for my waist line but bad for my taste buds. I have resorted to consumption of frozen Indian food as a poor substitute. I was surprised to find that Whole Foods carries a reasonable brand, Tandoor Chef, that has some decent options. Of course, these products come with a Whole Foods price tag.
On a recent trip to Devon Av., I happened to notice that the Fresh Farms supermarket carried these same products. Unfortunately, the prices are benchmarked against Whole Foods – no good deal there. But the supermarket also carries much cheaper products by Healthy Tiffin and they bear a remarkable resemblance to the Tandoor Chef products, e.g. both have Paneer Tikka Masala cooked in a relatively healthy way (if that is possible!). On closer inspection, Healthy Tiffin and Tandoor Chef are both made by Deep Products. I have been enjoying the arbitrage opportunity for a few months now. I worry that Deep Foods will reduce the quality of the Healthy Tiffin products to prevent arbitrage!
Trade of shares is going to be taxed by some countries inside the EU. The usual counter argument is that this will simply cause trading to move outside the tax zone to, in this case, the U.K. and the U.S. To try to get around this, the countries involved require that the tax be paid wherever the trade takes place:
The tax would be owed no matter where the trade took place, as long as a European security or European institution was involved. The law has been written so broadly that if a French bank bought shares in an American company on the New York Stock Exchange, the tax would be owed.
But who is going to report the trade? The EU authorities are relying on a prisoner’s dilemma to do the monitoring for them:
There is every chance that markets from other countries will not be very cooperative, meaning that to learn if a German bank traded in New York the authorities might have to rely on the bank to report it to them. But then there would be the risk that the tax authorities would learn of it otherwise, perhaps through an audit or from a report by an Italian bank that happened to be on the other side of that trade.
Mr. Bergmann, himself an economist, compared that to “the prisoners’ dilemma,” a classic concept in economics in which two people arrested for a crime would do best if neither confessed, but either would do very badly if he did not confess while the other did. If the authorities did find out, it would be tax fraud under the proposed law.
If the Italian bank reports the trade but the German bank does not, does the Italian bank get a reward? Is the tax forgiven? This is not clear from the article. (I also had a hard time finding the actual law but perhaps I did not look hard enough.) If the Italian bank is liable for tax if it unilaterally reveals the trade, then the game is a coordination game:
If the German bank does not reveal the trade, the Italian bank avoids the tax if it does not reveal but pays the tax if it does. Hence, not revealing is a strict best response to not revealing by the opponent. On the other hand, if the German bank is expected to reveal the trade, if the Italian bank does not reveal the trade, it pays a big fine. If it also reveals the trade, it just pays the tax. Hence, reveal is a strict best response to reveal. Then, the blog post should be called Coordination Games Everywhere.
Would love to know what the facts are. Or are they ambiguous? This would introduce uncertainty and then papers can be written about this possibly…
According to this video by Tim Hartford, this includes: Designing wargames for Kissinger et al., helping Kubrick with Dr Strangelove, suggesting the red telephone be installed between USA and Soviet Union and trying but failing to dissuade a bombing campaign in Vietnam. On the intellectual plane (as well as game theory), decades ahead of his time in thinking about behavioral economics (because he was trying to give up smoking), doing the first agent-based model (of discrimination) and thinking about climate change. Near-fatal flaw for Nobel Committee: Not enough math.
Great for teaching. Part on mutually assured destruction vs common interest games could easily be folded into discussion of Nash vs subgame perfect equilibrium and hence credibility.
[T]he Jets have invested an enormous amount of energy and money in Sanchez, and, assuming that no one will trade for him, they are contracted to pay him $8.25 million next year, whether he plays or not….
In a purely rational world, Sanchez’s guaranteed salary would be irrelevant to the decision of whether or not to start him (since the Jets have to pay it either way). But in the real world sunk costs are hard to ignore. Hal Arkes, a psychologist at Ohio State University who has spent much of his career studying the subject, explains, “Abandoning a project that you’ve invested a lot in feels like you’ve wasted everything, and waste is something we’re told to avoid.” This means that we often end up sticking with something when we’d be better off cutting our losses—sitting through a bad movie, say, just because we’ve paid for the ticket. In business and government, the effect pushes people to throw good money after bad.
Jeff and I have a paper, Mnemonomics: The Sunk Cost Fallacy As A Memory Kludge, that offers a primitive theory of this “Concorde effect” as a response to limited memory. Mark Sanchez was hired years ago. At that time there was a rationale for why he would be a great QB for the Jets and hence he was paid a high salary. This rationale for his hiring has been lost in the mists of time but his salary is recalled perfectly. His salary encodes the rationale for his hiring – the higher the salary the better must have been the rationale for his hiring. Even if we have forgotten the details, the rationale must have been good if Sanchez was paid a high salary. Therefore the higher the salary, the greater the chances of retention even when future events creates costs of retention. This is the Concorde effect. As far as Mark Sanchez goes, mnemonomics does not do too bad a job.
But an obvious alternate theory rests on reputation:
“Taking the original decision-maker out of the picture and letting a fresh pair of eyes look at the pros and cons can help,” Arkes says. He points to a…study of a bank that found that loan officers were reluctant to acknowledge that loans they’d made had gone bad, whereas new executives were far more likely to take the loss and move on. Whoever becomes the Jets’ new general manager will have no personal or reputational investment in Sanchez, which should make it easier for him to be more objective, though he’ll still have to persuade the head coach and the owner.
There’s surely a lot of truth to this theory. But there is a countervailing effect too. Managerial turnover generates limited memory – who knows why the previous CEO made the decisions he did? If he was smart, it would be good to accord his decisions some respect and see them through before trying out new ideas. Perhaps the best CEOs understand this. From our paper:
For example, when John Akers stepped down and Lou Gerstner became C.E.O. of IBM in 1993, he was determined to “carry out a set of policies put in place by none other than the much-maligned Akers.” He was not “rushing to make significant changes in vision” but was “still following through on Akers’ two-year-old restructuring.” He believed that “IBM has yet to test fully many if the changes Akers put in place” and said, “I want to make sure the current system is implemented before we try any alternatives.” We interpret Gerstner’s decision-making as follows: Akers’ old plans were initiated using information known to him at the time. By the time Gerstner arrived, the direct information was lost but was manifested indirectly in the strategic plan he inherited. Hence, this generated a bias to implement the old plan.
You dig your car out of the snow, run an errand or two and come back home to discover…someone else has parked in “your” spot! This free rider problem reduces your incentive to dig your car out in the first place. If only property rights could be enforced, your incentives would be good. It turns out that Bostonians have solved this problem:
Cold-weather cities like Boston, however, have gone so far as to enact laws on the subject. The Post reports that in Boston, “a city law says that if you dig out your car in a snow emergency, a lawn chair or trash can renders the spot yours for at least two days while you’re away at work.”
The Windy City is relying on social norms instead:
In Chicago, the article adds, citizens cannot legally block a parking spot but even city officials acknowledge an “informal rule of dibs” in favor of the person who has dug out the spot.
Hat Tip: Andrew Ellis, job candidate from B.U.
Via Tim Hartford’s Twitter feed.
The Observer‘s panel of stock-picking professionals has been undone in our 2012 investment challenge by a ginger feline called Orlando who spent time paw-ing over the FT.
The Observer portfolio challenge pitted professionals Justin Urquhart Stewart of wealth managers Seven Investment Management, Paul Kavanagh of stockbrokers Killick & Co, and Schroders fund manager Andy Brough against students from John Warner School in Hoddesdon, Hertfordshire – and Orlando.
Each team invested a notional £5,000 in five companies from the FTSE All-Share index at the start of the year. After every three months, they could exchange any stocks, replacing them with others from the index.
By the end of September the professionals had generated £497 of profit compared with £292 managed by Orlando. But an unexpected turnaround in the final quarter has resulted in the cat’s portfolio increasing by an average of 4.2% to end the year at £5,542.60, compared with the professionals’ £5,176.60.
While the professionals used their decades of investment knowledge and traditional stock-picking methods, the cat selected stocks by throwing his favourite toy mouse on a grid of numbers allocated to different companies.
“For many Republicans, a cliff dive means blaming President Barack Obama for a big tax hike in the short term and then voting to cut taxes for most Americans next month. That’s an easier sell back home in Republican-heavy districts than a pre-cliff deal that raises taxes on folks making over $250,000 or $400,000, extends unemployment benefits and does little if anything to curb entitlement spending. If they back a bad deal now, they run the risk of facing primary challenges in two years.
For Democrats, the cliff is better than setting a rich man’s cutoff in the million-dollar range — or worse yet, extending the Bush tax cuts for all earners — and slashing Medicare and Social Security to appease Republicans. They, too, see an advantage in negotiating with Republicans who will feel freed from their promise not to vote to raise taxes once the rates have already gone up….
Another analogy: It’s a Nash equilibrium. John Nash, subject of “A Beautiful Mind,” the Oscar-winning film that revolved around game theory, explained how players act in a multiplayer game. Put simply, if each player understands his adversaries’ strategies, no one will alter their own course. Right now, Obama, Boehner and Reid are locked in on a course for the cliff, and there’s no obvious solution that would make any of them switch directions.”
In the next story, they will superimpose electoral incentives on the Nash demand game!
“JPMorgan Chase & Co. (JPM) asked more than 2,000 current and former employees to contribute to a settlement with the U.K.’s tax authority over their use of an offshore trust for bonus payments, according to a person briefed on the situation…..
People who used JPMorgan’s trust told the FT they were asked to participate in a so-called blind auction, in which they would volunteer to pay a tax rate of their choosing.
If the auction fails to generate enough money to fund the settlement, people who submitted less than the average bid would be excluded from the deal and face a 52 percent tax rate when the trust’s assets are liquidated, the newspaper said.
People who don’t wish to participate can try to fight the government’s demand, the person briefed on the situation said.”
The rules of the auction are not 100% clear from the article. Taken at face value, there is the possibility of multiple coordination equilibria. If I expect everyone else to contribute a lot but not enough to pay off the tax debt, then I will contribute a lot too to avoid the 52% tax. If I expect everyone to contribute a little, so will I hoping people who decided not to participate or contributed less than the average bid will bear the punishment. Finally, if I expect total contributions to exceed the tax debt, I will contribute zero. Uncertainty about everyone’s willingness to pay, deep pockets etc will generate randomness and perhaps refine equilibria but leave open the possibility of multiplicity. Also, there will be positive probability that the auction does not fully recompense the tax authorities. This is also true in mixed strategy equilibria of the complete information game.
To increase contributions and guarantee success, the auction should specify that everyone who contributes more than the average bid will escape the 52% tax if total contributions are lacking. Then, people will submit more than the average just to be safe. Then, the average expected bid will go up. Then, they’ll submit even more etc.
In any negotiation, you first want to prepare the ground so that failing to make an agreement creates a situation that your counterparty absolutely hates–that even what is from their perspective a bad deal is better from their standpoint than no deal–and so that failing to make an agreement creates a situation that you rather like–so that only what is from your perspective a very good deal is better than no deal…
With respect to the debt ceiling, however, no effort has been made to prepare the ground at all: no steps have been taken to signal what actions the administration will take after the debt ceiling has been reached that will make the situation one that Republican politicians will hate and that Democratic politicians can live with. And without such a strategy in place, the Obama administration has no bargaining power on the debt ceiling.
Here’s my rationale: There are two negotiations going on. The Obama administration would like to resolve the fiscal cliff deal in their favor as soon as possible. The Republicans are worried that the tax increases that will ensue if negotiations fail will rebound to their disadvantage. They know that they will have more leverage in the debt limit negotiations that will soon follow. Hence, they are more likely to concede in the fiscal cliff negotiations if they think they will be in strong position in the debt limit negotiations. If Obama explores constitutional solutions to the debt limit increase that sidelines the House, this will impact the fiscal cliff negotiations. Then, the Republicans will be less likely to concede the middle class tax cut now and bargain about entitlements later because they will believe they have less leverage later.
Therefore, Obama should not bring up any exit option from the debt limit negotiations. No trillion dollar platinum coin should be invoked right now. Of course, when the debt limit does come up, the coin comes out. Ha ha.
But we can take this one step further in the usual hall-of-mirrors style of game theory. The Republicans know all the analysis above and have done it themselves. Hence, they know they will have no leverage in the debt limit negotiations as Obama will then pull out the platinum coin from his pocket. Hence, the only leverage they have is via holding up the middle class tax cut. Hence, Obama is in a weak position in the fiscal cliff negotiations and in a strong position in the debt limit negotiations. Of course, his threat point is the fiscal cliff taxes, sequesters etc. but at the risk of causing a recession next year. So, really, in superrational backward induction world, everyone has the analysis backwards – Obama weak now, strong later.
But hold on, this is not only assuming a lot of backward induction but also certainty that the platinum coin or some other constitutional fix works. We cannot be sure. Hence, the Republicans do have some leverage in the debt limit negotiations. Their wiggle rom comes from this uncertainty. But then we are back at square one!
Or we can throw up our hands, say this is all too complicated, and stick with my simpler rationale…..
A potent means of commitment, and some-times the only means, is the pledge of one’s reputation. If national representatives can arrange to be charged with appeasement for every small concession, they place concession visibly beyond their own reach. If a union with other plants to deal with can arrange to make any retreat dramatically visible, it places its bargaining reputation in jeopardy and thereby becomes visibly incapable of serious compromise. (The same convenient jeopardy is the basis for the universally exploited defense, “If I did it for you I’d have to do it for everyone else.”) But to commit in this fashion publicity is required. Both the initial offer and the final outcome would have to be known; and if secrecy surrounds either point, or if the outcome is inherently not observable, the device is unavailable.
From NYT, a proposed tax on beer has French imbibers, producers and intermediaries upset. E.g., from a bar owner:
“The increase is brutal; 160 percent is a lot,” said Mr. Thillou, 36, who prides himself on promoting French microbreweries. On a barrel near the entrance, a pile of fliers that say “+160% taxes on beer: Who is going to pay the price?” shows what he thinks of the government’s latest plan for raising revenue.
But the goverment may be rasing revenue the right way, by taxing goods with inelastic demand:
Philippe Lessevre, 26, who had come for a beer, said higher prices would not change his drinking. “It will affect my wallet,” Mr. Lessevre allowed, “but not my consumption.”
But Mr. Charvier was still skeptical about the government’s professed concerns for public health. “It’s the same as for cigarettes: If a percentage of the price goes into their pocket, they still need people to continue buying,” he said. “It’s hypocritical.”
But, of course, there are always lobbyists:
Many opponents of the bill suggested that wine was exempted because the industry has greater political clout, given that it is one of the country’s top three exporters and employs 250,000 people. Wine is currently taxed around the same rate as beer, per hectoliter, but unlike the rates for beer, its rates do not increase with the degrees of alcohol.
According to Jean-Jacques Dethier, a development economist at the World Bank:
Plot: Alec Trevelyan (Sean Bean) wants to use an electromagnetic pulse from a nuclear weapon to bring London to its knees and destroy the Bank of England, but not before electronically stealing millions of pounds from the Bank’s systems.
Plausibility: First of all, wouldn’t destroying London and the Bank of England render the pounds you’ve stolen largely worthless? “Not exactly worthless, but close,” says Dethier. Would you be able to convert it? “It’s actually very hard to convert huge amounts of something, which is a problem the Chinese now know well with all their American dollar holdings,” he says. So Trevelyan would have to spend all those pounds in the one country that’d take them: Britain. Whose economy he’s just destroyed.
The United States Department of Commerce signaled then that it might be willing to end a 16-year-old agreement between the United States and some Mexican growers that has kept the price of Mexican tomatoes relatively low for American consumers. American tomato growers say the price has been so low that they can barely compete.
Later, the article adds more detail:
As part of a complex arrangement dating to 1996, the United States has established a minimum price at which Mexican tomatoes can enter the American market. Over the years, Florida’s tomato sales have dropped as low as $250 million annually, from as much as $500 million, according to Reggie Brown, executive vice president of the Florida Tomato Exchange, which has led the push to rescind the agreement. The state is the country’s largest producer of fresh market tomatoes, followed by California.
In the meantime, Bruno Ferrari, the economy minister of Mexico, said the value of Mexico’s tomato exports to the United States had more than tripled to $1.8 billion since the agreement was signed, and the tomato industry there supports 350,000 jobs.
Note the agreement established a MINIMUM price. If the agreement is dropped, then prices can go down further. In this interpretation, the agreement has not “kept the price of Mexican tomatoes relatively low for American consumers”. It has kept them high. This is probably good for Mexican farmers because it moves prices away from perfect competition and towards the monopoly price. It is also good for Florida producers who are competing with more expensive Mexican tomatoes. Obviously, it is bad for American consumers. Overall, we should expect both Mexican and Floridian (?) producers to oppose the end of this agreement.
If the agreement is being dropped to be replaced by free trade, it seems I will be buying cheaper tomatoes.
But, finally the article says:
The agreement, which has been amended since it was struck, sets the floor price for Mexican tomatoes at 17 cents a pound in the summer and 21.6 cents in the winter. American growers say they cannot compete at that price.
So, really what is on the cards is even higher minimum prices. This could still be good for Mexican growers as it should raise prices even more towards the monopoly price. But the problem is that more Florida farmers could then afford to grow and sell tomatoes. Then, the rationing rule that determines who makes the sale becomes important. If domestic growers are favored disproportionately, Mexican farmers will suffer. And I will be buying more expensive tomatoes or growing my own.
There should be some diagram that illustrates this so we can all use it in our Micro classes.
How do we “bend the cost curve” of healthcare? Atul Gawande has some ideas after visiting the Cheesecake Factory with his daughters:
“We have forecasting models based on historical data—the trend of the past six weeks and also the trend of the previous year,” Gordon told me. “The predictability of the business has become astounding.” The company has even learned how to make adjustments for the weather or for scheduled events like playoff games that keep people at home.
A computer program known as Net Chef showed Luz that for this one restaurant food costs accounted for 28.73 per cent of expenses the previous week. It also showed exactly how many chicken breasts were ordered that week ($1,614 worth), the volume sold, the volume on hand, and how much of last week’s order had been wasted (three dollars’ worth). Chain production requires control, and they’d figured out how to achieve it on a mass scale.
By the end of this year, Champagne sales in the UK will have fallen by a third since the start of the recession, according to the latest figures.
At the same time, sales of sparkling wine – mainly Prosecco and Cava - will have risen by over 50%.
Orbitz Worldwide Inc. has found that people who use Apple Inc.’s Mac computers spend as much as 30% more a night on hotels, so the online travel agency is starting to show them different, and sometimes costlier, travel options than Windows visitors see.
Orbitz is not attempting third degree price discrimination:
Orbitz executives confirmed that the company is experimenting with showing different hotel offers to Mac and PC visitors, but said the company isn’t showing the same room to different users at different prices. They also pointed out that users can opt to rank results by price.
But is it just a matter of time?
So, we have found by Chris Bosh’s absence and then his presence that he is a significant part of the Miami Heat. But who is the fourth most important man on the team? An argument can be made that it is Shane Battier. A New Yorker story espouses the same theory. It led me to an old article by Michael Lewis. But just why is Battier so good? Lewis makes a telling point:
There is a tension, peculiar to basketball, between the interests of the team and the interests of the individual. The game continually tempts the people who play it to do things that are not in the interest of the group. On the baseball field, it would be hard for a player to sacrifice his team’s interest for his own. Baseball is an individual sport masquerading as a team one: by doing what’s best for himself, the player nearly always also does what is best for his team….It is in basketball where the problems are most likely to be in the game — where the player, in his play, faces choices between maximizing his own perceived self-interest and winning. The choices are sufficiently complex that there is a fair chance he doesn’t fully grasp that he is making them.
Taking a bad shot when you don’t need to is only the most obvious example. A point guard might selfishly give up an open shot for an assist. You can see it happen every night, when he’s racing down court for an open layup, and instead of taking it, he passes it back to a trailing teammate. The teammate usually finishes with some sensational dunk, but the likelihood of scoring nevertheless declined. “The marginal assist is worth more money to the point guard than the marginal point,” Morey says. Blocked shots — they look great, but unless you secure the ball afterward, you haven’t helped your team all that much. Players love the spectacle of a ball being swatted into the fifth row, and it becomes a matter of personal indifference that the other team still gets the ball back…
Having watched Battier play for the past two and a half years, Morey has come to think of him as an exception: the most abnormally unselfish basketball player he has ever seen. Or rather, the player who seems one step ahead of the analysts, helping the team in all sorts of subtle, hard-to-measure ways that appear to violate his own personal interests.
This has two Holmstrom and Milgrom ideas: tension between individual incentives and team incentives; use of easily identifiable measures of output distorting incentives to invest is less identifiable costly tasks. And in the absence of monetary incentives and market efficiency, the only solution to the moral hazard problem is in ethical behavior (Arrow made similar points many years ago).
Jamie Dimon, head of JPMorgan Chase, argues against regulation because, according to him, it lumps in good bankers with bad bankers. For example, via Maureen Dowd,
After the economy nearly atomized in a cloud of cupidity, Dimon became known as America’s least-hated banker. But now the blunt 56-year-old Queens native who snowed Democrats in Washington with all his talk about not lumping in “good banks” with “bad banks” has fallen off his pedestal.
For us humble outsiders, it is hard to tell a good banker from a bad banker, particularly when even good bankers can’t catch a “whale”. This generates Gresham’s Law of Bankers – bad bankers adversely affect good bankers. If I am not sure if I am employing the services of a good banker or a bad banker, I am going to make transactions under an expected quality of banker. Then good bankers suffer as they are pooled with bad bankers.
Screening out the bad bankers via regulation can help the good bankers by creating separation.
Derrick Rose is out for the season and a weekend that started badly might have ended sadly with another super dark episode of Mad Men. Instead, we got a few comedic rays of sunshine to break through the gloom – Pete tricking Megan’s pretentious father, Peggy’s mother’s surprise that Abe’s favorite dish is ham etc. Those of us looking to enliven our courses with the odd example here or there had to wait till the end.
Don is busy trying to drum up new business at his award dinner. He got the award for an anti-cancer ad he took out in the newspaper after losing the Lucky Strike cigarette account. But a colleague’s father rains on Don’s parade. He says that no-one will give Don any new business after he stabbed Lucky Strike in the back. Don signaled to the wrong audience in the last period of the Lucky Strike game. He tried to co-opt consumers by pretending to be concerned about their welfare. But consumers will not give his firm new accounts, firms selling crap to them will. And with them Don lost his reputation – will he also throw them under the bus if things turn sour? Life is an infinite horizon game with many bilateral interactions. Lose your reputation in one and, if your behavior is publicly observable, lose your reputation in all.
Textbook stuff on exit, entry and shutdown decisions:
Gas rigs have been disappearing particularly fast since late October, the last time prices were above $4.
Essentially, gas is so cheap that it’s no longer profitable to drill.
“Producers typically need $5 [per 1,000 cubic feet] to break even,” says David Greely, an energy analyst atGoldman Sachs (GS). The industry hasn’t seen prices consistently over $5 since September 2010, back when there were nearly 1,000 rigs operating in the U.S. The number of gas rigs peaked near 1,600 in mid-2008, when prices peaked at $10. (The boom was effectively confirmed in June 2009, when a Colorado School of Mines report showed that U.S. natural gas reserves were 35 percent higher than previously estimated.)
Other analysts say $5 is too high and that the average gas producer can still make money with the price between $3 and $4, depending on the well because different types of wells have different cost structures. Newer, high-production wells can turn a profit even with prices below $2, while older wells that are just trickling out gas need much higher prices to make money. That’s probably why there’s been stronger demand for horizontal rigs that specialize in fracking. Even those numbers have started to diminish in the last couple weeks.
Hat Tip: Jonathan Schultz, Kellogg MBA student
It’s best to start at $1.50 a slice.
That is what pizza was selling for about a year ago at a family business that is a combination vegetarian Indian restaurant, candy store and pizza parlor on Avenue of the Americas (also known as Sixth Avenue), between 37th and 38th Streets. It is called Bombay Fast Food/6 Ave. Pizza.
Then a Joey Pepperoni’s Pizza opened near the corner of 39th and Avenue of the Americas, offering pizza for $1, a price that has in recent years been favored by a number of New York pizza establishments.
So Bombay/6 Ave. Pizza shrank its price to $1 too.
All was good until last October, when a third player entered the drama.
A 2 Bros. Pizza, part of an enlarging New York chain of 11 shops that sell slices for a dollar, opened virtually next door to Bombay/6 Ave. Pizza. The only separation is a stairwell that leads up to a barbershop and hair salon.
Price stability at a buck all around persisted until eight days ago, when both 2 Bros. and Bombay/6 Ave. Pizza began selling pizza for the eye-catching price of 75 cents a slice, tax included — three slender quarters.
There is a sign that some parties hope things get better:
For his part, Eli Halali made it clear that 75 cents was a temporary price point. He said he could not make money at that level and eventually would return to $1. He said that if Bombay/6 Ave. Pizza went back to $1, he would as well.
But emotions may overcome reason:
If it didn’t, he said, it better watch out.
His father, Joshua Halali, who acts as a consultant to 2 Bros., said, “I suggested to my children to go to 50 cents.”
Oren Halali said, “We might go to free pizza soon.”
Eli said: “We have enough power to wait them out. They’re not going to make a fool of us.”
The brothers said they are also contemplating adding fried chicken to the Avenue of the Americas store to intensify the pressure on Bombay/6 Ave. Pizza.
Meanwhile, Mr. Patel remains intransigent. “We’re never going back to $1,” he said. “We’re going lower.”
“We may go to 50 cents,” Mr. Kumar said. Of his next-door rival, he said: “I want to hit him. I want to beat him.”
Differentiation may protect them. Yelp reviewers love the Indian items at Bombay Fast Food. The Halalis should introduce some Middle Eastern items. And perhaps Bombay Fast Food should just get out of the pizza business. This will allow pizza prices to go up. Then, pizza sales will stop cannibalizing profits from the Indian food operation.
The nationally recognized Piven Theatre Workshop would play a leading role in the revitalization of the Noyes Cultural Arts Center, occupying renovated space and a state-of-the-art theater in the building under a plan that received backing Monday from a city committee…
With past efforts to change things at the city owned building “not going as smoothly, as easily as we wanted,” the new plan seems to heading the city in the right direction, said Alderman Judy Fiske, in whose 1st Ward the building is located….
Piven Theatre officials are proposing to occupy the southern one-third of the building and would extensively renovate the area with new classrooms, rehearsal space, offices and a new theater, he said……
The building, which leases space at below-market rates to artists, faces substantial repairs, including a new roof and heating and air conditioning system.
City officials have looked at a new model for operating the center, a former school building, including asking tenants to take a greater role in the building’s upkeep.
Because of the ambiguity, Piven officials told [officials] last fall they were likely moving out of the building, and possibly out of Evanston…
Clear property rights are necessary to resolve the hold up problem.
But a battle to establish property rights can generate a war of attrition and hence the hold up problem. For the Church of thew Holy Sepulchre inthe Old City in Jerusalem:
The primary custodians are the Eastern Orthodox, Armenian Apostolic, and Roman Catholic Churches, with the Greek Orthodox Church having the lion’s share. In the 19th century, the Coptic Orthodox, the Ethiopian Orthodox and the Syriac Orthodox acquired lesser responsibilities…
Under the status quo, no part of what is designated as common territory may be so much as rearranged without consent from all communities. This often leads to the neglect of badly needed repairs when the communities cannot come to an agreement among themselves about the final shape of a project….A less grave sign of this state of affairs is located on a window ledge over the church’s entrance. Someone placed a wooden ladder there sometime before 1852, when the status quo defined both the doors and the window ledges as common ground. The ladder remains there to this day, in almost exactly the same position it can be seen to occupy in century-old photographs and engravings.
If one church fixes something, they then claim property rights over the thing they fix. Hence, all repair is vetoed
Dr Richard Weitz, Senior Fellow and Director of the Center for Political-Military Analysis at Hudson Institute said: “From our perspective, China should have done more in terms of security. From their perspective, they didn’t need to; they could free-ride, we were going to do it anyway. They didn’t see any point because all they would do is incur a lot of sacrifice and antagonise the Taliban and the global terrorist movement, and they’d rather let us incur that.”
Why aren’t Western countries going in there themselves?
Peter Galbraith, former deputy head of the UN mission in Afghanistan, said: “Western companies are exceptionally timid when it comes to operating in places where there is even the remotest hint that it might be a little risky, and the Chinese are not and are willing to go to these places. And the Chinese have business practices that Western countries … let’s just say that Chinese generosity towards local officials exceeds that of what Western companies are capable.”
I guess some might argue trade is good for Afghanistan and hence for us if trade leads to a stable prosperous economy. But as I have made it to Chapter 4 of Acemoglu and Robinson’s Why Nations Fail, I worry that Afghanistan will adopt “extractive political institutions” and all this trading will lead nowhere except a Swiss bank account.
People who read e-books on tablets like the iPad are realizing that while a book in print or on a black-and-white Kindle is straightforward and immersive, a tablet offers a menu of distractions that can fragment the reading experience, or stop it in its tracks.
E-mail lurks tantalizingly within reach. Looking up a tricky word or unknown fact in the book is easily accomplished through a quick Google search. And if a book starts to drag, giving up on it to stream a movie over Netflix or scroll through your Twitter feed is only a few taps away…
“The tablet is like a temptress,” said James McQuivey, the Forrester Research analyst…. “It’s constantly saying, ‘You could be on YouTube now.’ Or it’s sending constant alerts that pop up, saying you just got an e-mail. Reading itself is trying to compete.”
My (quite old) Kindle loses battery power rapidly if you attempt to use its wireless capabilities and its browser lacks the capability to access webmail or surf the web comfortably. So, you have only one option – use it to read. Fewer options are better is you lack self control. Far sighted readers who easily fall prey to Twemptation should stick with the Kindle over the iPad.
In an under-caffeinated state yesterday morning, I picked up the NYT Travel section to see where I might escape once my teaching is over in a few weeks. Nogales, Mexico, seemed easy to get to – you just go to Nogales, Arizona, and walk across the border. Good for tacos and cheap dental work.
A few hours and several coffees later, I settled down to read Why Nations Fail, Daron Acemoglu and Jim Robinson’s new book. It summarizes their many years of research (some with Simon Johnson) on political and economic institutions and their impact on economic growth. The book has no equations, graphs or tables and is aimed at a popular audience. The book begins by comparing the colonial history of Mexico and the U.S.
Mexico was settled by Spanish conquistadores who extracted as much gold and silver as possible and used the population as slave labor. The British tried to take the same approach when they arrived in Virginia. But there was no gold or silver and the population density was low. They were forced to set up political institutions that fostered economic activity. Settlers eventually got to keep a large slice of any surplus they generated and got the right to vote on taxation (this led to trouble for the British in the long run!). All very interesting and yet it seemed familiar. Eventually it dawned on me that a key Acemoglu and Robinson motivating example, used to show the importance of institutions, is Nogales Arizona vs Mexico. The geography is the same and yet the political institutions are quite different. And so are the economic outcomes. So, geography is not the major determinant of economic outcomes (roughly the theory of Jared Diamond) and political institutions are at the core of economic development.
Serendipity, synchronicity, call it what you will, but the time seems ripe for this book. Acemoglu and Robinson have a blog to accompany their book. I suppose they will interpret comtemporary events through the lens of their theory. I look forward to reading it on a regular basis.
The Cubs are finally ready to end their losing streak.
After years of being out-hustled by secondary ticket brokers, which flip high-demand seats for huge profit, the North Siders are stealing a page from their South Side rival’s playbook and implementing “dynamic pricing” in their 5,000 bleacher seats this season.
Until recently, all 30 Major League Baseball teams set prices well before the start of the season, leaving their hands tied on game days, when StubHub Inc. sellers might be hawking the same tickets for twice as much. Now, if demand spikes, the Cubs can hike prices much like airlines do as departure time nears.
“Teams are looking at (dynamic pricing) to capture some of that secondary market that they’re not capturing,” says Colin Faulkner, the Cubs’ vice president of ticket sales and service, who implemented the new system when he worked for the NHL’s Dallas Stars before moving to Wrigley Field in 2010. Mr. Faulkner says the dynamic pricing will supplement a tiered system in the bleachers, where initial costs range from $17 to $78 apiece.
(Hat Tip: Kathryn Landis, Kellogg MBA)