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In his first study, each year, for four years, Mr. Hodgson served actual panels of California State Fair Wine Competition judges—some 70 judges each year—about 100 wines over a two-day period. He employed the same blind tasting process as the actual competition. In Mr. Hodgson’s study, however, every wine was presented to each judge three different times, each time drawn from the same bottle.
The results astonished Mr. Hodgson. The judges’ wine ratings typically varied by ±4 points on a standard ratings scale running from 80 to 100. A wine rated 91 on one tasting would often be rated an 87 or 95 on the next. Some of the judges did much worse, and only about one in 10 regularly rated the same wine within a range of ±2 points.
The article was published in the January issue of the Journal of Wine Economics. The Wall Street Journal has a fun writeup. The same researcher showed that the distribution of medal winners in a sample of wine competitions matched what you would get if the medal was awarded by a fair lottery.
Will…You…Play…Black Knight Again??
There is a reason I live in Winnetka and not in Evanston. And it’s not because, as Sandeep would put it, I like to get up 30 minutes earlier than otherwise so that my daughters can put their hair up and dress like beautiful little dolls to match all the other dolls in their classes. No, its because after all the dolls are asleep we get to go to their parents’ mansions for parties and there’s always at least one parent who makes a living doing something incredibly interesting.
Tonight I met the guy who once made a living designing the classic pinball machines. And he designed the two pinball machines, Black Knight in 1980 and High Speed in 1986 that are bookends for a period when the most important stuff I was learning about life was learned within a few feet of at least one of these machines.
It turns out these were also major turning points in the history of pinball itself. In 1980, pinball went digital, multi-ball, and multi-media starting with the game Black Knight. Black Knight brought pinball to a new level, literally speaking because it was among the first games with ramps and elevated flippers, but even more importantly because it brought a new challenge that drew in and solidified a pinball crowd. In doing so it also set the pinball market on a path that would eventually lead to its demise.
In 1986, Williams High Speed changed the economics of pinball forever. Pinball developers began to see how they could take advantage of programmable software to monitor, incentivize, and ultimately exploit the players. They had two instruments at their disposal: the score required for a free game, and the match probability. All pinball machines offer a replay to a player who beats some specified score. Pre-1986, the replay score was hard wired into the game unless the operator manually re-programmed the software. High Speed changed all that. It was pre-loaded with an algorithm that adjusted the replay score according to the distribution of scores on the specified machine over a specific time interval.
The early versions of this algorithm were crude, essentially targeting a weighted moving average. But later implementations were more sophisticated. The goal was to ensure that a fixed percentage, say the top 5% of all scores would win a free game. The score level that would implement this varies with the machine, location, and time. The algorithm would compute a histogram of scores and set the replay threshold at the empirical cutoff of 5%. Later designs would allow the threshold to rise quickly to combat the wizard-goes-to-the-cinema problem. The WGTTC problem is where a machine has adjusted down to a low replay score because it is mostly played by novices. Then anytime an above average player gets on the machine, he’s getting free games all day long.
The other tool is the match probability: you win a free game if the last two digits of your score match an apparently random draw. While adjustments to the high-score threshold is textbook price theory, the adjustments to the match probability is pure behavioral economics. Let’s clear this up right away. No, the match probability is not uniform and yes, it is strategically manipulated depending on who is playing and when. For example, if the machine has been idle for more than three minutes, the match probability is boosted upward. You will never match if you won a free game by high score. And it gets more complicated than that. Any time there are two or more players and they finish a game with no credits left, one player (but only one) is very likely to match. Empirically, the other players will more often than not put in another quarter to play again.
(The tilt tolerance, by contrast has always been controlled by a physical device which is adjusted manually and rarely in response to user habits.)
Pinball attracted a different crowd than video games like Defender (my new pal designed Defender and Stargate too,) and this is the fundamental theorem of pinball economics. Pinball skill is transferrable. If you can pass, stall, nudge, and aim on one machine you can do it on any machine. This is both a blessing and a curse for pinball developers. The blessing is that pinball players were a captive market. The curse was that to keep the pinball players interested the games had to get more and more intricate and challenging.
Pinball developers struggled with this problem as pinball was slowly losing to video games. Video games competed by adding levels of play with increasing difficulty. Any new player could quickly get chops on a new game because the low levels were easy. This ensured that new players were drawn in easily, but still they were continually challenged because the higher levels got harder and harder. By contrast, the physical nature of pinball, its main attraction to hardcore players, meant that there was no way to have it both ways.
Eventually, to keep the pinballers playing, the games became so advanced that entry-level players faced an impossible barrier. High-schoolers in 1986 were either dropouts or professionals in 1992 and without inflow of new players that year essentially marked the end of pinball. In 1992 The Addams Family was the last machine to sell big. By this time, pinball machines used a free-game system called replay boost. After any replay, the score required was increased by some increment. Apparently, only hardcore pinballers were left and this was the only way to prevent them playing indefinitely for free.
Today Williams owns Bally but they make slot machines and video poker. There currently exists one botique manufacturer of pinball machines but its fair to say that innovation stopped in 1992.
My new best friend has a basement full of Black Knight, High Speed, Defender, Pac Man, Asteroids, and everything else you inserted quarters into when you were 16. Now I just have to find a supplier of C45, Djarums, and gooney-birds and I’ll be ditching class to hear sirens and “Pull Over Buddy.”
News Corp., parent company of Fox News is reported to have made an offer for NBC Universal in competition with Comcast. Who should be willing to pay more for an upstream supplier (NBC), the downstream monopolist (Comcast), or an upstream competitor (News Corp.)?
I assume that “dessert” in the sweet-stuff-eaten-after-the-meal sense is not a regular part of Chinese and Indian cuisines. So in some ways this is not a fair question, but they have sweets and they are generally uninspiring and often downright gross. My caricature, not too much of a stretch, is that at the end of a meal in a Chinese restaurant, the leftovers are brought back into the kitchen where they are mixed with sugar and possibly liquified or gelatenized before being returned to the table as dessert. Here is the very popular Cantonese dessert, red bean soup.
Mmmm… . Variations of this dessert appear in many East Asian cuisines. Indian sweets, in my limited experience, are similar.
The few exceptions I have encountered are Vietnamese and Cambodian where the desserts are essentially French.
We have spent most of the course using the tools of dominant-strategy mechanism design to understand efficient institutions and second-best tradeoffs. These topics have a normative flavor: they describe the limits of what could be achieved if institutions were designed with efficiency as the goal.
But most economic activity is regulated not by efficieny-motivated planners but by self-interested agents. This adds an additional friction which potentially moves us even further from the first-best. Self-interested mechanism designers will probably introduce new distortions into their mechanisms because as they try to tilt the distribution of surplus their way.
In this lecture we use the model of an auction to see the simplest version of this. We consider the problem of designing an auction for two bidders with the goal of maximizing revenue rather than efficiency. We do not have the tools necessary to do the full-blown optimal auction problem but we can get intuition by studying a narrower problem: find an optimal reserve price in an English auction.
With a diagram we can see the tradeoffs arising from adjusting the reserve price above the efficient level. The seller loses because sometimes the good will go unsold but in return he gains from receiving a higher price when the good is sold. The size and shape of the regions where these gains and losses occur suggest that it should be profitable to raise the reserve price above cost.
Without solving explicitly for the optimal reserve price we can give a pretty compelling, albeit not 100% formal, argument that this is indeed the case. At the efficient reserve price (equal to the cost of selling) total surplus is maximized. A graph of total expected surplus as a function of the reserve price should be locally flat at the efficient point. (We are implicitly assuming differentiability of total expected surplus which holds if the distribution of bidder values is nice.) Buyers’ utility is unambigously declining when the reserve price increases. Since total surplus is by definition the sum of buyers’ utility and seller profit, it follows that seller profit is locally increasing as the reserve price is raised above the efficient level.
Thus, while we know that in principle this allocation problem can be solved efficiently, when the allocation is controlled by a profit maximizer, there is a new source of inefficiency. The natural next question is whether competition among profit-maximizing sellers will mitigate this.
Karthik Shashidar writes to us:
I am a regular reader of your blog, and like most of the stuff that you guys put there. Yesterday while blogging, I came across something which I thought might interest you people, hence I’m writing to you.
Recently my girlfriend and I realized that we were spending way too much time talking to and thinking about each other, and that we needed to scale down in order to give us time to do other things that we want to do. Both of us are in extremely busy jobs and hence time available for other things (including each other) is very limited, and hence the need to scale down.
I was wondering why this is not a widespread phenomenon and why more couples don’t do this “scaling down”
His analysis is here.
There is a natural force pushing couples toward too much engagement. Unilateral escalations make your partner feel good. Even if you internalize the long-run cost due to the inevitable following-suit, the slightest bit of discounting means that the equilibrium level will be above the social optimum. The usual dynamic game logic seems especially perverse here. If I am extra sweet to my sweet does she punish me for that? And what form does the punishment take, even further escalation?
Negotiating down from these heights is indeed tricky. Unilateral de-escalation is risky as Karthik discusses on his blog. The proposal could easily be read as a cold shoulder. Even assuming that both agree to scale down, how do you decide where to go? It is not easy to describe in words a precise level of interaction and this ambiguity leads to the potential for hurt feelings, if there is mis-coordination.
Some dimensions are easier to contract on. It’s easy to commit to go out only on Tuesday nights. However, text messages are impossible to count and the distortions due to overcompensation on these slippery-slope dimensions may turn out even worse than the original state of affairs.
But even setting aside all of these problems, what mechanism can you use to coordinate on a lower scale? If we both make offers and split-the-difference, then the one asking for a higher scale is going to feel hurt. Any mechanism has got to be noisy enough to hide such inequities without being totally random. The trick may be to short-circuit common knowledge. For example we could have a third party make a take-it-or-leave-it proposal and then the two partners secretly reject (if too low) or accept (if not.) The proposal is enacted only if both accept.
This ensures that when the offer is accepted, both parties learn only that each was willing to scale down to at least the same level. And when the offer is rejected, the one who was not willing to go that low will never know whether the other was, i.e. no hurt feelings.
(dinner conversation with Utku, Samson, and Hideo.)
He is the singer and songwriter for The Mr. T Experience and he wrote King Dork. His new book, Andromeda Klein is not as great but still good. His next book is a King Dork sequel called King Dork, Approximately. And a film adaptation of King Dork is in development with Will Ferrell producing.
Here is the inteview. And here is Frank Portman’s blog.
Computer scientists study game theory from the perspective of computability.
Daskalakis, working with Christos Papadimitriou of the University of California, Berkeley, and the University of Liverpool’s Paul Goldberg, has shown that for some games, the Nash equilibrium is so hard to calculate that all the computers in the world couldn’t find it in the lifetime of the universe. And in those cases, Daskalakis believes, human beings playing the game probably haven’t found it either.
Solving the n-body problem is beyond the capabilities of the world’s smartest mathematicians. How do those rocks-for-brains planets manage to do pull it off?
We are officially big-time bloggers now because today we have our first guest blogger. This week Jeroen Swinkels will be shirking sharing his thoughts with us and you and we are really looking forward to it.
Jeroen is a Northwestern guy so we are keeping it in the family and he is forty-something too (albeit a tad more “something” than Sandeep and I.) In case you don’t already know, Jeroen is a game/auction/micro/evolution-theorist who teaches in the Management and Strategy department in Kellogg. I like all of his work but I am especially fond of a somewhat idiosyncratic paper he wrote with Larry Samuelson on evolution and behavioral biases and I blogged about it here before. He’s got lots of ideas on lots of subjects so he is going to be a blogging natural. So thanks Jeroen and welcome.
I have a student who is in charge of Northwestern’s Undergraduate Economics Society and he is planning an event in the Spring. They have some money and they want to organize an activity for their membership that will be fun and economics-oriented. Think of this as an opportunity to design an experiment involving any number of students (up to hundreds of students), but it should be fun as well as educational. I know that our readers will have some good ideas for them. Please share them in the comments.
Shows that are widely time-shifted are not losing money due to skipped commercials.
Against almost every expectation, nearly half of all people watching delayed shows are still slouching on their couches watching messages about movies, cars and beer. According to Nielsen, 46 percent of viewers 18 to 49 years old for all four networks taken together are watching the commercials during playback, up slightly from last year.
On net, the gain in viewership from time-shifted shows often more than compensates for the few who skip ads.
When NBC added the “The Jay Leno Show” at 10 each weeknight, it boasted that the show would be “DVR proof,” meaning that because the humor was topical, viewers were more likely to watch it live, avoiding much of the commercial-skipping that was expected to plague recorded shows.
Now being “DVR proof” looks like a disadvantage. Mr. Leno’s shows were among the few with three-day commercial ratings lower than their live ratings. Not enough people have been recording the show and playing it back to overcome the commercial-skipping being done by a percentage of its live viewers.
From the NY Times.
Japanese scientists asked study subjects to try 38 red wines and 26 whites while eating scallops. Some of the wines contained small amounts of iron, which varied by country of origin, variety and vintage. The tasters noted which wines really didn’t work with scallops. And the researchers found that those wines all had high levels of iron. So they doctored the wine with a substance that binds iron, keeping it away from the tasters’ tongues. And voila, the bad taste became a bad memory. The study appears in the Journal of Agricultural and Food Chemistry.
With that knowledge in hand, wine lovers should be able to find reds that taste terrific with tilapia. So look for red wines with low iron.
From a Scientific American podcast. Transcript here.
Big events at Northwestern this weekend, including Paul Milgrom’s Nemmers’ Prize lecture and a conference in his honor. (My relative status was microscopic.) A major theme of the conference was market design and I heard a story repeated a few times by participants connected with research and implementation of online ad auctions.
Ads served by Yahoo!, Google and others are sold to advertisers using auctions. These auctions are run at very high frequencies. Advertisers bid for space on specific pages at specific times and served to users which are carefully profiled by their search behavior. This enables advertisers to target users by location, revealed interests, and other characteristics.
Not content with these instruments, McDonalds is alleged to have proposed to Yahoo! a unique way to target their ads and their proposal has come to be known as The Happy Contract. Instead of linking their bids to personal profiles of users, they asked to link their bids to weather reports. McDonalds would bid for ad space only when and where the sun was shining. That way sunshine-induced good moods would be associated with impressions of Big Macs, and (here’s the winner’s curse) the foul-weather moods would get lumped with the Whopper.
I can relate to this.
For most of history, almost everything people did was forgotten because it was so hard to record and retrieve things. But this had a benefit: “social forgetting” allowed us to move on from embarrassing moments. Digital tools have eliminated this: Google caches copies of blog posts; networking sites thrive by archiving our daily dish. Society defaults to a relentless Proustian remembrance of all things past.
From an article in Wired.
Extremely simple and good. You need corn tortillas, some kind of meaty fish, some kind of salsa. I like guacamole. I wouldn’t use anything more than this. Store bought corn tortillas are dry but you can steam them and then keep them in a damp kitchen towel and they will work great. Or you can try making your own. It takes some practice, but it pays off.
Mahi Mahi works great. Just squeeze some lime on it, then coat with light oil and let it marinate for about 15 minutes. (Much longer and the acid in the lime will make the fish too flaky and the next step won’t work.) Cut into small pieces and grill. Get yourself a cast-iron grill pan and you can do this indoors.
Put it all together and eat. With store-bought tortillas the whole preparation takes no more than 1/2 hour.
- A long interview with R. Crumb.
- Leaving it all on the field.
- Stay away from 2007 Bordeaux. (the whites may be fine though.)
- Fruit Bat Foreplay.
Sex is a puzzle for evolutionary biologists. It seems to be a waste of reproductive output. A population of a fixed size which requires two members to produce offspring reproduces, and therefore grows, at half the rate of the same sized asexsual population (which requires only one member to produce one offspring.)
So to explain the prevalence of sexual reproduction in nature we need to find some advantage to offset this so-called two-fold cost of sex. There are two prominent theories. The first is that sexual reproduction allows a species to shed disadvantageous mutations. Sexual reproduction thus ensures that offspring loses any harmful mutation with probability 1/2 (we are assuming that the parents do not have mutations of the same gene, a good approximation when there are many genes.) But with asexual reproduction, these mutations just accumulate.
Another theory is that sexual reproduction, by mixing around genes, ensures genetic diversity which enables a species to survive changes in the environment.
Not Exactly Rocket Science reports on an experiment designed to test these theories.
Like humans, C.elegans has two sexes but unlike us, they are males and hermaphrodites (with males making up just one in every two thousand individuals). Equipped with both sets of genitals, hermaphrodites worms can fertilise themselves without male help – far from being rude, telling C.elegans to go &$&! itself is a feasible lifestyle suggestion. Hermaphrodites could also mate with males, but they do that on less than one in 20 occasions.
The biologists manipulated the genetics of a population of these worms so that half would always mate with themselves and the others would always mate sexually. Next, they exposed the worms to a chemical that raised their rate of mutations. As the theory predicts, the sexually reproducing worms were more successful.
Next, they exposed the worms to a deadly bacterium. Consistent with the second theory, the sexually reproducing worms also fared better in this experiment.
Now the big puzzle. If sexual reproduction is beneficial, why do all sexually reproducing species in nature do it in pairs? This paper by economists Motty Perry, Phil Reny, and Arthur Robson proves that, at least with respect to the harmful mutation theory, a particular form of tri-parental sex dominates bi-parental sex. In the Perry-Reny-Robson world, reproduction requires two males and one female. The offspring receives genes with half-probability from the mother and 1/4-probability from each of the fathers.
(With this particular menagerie, in every reproductive cycle each female gets two partners per encounter but each male gets two encounters. Not only does this ensure that the “cost of sex” is again two-fold and not three-fold, but it also maintains equity in the gettin’ busy department. Only fair.)
Pronounced ‘Ely’ (unless Marciano corrects me.) They are expanding their ‘Artisti del Gusto‘ program in the US in which
Illy supplies shops with Italian espresso machines, coffee cups, artwork, drink recipes and intensive training, after which the cafe becomes a certified Illy purveyor. In return, the shop must agree to serve only Illy coffee for at least three years.
This can’t be bad, but I would guess that Illy coffee is too light for American tastes. I have tried the Illy in vacuum sealed cans and it is never fresh enough to be worth buying. Will the coffee sold in the Artisti del Gusto shops be shipped from Trieste?
He is a political scientist at NYU who uses spreadsheets to predict how conflicts will be resolved. He consults for the CIA, earns $50,000 per prediction, and uses his brand of game theory to offer wisdom on questions like “How fully will France participate in the Strategic Defense Initiative?” and “What policy will Beijing adopt toward Taiwan’s role in the Asian Development Bank?”
To predict how leaders will behave in a conflict, Bueno de Mesquita starts with a specific prediction he wants to make, then interviews four or five experts who know the situation well. He identifies the stakeholders who will exert pressure on the outcome (typically 20 or 30 players) and gets the experts to assign values to the stakeholders in four categories: What outcome do the players want? How hard will they work to get it? How much clout can they exert on others? How firm is their resolve? Each value is expressed as a number on its own arbitrary scale, like 0 to 200. (Sometimes Bueno de Mesquita skips the experts, simply reads newspaper and journal articles and generates his own list of players and numbers.) For example, in the case of Iran’s bomb, Bueno de Mesquita set Ahmadinejad’s preferred outcome at 180 and, on a scale of 0 to 100, his desire to get it at 90, his power at 5 and his resolve at 90.
His model is a secret but it seems to be some kind of dynamic coalition formation model. He has predicted that Iran will not obtain a nuclear weapon owing to the rising power of dissident coalitions. In August,
He spent that morning looking over his Iranian data, and he generated a new chart predicting how the dissidents’ power would grow over the next few months. In terms of power, one category — students — would surpass Ahmadinejad during the summer, and by September or October their clout would rival that of Khamenei, the supreme leader. “And that’s huge!” Bueno de Mesquita said excitedly. “If that’s right, it’s huge!” He said he believed that Iran’s domestic politics would remain quiet over the summer, then he thought they’d “really perk up again” by the fall.
A long profile appeared in The New York Times Magazine.
So long, anonymity — it’s been swell. For nearly ten years now, I have done my job incognito. Now I am joining the ranks of no-longer-anonymous restaurant critics. Last Friday, I gave a lecture to the students and faculty of the Texas A&M Meat Science Center without the usual hat and sunglasses. I didn’t wear a disguise on Sunday when I appeared at the Texas Book Festival either. Soon you will be able to Google grainy photos of me to your heart’s content. I also have given my publishers an author’s photo to use for publicity.
So writes Robb Walsh, the no-longer-anonymous food critic for the Houston Press. He is the latest critic to shed his anonymity since the google-able Sam Sifton took over the job at the New York Times. Before that, professional food critics were expected to visit restaurants anonymously and indeed the presumption was that anonymity was required for a critic to provide a useful review. But there are arguments either way.
You might think that the job of a critic is to distinguish the great chefs from the merely good ones. A conspicuous critic would get special treatment and this biases the test. But as long as the critic (or the reader) accounts for this and can “invert the mapping,” essentially factoring out the extra effort, this is not really a problem.
We may only want a relative ranking of chefs and adding a constant to each chef’s baseline quality won’t change that.
Noise in the signal can complicate the inversion but this could go either way. One theory is that the effect of extra effort is to reduce variance in the quality of the dish. If so, a conspicuous chef gets a better signal. Alternatively it could be there is a uniform upper bound and any competent chef can hit that upper bound with enough effort. In this case, anonymity is required.
An anonymous critic generates other welfare gains. Every diner has a positive probability of being Ruth Reichl and so every diner gets a slightly better meal than otherwise. Once critics out themselves, we are all 100% nobodies again.
We may not care who is the most talented chef but instead we want to know where we (nobodies) are going to get the best meal. As long as these are sufficiently correlated, again not much is lost from going conspicuous. But in any event it is not clear that a single critic provides much more information about this than could be had from data on popularity alone. If we want critics to break herds, then they should be anonymous.
Maybe we want critics to start herds. Critics are most influential for tourists and locals prefer to avoid tourists. Conspicuous critics enable efficient market segmentation where restaurants wishing to cater to tourists give special treatment and get good reviews. A good review can destroy a restaurant that caters to locals so all parties benefit if the critic is conspicuous ensuring he is given a bad meal.
(Arising from conversations with Ron Siegel, Mike Whinston, Jeroen Swinkels, Eddie Dekel and Phil Reny.)
Mamihlapinatapai (sometimes spelled mamihlapinatapei) is a word from the Yaghan language of Tierra del Fuego, listed in The Guinness Book of World Records as the “most succinct word”, and is considered one of the hardest words to translate.[1] It describes “a look shared by two people with each wishing that the other will initiate something that both desire but which neither one wants to start.”
Comcast is in talks with GE to buy NBC Universal which would give Comcast all of NBC’s television and movie assets. According to the Wall Street Journal we should know in a matter of weeks if agreement is reached but any deal would certainly be given a lengthy review by anti-trust authorities. A concern often cited is the motive of vertical foreclosure: a merged Comcast-NBC would use their alliance to gain advantage over competitors for content provision. This issue also foreshadows those that would arise with internet content provision should net-neutrality be abandoned.
Comcast is a monopoly provider of access to content. Think of Comcast as the guy at the door charging you a fee to get into the party. You want to get in because inside there are people providing various services, perhaps for an additional fee. The best structure of all for Comcast would be to take ownership of all the service-providers inside and act as a joint monopoly collecting entrance fees and selling the services inside.
What would such a monopoly do to maximize profits? It would maximize the value of the services offered inside and then extract that value in the form of an entrance fee.
But this same outcome is achieved with the structure in which the services inside are provided competitively. Competition among service providers maximizes the value of the service thereby enabling the monopoly gatekeeper to earn the same profits as if it owned the entire enterprise.
So if you think that content is provided competitively (in my opinion its pretty close) then you shouldn’t worry too much about vertical foreclosure. On the other hand we should still wonder why Comcast is interested in NBC. Are there any plausible efficiency gains from a merger?
Merger review is based on looking for likely anti-competitive results or motives and if there is no clear anti-competitive motive then the merger is approved. But it’s worth considering a different standard here (and in the net-neutrality debate as well.) If there are no clear efficiency gains and a merger enables anti-competitive behavior even though that behavior may not have any clear rationale, then the merger should be rejected.
Allowing the merger would be like leaving scissors within reach of my (then) three-year-old. No good will come of it, and if I trust that she acts in her self-interest no harm would come either. But she is hard to predict:
I once linked to something like this. But that didnt hold a candle to this one:
Did you notice that when the song starts to go in the right direction his voice has an Eastern European accent? I have no idea whether this guy is a native English speaker. If he is then this is an artifact of singing backwards. If he really is Eastern European then it says something about language accents that they appear even when singing a foreign language backwards.
Thanks to Tyler and Alex for their good nature. They know that this was the sincerest form of flattery.
It is extremely easy to parody MR, especially Tyler because there is so much output and it is all part of his characteristic style. I think that being easy to parody is a great sign of success.
My favorite post was the one about Swedish meatballs because I think of the enumeration style of reasoning as being quintessential Tyler. Little known fact: Tyler Cowen is the reason I am an economist. 20 years ago as an undergraduate adrift I was inspired by his microeconomics course and he convinced me to go to grad school. In that course we learned the enumeration style via his “thought questions” and in fact, looking back, I think we were learning to be bloggers before the channel for that existed. Our final exam question was “Write down a thought question and answer it.” I owe Tyler Cowen a tremendous debt.
Tyler’s reading habits are obvious fodder for parody. I have no doubt that Tyler reads as much as he claims and, while easy to make fun of, his approach to books should be taught to children at an early age. (Start reading everything that might be interesting. Stop as soon as it isn’t. Skip over parts that are boring.) I never was much of a reader before, now I read quite a lot.
FYI, I copied MR’s look by switching to a generic wordpress theme (andreas09) and then modifying the css to get the colors, fonts, and look/feel right. I didnt know anything about css (and the normally helpful Kellogg support team didn’t see this as falling under their job description, not surprisingly) so I had to figure it out on the fly. If anyone is interested I can send you what I did.
And now back to our regular programming…
How do you like our costume? Check back later in the day for more fun 🙂 Readers using rss will want to click through to the main site to get the full effect.
- The acrosticnator
- Go to google.com, type in “why do” and see what google predicts you are curious about. (dunce doff: storn.)
- Corn smut.
Via The Sports Economist comes a report that Las Vegas bookmakers are seeing big losses on NFL games this year owing to the large number of very bad teams and the difficulty of getting the point spreads right.
The Golden Nugget sports book, for instance, opened with St. Louis getting 12.5 points (the half to help with ties). That way, if you bet the Rams and the actual game ended 21-10 Indy, you’d win the bet with a score of 22.5-21 St. Louis.
A betting line is fluid though and will correct itself as money pours in for the favorite or underdog. Despite the Rams getting all those points, at home no less, the money kept going to Indy. The line reacted by moving all the way to 14 points at kickoff.
Still 90% of the money was on the Colts at game time and the Colts won 42-6. Perhaps the problem is that there is a large variance in the market’s estimate of the likely point spread. The bookmaker has to make a good guess the first time becuase too much adjustment of the line allows arbitrage. And a bad guess can be costly.
Here is an experiment that as far as I know has not been done. (Please correct me if I am wrong.) Offer contestants the choice of two raffles. Raffle A pays the winner $1000, Raffle B pays the winner $1000+x where x is a positive number. Contestants must pick one of the raffles and can buy at most one raffle ticket. They choose simultaneously. There will be one winner from each raffle and the winners will be determined by random draw.
In equilibrium the expected payoff in the two raffles should be equalized. This means that more people should enter raffle B to compete away the extra $x prize money. My hypothesis is that in fact too many people will enter raffle B so that raffle A will have a higher expected payoff. I am thinking that the contestants will inusfficiently account for the strategic effect of free entry and will naively assume that B is the better choice. And I believe this effect will be large even when x is very small.
If this is true then it has important consequences for markets. Suppose two job market candidates are almost equally qualified but candidate A is a little better than candidate B. Candidate A will get too many interviews and candidate B will get too few. Candidate B’s slight disadvantage will be amplified by the market and will go too often unemployed.
In the economics job market for new PhD’s, economics departments are often asked by potential employers for rankings of their candidates. Departments are often unwilling to give more than coarse rankings and I believe that the effect I describe is the reason.
Apple is opening a new retail store on a neglected chunk of land in the middle of a gentrifying part of the North side of Chicago. Before moving in they will tidy up a bit by landscaping an adjacent lot and refurbishing a run-down CTA subway station entrance and underground train platform (the North and Clybourn red line station) with a total cost of up to $4 million.
Over the years, the CTA’s building has fallen behind on maintenance. The paint is peeling, the windows are filthy, an electrical sign has dangling wires, and metal framing is rusting. Inside the building and underground, the station features white tile walls and fluorescent lighting, with hallways leading to two narrow platforms underground.
In the agreement approved at an August 19th Chicago Transit Board meeting, in exchange for the improvements the CTA will lease the bus turnaround to Apple at no cost for 10 years, with options on four, five-year extensions. The CTA will also give Apple “first rights of refusal” for naming the station and placing advertising within the station, if the CTA later decides to offer those rights.
Memo to Steve Jobs: you will probably also want to take care of the crater-sized potholes on North Avenue just West of your new home. Thanks.
Via Mac Rumors.
Cheap Talk 