You are currently browsing the category archive for the ‘Uncategorized’ category.
I don’t mind rejection but a lot of people do.
When I want to ask someone to join me for a coffee or lunch I always send email. And its all about rejection even though I don’t mind rejection so much. The reason is that nobody can know for sure how I deal with rejection. And almost everybody hates to reject someone who might have their feelings hurt.
If I ask face-to-face I put my friend in an awkward position. Because every second she pauses to think about it is an incremental rejection. Because while the delay could be just because she is thinking about scheduling, it also could be that she is searching for excuses to get out of it.
These considerations combined with her good graces mean that she feels pressure to say yes and to say yes quickly. Even if she really does want to go. I would rather she have the opportunity to consider it fully and I would rather not make her feel uncomfortable.
Email adds some welcome noise to the transaction. It is never common knowledge exactly when she is able to read my email invitation. If she gets it right away she can comfortably consider the offer and her schedule and get back to me on her own time. And she knows that I know that… that I have no way of knowing how much time it took her to decide.
Game theorists can’t stop trashing email as a coordination device but that’s because we always think that common knowledge is desirable. But when psychology is involved it is more often that we want to destroy common knowledge.
I was wandering by the Bottle Shop last week when I popped in on a whim to see if they had the Trimbach Fredric Emile. No luck in that search but I starting talking to Joe, one of the owners. I asked him if he carries wines distributed by Kermit Lynch. Not only did he carry them but Greg, the local Kermit-rep, was in the shop opening some of his wines for Joe and Amy, the other owner of the Bottle Shop. One thing led to another and I found that the Bottle Shop had both the Chateau Aney and Ch. de Bellevue recommended by the NYT wine writer Eric Asimov. I left clutching those two bottles and an invitation to a Saturday tasting at the shop hosted by Greg.
When I went by on Saturday, Greg was pouring a Domaine Henri Perrusset Macon-Villages. It was multi-faceted – classic Chardonnay but with a mineral almost salty finish. We bought several bottles and left converts to the Bottle Shop. They carry lots of wines hard to find elsewhere and the owners are friendly and informed.
Locavores advocate paying attention to the distance your food traveled before it reached your table. They want you to be aware of the social cost of the the tomatoes you buy. Steven Landsburg ridicules this kind of micro-mindedness as follows:
You should. You should care about all those costs. And here are some other things you should care about: How many grapes were sacrificed by growing that California tomato in a place where there might have been a vineyard? How many morning commutes are increased, and by how much, because that New York greenhouse displaces a conveniently located housing development? What useful tasks could those California workers perform if they weren’t busy growing tomatoes? What about the New York workers? What alternative uses were there for the fertilizers and the farming equipment — or better yet, the resources that went into producing those fertilizers and farming equipment — in each location?
And he helpfully points out that accounting for all of this is unnecessary because these costs are already all summarized by the price of the tomato.
But even if markets are perfectly competitive, the marginal social cost of a tomato equals the price plus the under-priced cost of the environmental damage from the fuels used in transportation. Any given locavore has his own private belief about the size of that gap. So a locavore wants to know how much energy was used in order to calculate the total gap. And locavore advocates are doing precisely the right thing by presenting that information.
On the other hand, this guy, the guy who Landsburg was actually ridiculing, is spot on when he points out they often present distorted information.
I think all sides should compromise. We should build a very tiny mosque. And it should have wings. The Ground Zero Mosquito. But instead of sucking your blood it would enrich your blood with the dual nectars of Retribution and Tolerance. We will all make pilgrimages to the site and our children will line up to be kissed by it. And one by one they will announce their mosquito-induced blessings like “I want to vanquish all of those who do Evil to our homeland but still I Love them all the same.” Thank you Ground Zero Mosquito!
Mark Kleiman proposes making it legal to grow, share, and consume cannabis, but not to sell it.
To the consumer, developing a bad habit is bad news. To the marketing executive, it’s the whole point of the exercise. For any potentially addictive commodity or activity, the minority that gets stuck with a bad habit consumes the majority of the product. So the entire marketing effort is devoted to cultivating and maintaining the people whose use is a problem to them and a gold mine to the industry.
Take alcohol, for example. Divide the population into deciles by annual drinking volume. The top decile starts at four drinks a day, averaged year-round. That group consumes half of all the alcohol sold. The next decile does from two to four drinks a day. Those folks sop up the next thirty percent. Casual drinkers – people who have two drinks a day or less – take up only 20% of the total volume. The booze companies cannot afford to have their customers “drink in moderation.”
Some questions come to mind:
- Would it be legal to sell the seeds? If not, how could anybody get them? If so, has the problem (assuming there is one) really been solved?
- The economics of the problem boil down to which market structure minimizes the private incentive to boost demand, say via marketing. If we outlawed the sale of tobacco but allowed the sale of grow-your-own-tobacco kits would we see more or less marketing? The less competitive the market the more each individual seller gains from a boost in generic demand. Should we expect the market for growing kits to be more competitive than the market for the final product?
- If we are going to ban something, why not advertising? Seems more direct and arguably a Pareto improvement if advertising acts as rent-seeking between producers and creates “artificial” demand as the premise of the policy seems to be.
Subjects in an experiment were shown pictures of people of the opposite sex and were asked to rate their attractiveness. Some subjects were first subliminally flashed pictures of their opposite-sex parent. For other subjects the pictures they were rating were actually a composite image made from pictures of the subject himself. Both of these induced higher attractiveness ratings.
Finally, in a third treatment the subjects were falsely (!) told that the images they were seeing were partly morphed from pictures of themselves. This reduced the attractiveness ratings.
Here is a link to the paper.
First watch the video below. The dark haired guy, Booth, has just made a big bet. He is claiming to have three-of-a-kind (fours). If he does he would win the hand, but he might be bluffing. The other guy, Lingren, has to decide whether to call the bet and he does something unexpected: he asks Booth to show him one of his cards:
The strategic subtext is this: if Booth has the third four then he wants Lingren to call. If not, he wants him to fold. Implicitly, Lingren is offering the following mechanism: if you do have the third four then you won’t want me to know it because I would then fold. So show me a card, and if it’s not a four I will call you.
What is left unsaid is what Lingren would do if Booth declined to show a card. The spirit of the mechanism is that showing a card is the price Booth has to pay to have his bet called. So the suggestion is that Lingren would fold if Booth is not forthcoming because that would signal that he is hiding his strong hand.
But in fact this can’t be part of the deal because it would imply exactly the opposite of Lingren’s expectations. Booth, knowing that it would get Lingren to fold, would in fact hide his cards when he is bluffing and show a card when he actually has the three-or-a-kind (because then he gets a 50% chance of having his bet called rather than a 100% chance of Lingren folding.)
So what exactly should happen in this situation? And did Booth really play like a genius? Leave your analysis in the comments.
Visor visit: the ever-durable Presh Talwalker.
Here is the abstract from a paper by Matthew Pearson and Burkhard Schipper:
In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values, we collected information on the female participants’ menstrual cycles. We find that women bid significantly higher than men in their menstrual and premenstrual phase but do not bid significantly different in other phases of the menstrual cycle. We suggest an evolutionary hypothesis according to which women are genetically predisposed by hormones to generally behave more riskily during their fertile phase of their menstrual cycle in order to increase the probability of conception, quality of offspring, and genetic variety.
Believe it or not, this contributes to a growing literature.
Tyler links to this paper which asks the question “Do Minimum Parking Requirements Force Developers to Provide More Parking than Privately Optimal?” and answers in the affirmative.
I would think that is exactly the purpose of minimum parking requirements, especially in suburbs. Take as given that residents will resist the installation of parking meters on their streets or other parking restrictions. Then parking spaces in strip malls have positive externalities for homeowners because they reduce spillover parking in the neighborhoods. The privately optimal number of parking spaces is therefore too low and mandatory minimums are aimed at correcting that. The question we are interested in is whether mandatory minimums increase parking space beyond what is socially optimal.
This guy thinks so.
There it is: Zynga’s dirty technique for making its $500 million. It ropes players into the game with the promise that absolutely anyone can play. It will even float you coins the first time you run out, not unlike the casino that gives a high-roller luxury accommodations in anticipation of making back the house’s stake. It dangles the prospect of a bigger, prettier, better farm; as the game loads, you’re faced with idyllic images of well-off farms, not unlike the glossy ads for high-end residences. But it’s nearly impossible to get some of those goods without ponying up a buck or two here and there. When Zynga’s got a user base of 61 million digital farmers, it’s easy enough to make ends meet, to say the least.
The argument seems to be: it sucks your time, it gets your friends hooked too, it’s stupid. Like TV, reading blogs, talking on the phone, etc. I do recommend reading the article though because its a fine case study in how to try and substitute a logical argument in place of “Why do people have tastes that are so different from mine?” (Full disclosure: some people very close to me play Zynga games. I think Zynga games are really stupid.)
Ten Gallon Greeting: GeekPress.
Even as parking meter technology improves to handle credit cards and flexible pricing, one relic remains: pay-in-advance. You have to commit to a period of time and pay the meter at the beginning of that time interval. You are fined if you don’t move before your pre-specified time expires.
Wouldn’t it be better if you paid only at the end and only for the amount of time you actually occupied the parking space? This is easily implemented in smart parking meters: you swipe your card when you park and you swipe it again when to pay when you are done. To prevent scofflaws, if you never swipe the second time the rest of the day’s parking is on you (sorta like the lost ticket fee in parking lots), and if you are parked in a meter that wasn’t swiped the first time you get a ticket.
Holding fixed the meter rate and demand for parking such a switch would lower your total parking bill and hence revenues. To show this you could try writing down a model where the parker has a probability distribution over waiting times and chooses optimally his parking time, but there is a simpler argument. With pay-in-advance two things can happen: either you pay for more time than you actually use or you get a ticket and pay a fine!
But switching to pay-as-you-leave parking must surely increase overall demand for parking and may even increase individual parking spells so the net effect on revenue is not so clear.
While we are on the subject I liked Tyler Cowen’s bit about free parking. But I think that there is a second-best logic that justifies mandatory free parking in the suburbs. Homeowners want their streets free of cars (but still the option to park on the street when necessary) and they don’t want parking meters on their sidewalks. This makes strip-mall parking a public good. The private incentive of commercial developers is to provide too little parking.
1. What will Israel do if Iran gets close to going nuclear? Interesting article by Jeffrey Goldberg in the Atlantic.
2. What does the future hold for your lying toddler?
3. What do Buzz Aldrin and Leon Panetta have in common?
4. Brookline-Palestine beer connection.
1. Kenneth Arrow on healthcare and climate change.
2. Thomas Schelling on climate change.
- There is diversity in sexual preference (same-sex or opposite-sex) but most people are at corner solutions.
- The ideal temperature in San Diego is 66F. You will worry in the morning when its cloudy but once the marine layer burns off the sun by itself will keep you warm. The air will keep you cool.
- It is not possible to define ‘fitness’ in a way that doesn’t make “survival of the fittest” into a tautology.
- People who argue that tenure should disappear should begin by saying what they think the market failure is that prevents that from happening by itself.
Here is a theory of why placebos work. I don’t claim that it is original, it seems natural enough that I am surely not the first to suggest it. But I don’t think I have heard it before.
Getting better requires an investment by the body, by the immune system say. The investment is costly: it diverts resources in the body, and it is risky: it can succeed or fail. But the investment is complementary with externally induced conditions, i.e. medicine. Meaning that the probability of success is higher when the medicine is present.
Now the body has evolved to have a sense of when the risk is worth the cost, and only then does it undertake the investment. Being sick means either that the investment was tried and it failed or that the body decided it wasn’t worth taking the risk (yet! the body has evolved to understand option value.)
Giving a placebo tricks the body into thinking that conditions have changed such that the investment is now worth it. This is of course bad in that conditions have not changed and the body is tricked into taking an unfavorable gamble. Still, the gamble succeeds with positive probability (just too low a probability for it to be profitable on average) and in that case the patient gets better due to the placebo effect.
The empirical implication is that patients who receive placebos do get better with positive probability, but they also get worse with positive probability and they are worse off on average than patients who received no treatment at all (didn’t see any doctor, weren’t part of the study.) I don’t know if these types of controls are present in typical trials.
I liked this post from Dan Reeves.
Remember, if it’s in the news don’t worry about it. The very definition of news is “something that almost never happens.” When something is so common that it’s no longer news — car crashes, domestic violence — that’s when you should worry about it.
The truth of that[1] hit home recently when I saw a news feature on the abduction of a four-year-old girl from her front yard in Missouri. Candlelight vigils, nation-wide amber alert, police blockades where every single car was stopped and questioned, FBI agents swarming the house. I think the expected reaction from parents is “oh my god, I need to be so vigilant, even in my own front yard!” My reaction was the opposite: Wow, this sort of thing really does essentially never happen. Let the kids run free!
While I generally have similar reactions, it is easy to take this too far. The weather is the prime counter-example. Valuable minutes of every nightly newscast in Southern California are devoted to repeating the same weather-mantra “Late Night and Early Morning Low Clouds and Fog” which indeed happens every single day.
Also, your interpretation of news depends on your implicit model of competition between news sources. A perfectly plausible model would be consistent with abductions happening every day but being reported only once in a while because we have a taste for variety in our stories of tragedy.
In San Francisco no less
San Francisco has been working on making parking “smarter” for quite a while now, and it’s just recently taken another big step in that direction by starting to replace over 5,000 older parking meters with the snazzy new model pictured above. Those will not only let you pay with a credit or debit card (and soon a special SFMTA card), but automatically adjust parking rates based on supply and demand, which means you could pay anywhere from $0.25 to $6.00 an hour depending on how many free spaces there are. Those rates are determined with the aid of some sensors that keep a constant watch on parking spaces, which also means you’ll be able to check for free spaces in an area on your phone or your computer before you even leave the house.
fedora flip: rob jefferson.
Limbaugh quotes from a Times article about the paper (gated link) and critiques it:
“Using survey data, it finds that high unemployment rates are associated with less concern for the environment and greater skepticism about global warming.” I don’t think unemployment has nothing to do with it. It has to do with the fact that we have now learned that man-made global warming is a hoax that has been perpetrated by a bunch of leftists, and the guys participating in it at the Hadley Centre for Climate Prediction and Research at the University of East Anglia have been found out. And even though the partisan political operative media has yet to report on this, we have — and more and more people are understanding now what a fraud this whole thing has been, like much of liberalism is. “The Chilling Effect of Recession.”
He adds:
Despite all their efforts over the last 20 to 30 years to make you feel guilty for causing all this destruction, now we have a recession that’s come along and, damn it, you are being so selfish that you’ve given up the notion that you have to save the planet. Now you want a job instead, and these ruling class professors are distressed. By the way, as we have previously noted on this program, Google searches themselves cause global warming. “From national surveys…” This is from the abstract: “From national surveys, we find that an increase in a state’s unemployment rate is associated with a decrease in the probability that residents think global warming is happening and reduced support for the US to target policies intended to mitigate global warming. Finally, in California, we find that an increase in a county’s unemployment rate is associated with a significant decrease in county residents choosing the environment as the most important policy issue.”
So now you, you selfish people, are so concerned about finding a job while you’re unemployed that you are forgetting about global warming. You are forgetting about environmentalism. “From the study’s abstract: ‘[W]e find that an increase in a state’s unemployment rate decreases Google searches for “global warming” and increases searches for “unemployment,” and that the effect differs according to a state’s political ideology.'” So this scientific survey is using Google searches for their data? This is hilarious. This is actually from the study by these two university professors: “We find that an increase in a state’s unemployment rate decreases Google searches for ‘global warming’…” They’re actually judging public interest in global warming by examining Google searches, and they’re ticked off more of you people are entering the search term “unemployment” than you are “global warming.”
Limbaugh grudgingly/sarcastically admits:
I am not making this up. These are learned, high-education, ruling class members — the best and the brightest, the smartest — and they’re out there researching why it is that you don’t care about global warming.
We are all used to such reports, delivered behind the veil of anonymity furnished by peer-reviewed journals. But to have infamy delivered in public and by Rush Limbaugh. Surely, a mark of honor.
One of my favorite vineyards. Ridge wine is undervalued because their vineyards are largely in the Santa Cruz Mountains not in ever-trendy Napa. Watch Paul Draper their iconic wine maker with Julia Child:
How to allocate an indivisible object to one of three children, it’s a parent’s daily mechanism design problem. Today I used the first-response mechanism. “Who wants X?” And whoever says “me!” first gets it.
This dimension of screening, response time, is absent from most theoretical treatments. While in principle it can be modeled, it won’t arise in conventional models because “rational” agents take no time to decide what they want.
But the idea behind using it in practice is that the quicker you can commit yourself the more likely it is you value it a lot. Of course it doesn’t work with “who wants ice cream?” But it does make sense when its “We’ve got 3 popsicles, who wants the blue one?” We are aiming at efficiency here since fairness is either moot (because any allocation is going to leave two out in the cold) or a part of a long-run scheme whereby each child wins with equal frequency asymptotically.
It’s not without its problems.
- Free disposal is hard to prevent. Eventually the precocious child figures out to shout first and think later, reneging if she realizes she doesn’t want it.
- There’s also ex-post negotiation. You might think that this can only lead to Pareto improvements but not so fast. Child #1 can “strongly encourage” child #2 to hand over the goodies. A trade of goods for “security” is not necessarily Pareto improving when the incentives are fully accounted for.
- It prevents efficient combinatorial allocation when there are externalities and/or complementarities. Such as, “who’s going in Mommy’s car?” A too-quick “me!” invites a version of the exposure problem if child #3 follows suit.
Still, it has its place in a parent’s repertoire of mechanisms.
1. Wine tasting note generator.
2. Postmodern essay generator.
- The art of 1-star Amazon reviews. I have been looking for a new hobby…
- Stanley Milgram, the TV show, starring William Shatner.
- History of the laugh track.
- Massaging your oppossum properly.
This is in fact an excellent introduction to game theory full stop. It covers strategic and extensive games, complete and incomplete information, sequential rationality, etc. Very nicely. And then on page 64 it gets really interesting, applying evolutionary game theory to pragmatics, a field in linguistics concerned with the contextual meaning of language.
After a disaster happens the post-mortem investigation invariably turns up evidence of early warning signs that weren’t acted upon. There is a natural tendency for an observer to “second-guess,” to project his knowledge of what happened ex post into the information of the decision-maker ex ante. The effects are studied in this paper by Kristof Madarasz.
To illustrate the consequences of such exaggeration, consider a medical example. A radiologist recommends a treatment based on a noisy radiograph. Suppose radiologists differ in ability; the best ones hardly ever miss a tumor when its visible on the X-ray, bad ones often do. After the treatment is adopted, an evaluator reviews the case to learn about the radiologist’s competence. By observing outcomes, evaluators naturally have access to information that was not available ex-ante; in that interim medical outcomes are realized and new X-rays might have been ordered. A biased evaluator thinks as if such ex-post information had also been available ex-ante. A small tumor is typically difficult to spot on an initial X-ray, but once the location of a major tumor is known, all radiologists have a much betterchance of finding the small one on the original X-ray. In this manner, by projecting information, the evaluator becomes too surprised observing a failure and interprets success too much to be the norm. It follows that she underestimates the radiologistís competence on average.
The paper studies how a decision-maker who anticipates this effect practices “defensive” information production ex ante, for example being too quick to carry out additional tests that substitute for the evaluator’s information (a biopsy in the medical example) and too reluctant to carry out tests that magnify it.
A tip of the boss of the plains to Nageeb Ali.
I thank Presh Talwalker for the pointer. Pretty soon I won’t have to do any teaching, I’ll just play YouTube clips for 90 minutes, pass out the chocolate and send them on their way.
A new study by many authors presented at the N.B.E.R. finds:
“Students who had learned much more in kindergarten were more likely to go to college than students with otherwise similar backgrounds. Students who learned more were also less likely to become single parents. As adults, they were more likely to be saving for retirement. Perhaps most striking, they were earning more.
All else equal, they were making about an extra $100 a year at age 27 for every percentile they had moved up the test-score distribution over the course of kindergarten. A student who went from average to the 60th percentile — a typical jump for a 5-year-old with a good teacher — could expect to make about $1,000 more a year at age 27 than a student who remained at the average. Over time, the effect seems to grow, too.”
Correlation is not causation but the study:
“offered a chance to answer these questions because it randomly assigned students to a kindergarten class. As a result, the classes had fairly similar socioeconomic mixes of students and could be expected to perform similarly on the tests given at the end of kindergarten.
Yet they didn’t. Some classes did far better than others. The differences were too big to be explained by randomness. (Similarly, when the researchers looked at entering and exiting test scores in first, second and third grades, they found that some classes made much more progress than others.)
Class size — which was the impetus of Project Star — evidently played some role. Classes with 13 to 17 students did better than classes with 22 to 25. Peers also seem to matter. In classes with a somewhat higher average socioeconomic status, all the students tended to do a little better.
But neither of these factors came close to explaining the variation in class performance. So another cause seemed to be the explanation: teachers.”
Did you know that the number 4, spoken in Chinese, sounds very similar to the Chinese word for death? For that reason the number 4 is considered unlucky. (You may also know that the number 8 sounds like money and so it is considered lucky.) Well it is unlucky. Indeed, the 4th of the month is the peak day for death by cardiac arrest among Asian Americans. That is according to this study which I found via my new favorite blog, which I found via my always favorite Twitterer, nambupini.
Suppose you are selling your house and 10 potential buyers are lined up. For whatever reason you cannot hold an auction (in fact sellers rarely do) but what you can do is make take-it-or-leave-it price demands. To be clear: this means that you can approach buyers in sequence proposing to each a price. If a buyer accepts you are committed to sell and if he rejects you are committed to refuse sale to this buyer. All buyers are ex ante identical, meaning that you while you don’t know their maximum willingness to pay, you have the same beliefs about each of them. How do you determine the profit-maximizing price?
It is somewhat surprising that despite the symmetry, in order to maximize profits you will discriminate and charge them different prices. What you will do is randomly order them and offer a descending sequence of prices. The buyer who was randomly put first in the order (unlucky?) will be charged the highest price and this is an essential part of your optimal pricing policy.
Although it sounds surprising at first the intuition is pretty simple, it’s an application of the idea of option value. When you have only one buyer left you will charge him some price 
Now the same tradeoff determines your price to the second-to-last buyer. Except now the cost of having your offer rejected is lower because you will have another chance to sell. So you are willing to take a larger chance of a rejected offer and therefore set a higher price. Now continuing up the list, at every step the option value associated with a rejected offer increases and therefore so does the price.
OK that was easy. Now consider a model where the seller posts prices and the buyers choose when to arrive. This should break the symmetry if higher value buyers arrive earlier or later than lower value buyers. And they will for two reasons. First, nobody with a willingness to pay that is below the opening price will want to be first. Second, even among buyers with a high willingness to pay, the higher it is the more you value the increased chance to buy relative to lower prices later. (There is a “single-crossing property.”) The seller adjusts to this by further steepening the price path, etc.
Thanks to Toomas Hinnosaar for conversations on the topic. Here is a paper by Liad Blumrosen and Thomas Holenstein on optimal posted prices.
Have you seen these? They mysteriously lurk at the top right of miscellaneous web pages on the Harvard Econ department web site. Like here, look Philippe Aghion’s page has brains. Mankiw? brains. And there is no caption or explanation given. I started to think that it was there as some kind of experiment like those guys in gorilla suits that run across the screen when you’re supposed to be counting basketballs? So I am here to say that I am not blind to these brains. And I see the word juice there. You can’t slip anything by me.
Cheap Talk 