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Consider the Equilibrium

This optical illusion appears on a street in West Vancouver.  It is an experiment to see whether the image of a girl crossing the street will get drivers to slow down. The pushback has been from groups who worry that drivers might react by braking or swerving and cause an accident.  But that’s the short-run […]

Considerate Them Equilibriums

Good grammar makes for bad passwords: […]there’s an Achilles’ heel in creating phrase-based passwords. It’s the fact that most English speakers will craft phrases that make sense. Ashwini Rao and Gananand Kini at Carnegie Mellon and Birenda Jha at MIT have developed proof-of-concept password-cracking software that takes advantage of that weakness. It cracks long passwords, […]

Placebo and Equilibrium

Here is a wide-ranging article about proposals to utilize placebos as medicine. But according to advocates, there’s enough data for doctors to start thinking of the placebo effect not as the opposite of medicine, but as a tool they can use in an evidence-based, conscientious manner. Broadly speaking, it seems sensible to make every effort […]

Sordid Links

This gets really good at 3:32. The iRistocrats. The machines that get women off at the gym. Consider the equilibrium.  Hint: the equilibrium path begins with cars stenciled with “Make Money Fast:  Ask Me How!!” and ends with goatse. Sisyphean slinky. QR code that you can only see when you pour a pint of Guinness. […]

Remotely Sordid Links

How to parallel park The digital divide Sweet-sounding Christmas album from John Zorn The Farrelly brothers are making a Three Stooges movie Consider The Equilibrium via Josh Gans

Bracket Squatting

Dear Northwestern Economics community. I was among the first to submit my bracket and I have already chosen all 16 teams seeded #1 through #4 to be eliminated in the first round of the NCAA tournament. In case you don’t believe me: Now that i got that out of the way, consider the following complete […]

Hurtling Towards A Cliff

As budget negotiations get underway with the threat of sequestration looming, it’s worth recalling a basic lesson from game theory. Consider two parties in the same vehicle speeding towards a cliff. The one who concedes, i.e. chickens out and steers the car out of danger, is the loser. Winning is better than losing but either […]

The Peacock’s Tail

Over the weekend I attended a conference at the University of Chicago on The Biological Basis of Preferences and Behavior, and Balazs Szentes stole the show with a new theory of the peacock’s tail.  In Balazs’ theory a world without large and colorful peacock plumage is simply not stable. A large tail is an evolutionary […]

Golden Balls Solved?

Everybody is reacting to the Golden Balls video that I and others have posted. They are saying that the Split or Steal game has been solved.  I am not so sure. First of all I would like to point out that this solution was suggested here in the comments the first time I (or anybody […]

The Trough

My son and I went to see the Cubs last week as we do every Spring. The Cubs won 8-0 and Matt Garza was one out away from throwing a complete game shutout, a rarity for a Cub.  The crowd was on its feet with full count to the would-be final batter who rolled the […]

It Gets Better

This is a personal note for a friend.  Read it when you get turned down for tenure. I was an Assistant Professor at Northwestern, came up for tenure according to schedule and was denied.  Fired.  Canned.  Sent packing.  It sucked. But actually it wasn’t so bad.  First of all even if you never get tenure […]

Love: A Continuous Time Approach

Consider a Man and a Woman. Time flows continuously and the horizon is infinite. At time they are locked in an embrace, and every instant of time their lips draw closer. Let be the distance at time , it declines monotonically over time.  At each , the two simultaneously choose actions which jointly determine the […]

The Sequential Urinal Game

Great prelim question:  To provide some interpretation, consider a set of equidistant urinals in a washroom and men who enter the room sequentially. Men dislike to choose a urinal next to another urinal which is already in use. If no urinal providing at least basic privacy is available, each man prefers to leave the room […]

Really, You Don’t Already Know Why Questions Are Rhetorical?

Start with a world without rhetorical questions. All questions are interpreted as being genuinely inquisitive. You are considering doing X and someone comes up to you and says “Why on Earth would you want to do X?” Now two things happen. First, since all questions are genuinely inquisitive, you take his question literally and you […]

The Incidence of Anti-Defamation Laws

Defamation is the making of a false statement that creates a negative image of another person.  At a superficial level the point of anti-defamation laws are to prevent such false statements.  But false statements by themselves are not damaging unless they do harm to the subject’s reputation.  For that, the statement must be credible. If […]

Job Market Ideas That Can Be Explained In Words

(Regular readers of this blog will know I consider that a good thing.) Why did Apple enter an exclusive partnership with AT&T?  Michael Sinkinson has a nice theoretical model that shows how vertical exclusivity can soften competition.  A smartphone requires an accompanying wireless service in order to be useful.  While smartphones are differentiated goods, wireless […]

Job Market Ideas That Can Be Explained In Words

(Regular readers of this blog will know that I consider that a good thing.) John Lazarev at Stanford GSB has a nice little theory paper (not his job market paper which is not little and not theory, but also nice.)  It’s a model of market competition which consists of two stages.  In stage one the […]

Job Market Ideas That Can Be Explained In Words

(Regular readers of this blog will know I consider that a good thing.) Market mechanisms of all sorts are plagued in practice by the problem of unraveling.  For example, well before completing law school, law students sign contracts to assume positions at established law firms.  Unraveling occurs when this early contracting motive causes market participants […]

Bounded Complexity and Market Swings

I have now seen this paper presented twice and I really like it.  It’s Gul, Pesendorfer, and Strzalecki modeling the implications of limited attention on asset prices.  They show how competitive equilibrium requires large fluctuations in prices in extreme states of productivity. Their model is very simple and the logic can be explained in a […]

False Starts

Usain Bolt was disqualified in the final of the 100 meters at the World Championships due to a false start.  Under current rules, in place since January 2010, a single false start results in disqualification.  By contrast, prior to 2003 each racer who jumped the gun would be given a warning and then disqualified after […]

Why Sex?

It is a challenge for evolutionary theory to explain the prevalence of sexually reproducing species.  That’s because of the twofold cost of sex:  a sexually reproducing species produces half as many offspring per generation as an asexually reproducing population of the same size.  So not only must there be some other advantage to sexual reproduction, […]

G+H+25: Oliver Hart

With Oliver’s speech, we got some insights into the inception and inner workings of the Grossman-Hart team.  It was formed when both were put into the same session at the Stanford theory conference.  Sandy was working on informativeness of rational expectations equilibria and Oliver on general equilibrium with incomplete markets so their combination  in one […]

Anatomy Of A Perfectionist

Perfectionism seems like an irrational obsession.  If you are already very close to perfect the marginal benefit from getting a little bit closer is smaller and smaller and, because we are talking about perfection, the marginal cost is getting higher and higher.  An interior solution seems to be indicated. But this is wrong.  There is […]

Prisoners’ Dilemma Everywhere: Competition Among Colleges and Early Admissions Programs

Research by Chris Avery, Andrew Fairbanks and Richard Zeckhauser showed that early admissions (EA) programs give applicants a boost in college admissions.  Improved chances of admissions might reflect a better applicant pool and not an advantage built into the early admissions process.  But Avery et al controlled for this and still found that EA gives […]

Job Market Ideas Explained In Words: Daniel Shoag

(Regular readers of this blog will know I consider that a good thing.) The fiscal multiplier is an important and hotly debated measure for macroeconomic policy. If the government spends an additional dollar, a dollar’s worth of output is produced, but in addition the dollar is added to disposable income of the recipients who then […]

Keynes and the WW1 reparations

This year, Germany finally paid off its old bonds for World War 1 reparations, as Margaret MacMillan has noted in the New York Times.  MacMillan asserts that “John Maynard Keynes, a member of the British delegation in Paris, rightly argued that the Allies should have forgotten about reparations altogether.” Actually, the truth is more complicated.  […]

Why do M.I.T. PhDs have an Edge on the Job Market?

As junior recruiting approaches, we cannot help but speculate on the optimal way to compare apples to oranges – candidates across different fields (e.g. micro vs macro) and across universities.  I speculated a while ago that a “best athlete” recruiting system across fields is prone to gaming.  Each field might simply claim its candidate is […]

A Summary of the Torture Model

Sandeep and I are very close to finishing a first draft of our paper on torture.  As I was working on it today, I came up with a simple three-paragraph summary of the model and some results.  Here it is. A number of strategic considerations play a central role in shaping the equilibrium. First, the rate […]

Cheap Talk, Obama and Nuclear Posture Review, Part II

It’s always nice when you get a comment from someone you recognize but do not know personally.  So it was a nice surprise to see that Andrew Gelman left  a comment on my earlier post and then wrote his own blog post.  Andrew says: [I]f this “cheap talk” is useless, why it’s done at all! […]

Testing Minimax Play In The Field

Does game theory have predictive power?  The place to start if you want to examine this question is the theory of zero sum games where the predictions are robust:  you play the minimax strategy:  the one that maximizes your worst-case payoff.  (This is also the unique Nash equilibrium prediction.) The theory has some striking and […]