Obsessively Checking Email, Feel Free To Profit From This Idea

March 6, 2012 in Uncategorized | Tags: , , , , , | by | 17 comments

Email is the superior form of communication as I have argued a few times before, but it can sure aggravate your self-control problems. I am here to help you with that.

As you sit in your office working, reading, etc., the random email arrival process is ticking along inside your computer. As time passes it becomes more and more likely that there is email waiting for you and if you can’t resist the temptation you are going to waste a lot of time checking to see what’s in your inbox.  And it’s not just the time spent checking because once you set down your book and start checking you won’t be able to stop yourself from browsing the web a little, checking twitter, auto-googling, maybe even sending out an email which will eventually be replied to thereby sealing your fate for the next round of checking.

One thing you can do is activate your audible email notification so that whenever an email arrives you will be immediately alerted. Now I hear you saying “the problem is my constantly checking email, how in the world am i going to solve that by setting up a system that tells me when email arrives? Without the notification system at least I have some chance of resisting the temptation because I never know for sure that an email is waiting.”

Yes, but it cuts two ways.  When the notification system is activated you are immediately informed when an email arrives and you are correct that such information is going to overwhelm your resistance and you will wind up checking. But, what you get in return is knowing for certain when there is no email waiting for you.

It’s a very interesting tradeoff and one we can precisely characterize with a little mathematics. But before we go into it, I want you to ask yourself a question and note the answer before reading on.  On a typical day if you are deciding whether to check your inbox, suppose that the probability is p that you have new mail. What p is going to get you to get up and check?  We know that you’re going to check if p=1 (indeed that’s what your mailbeep does, it puts you at p=1.) And we know that you are not going to check when p=0.  What I want to know is what is the threshold above which its sufficiently likely that you will check and below which is sufficiently unlikely so you’ll keep on reading?  Important:  I am not asking you what policy you would ideally stick to if you could control your temptation, I am asking you to be honest about your willpower.

Ok, now that you’ve got your answer let’s figure out whether you should use your mailbeep or not.  The first thing to note is that the mail arrival process is a Poisson process:  the probability that an email arrives in a given time interval is a function only of the length of time, and it is determined by the arrival rate parameter r.  If you receive a lot of email you have a large r, if the average time spent between arrivals is longer you have a small r.  In a Poisson process, the elapsed time before the next email arrives is a random variable and it is governed by the exponential distribution.

Let’s think about what will happen if you turn on your mail notifier.  Then whenever there is silence you know for sure there is no email, p=0 and you can comfortably go on working temptation free. This state of affairs is going to continue until the first beep at which point you know for sure you have mail (p=1) and you will check it.  This is a random amount of time, but one way to measure how much time you waste with the notifier on is to ask how much time on average will you be able to remain working before the next time you check.  And the answer to that is the expected duration of the exponential waiting time of the Poisson process.  It has a simple expression:

Expected time between checks with notifier on = \frac{1}{r}

Now let’s analyze your behavior when the notifier is turned off.  Things are very different now.  You are never going to know for sure whether you have mail but as more and more time passes you are going to become increasingly confident that some mail is waiting, and therefore increasingly tempted to check. So, instead of p lingering at 0 for a spell before jumping up to 1 now it’s going to begin at 0 starting from the very last moment you previously checked but then steadily and continuously rise over time converging to, but never actually equaling 1.  The exponential distribution gives the following formula for the probability at time T that a new email has arrived.

Probability that email arrives at or before a given time T = 1 - e^{-rT}

Now I asked you what is the p* above which you cannot resist the temptation to check email.  When you have your notifier turned off and you are sitting there reading, p will be gradually rising up to the point where it exceeds p* and right at that instant you will check.  Unlike with the notification system this is a deterministic length of time, and we can use the above formula to solve for the deterministic time T at which you succumb to temptation.  It’s given by

Time between checks when the notifier is off = \frac{- log (1 - p^*)}{r}

And when we compare the two waiting times we see that, perhaps surprisingly, the comparison does not depend on your arrival rate r (it appears in the numerator of both expressions so it will cancel out when we compare them.) That’s why I didn’t ask you that, it won’t affect my prescription (although if you receive as much email as I do, you have to factor in that the mail beep turns into a Geiger counter and that may or may not be desirable for other reasons.)  All that matters is your p* and by equating the two waiting times we can solve for the crucial cutoff value that determines whether you should use the beeper or not.

The beep increases your productivity iff your p* is smaller than \frac{e-1}{e}

This is about .63 so if your p* is less than .63 meaning that your temptation is so strong that you cannot resist checking any time you think that there is at least a 63% chance there is new mail waiting for you then you should turn on your new mail alert.  If you are less prone to temptation then yes you should silence it. This is life-changing advice and you are welcome.

Now, for the vapor mill and feeling free to profit, we do not content ourselves with these two extreme mechanisms.  We can theorize what the optimal notification system would be.  It’s very counterintuitive to think that you could somehow “trick” yourself into waiting longer for email but in fact even though you are the perfectly-rational-despite-being-highly-prone-to-temptation person that you are, you can.  I give one simple mechanism, and some open questions below the fold.

Read the rest of this entry »

The TED model for publishing

March 5, 2012 in Uncategorized | Tags: | by | 2 comments

Giving the content away for free publicizes the event and adds to the cache of (and willingness to pay for) the actual event. Also,

Anderson did not stop there. He opened up not only the TED talks themselves but the TED name. TEDx are events that can be put on by pretty much anyone. You need a license and have to do a good job (there’s no automatic renewal of the license), but nearly anyone can pitch in. This is literally a freeing up of the concept “ideas worth spreading” to allow anyone to select what those ideas are. So long as you follow a few simple rules — a talk format, some video, and no ads or other commercial tags — you can host a TEDx event. And there are now hundreds of these each year. What is more, TED regularly features talks from these on the site, so they act as feeder for TED publishing.

That’s from Josh Gans, more here.

Heated Debate in Sociobiology: Is Hamilton’s Equation Wrong?

March 5, 2012 in Uncategorized | by | Leave a comment

From the New Yorker:

In 1964, [W D Hamilton] submitted a pair of papers to the Journal of Theoretical Biology. The papers hinged on one simple equation: rB > C. Genes for altruism could evolve if the benefit (B) of an action exceeded the cost (C) to the individual once relatedness (r) was taken into account. Hamilton referred to his model as “inclusive fitness theory.”…[A]n ambitious entomologist named E. O. Wilson read the paper. Wilson wanted to understand the altruism at work in ant colonies, and he became convinced that Hamilton had solved the problem. By the late nineteen-seventies, Hamilton’s work was featured prominently in textbooks; his original papers have become some of the most cited in evolutionary biology. …In an obituary published after Hamilton’s death, in 2000, the Oxford biologist Richard Dawkins referred to Hamilton as “the most distinguished Darwinian since Darwin.” But now, in an abrupt intellectual shift, Wilson says that his embrace of Hamilton’s equation was a serious scientific mistake. Wilson’s apostasy, which he lays out in a forthcoming book, “The Social Conquest of the Earth,” has set off a scientific furor.

I described the Wilson et al paper in an earlier post.

Condoms And Health Care

March 4, 2012 in Uncategorized | Tags: , , , | by | 5 comments

Here’s a pretty simple point but one that seems to be getting lost in the “discussion.”

Insurance is plagued by an incentive problem. In an ideal insurance contract the insuree receives, in the event of a loss or unanticipated expense, a payment that equals the full value of that loss. This smooths out risk and improves welfare. The problem is that by eliminating risk the contract also removes the incentive to take actions that would reduce that risk. This lowers welfare.

In order to combat this problem the contracts that are actually offered are second-best: they eliminate some risk but not all. The insured is left exposed to just enough risk so that he has a private incentive to take actions that reduce it. The incentive problem is solved but at the cost of less-than-full insurance.

But building on this idea, there are often other instruments available that can do even better. For example suppose that you can take prophylactic measures (swish!) that are verifiable to the insurance provider. Then at the margin welfare is improved by a contract which increases insurance coverage and subsidizes the prophylaxis.

That is, you give them condoms. For free. As much as they want.

Keith Jarrett: The Art of Improvisation

March 2, 2012 in Uncategorized | Tags: | by | Leave a comment

This is worth your Friday (or your employer’s as the case may be.)  Check out Jarrett playing/talking Bach (1:30ish), Manfred Eicher’s take (5:10ish), Keith Jarrett listening to Jack DeJohnette and Gary Peacock playing a piano duet! (7:00ish), KJ’s hippie brother (14:00 ish), small hands (3:45ish on part 2), obligatory squeaking questions (6:15 part 2), Miles Davis (part 3), Koln (halfway part 3), Chick Corea (end of part 3-part 4), playing soprano sax (middle part 4), American quartet (end part 4), European quartet (part 5), chronic fatigue (part 6).

Thanks to Tobias Schmidt for the link.

Iran and “Strategic Ambiguity”

March 1, 2012 in Uncategorized | by | 5 comments

Iran may be going to headlong into a pursuit of nuclear weapons. Or maybe not:

Yet some intelligence officials and outside analysts believe there is another possible explanation for Iran’s enrichment activity…. They say that Iran could be seeking to enhance its influence in the region by creating what some analysts call “strategic ambiguity.” Rather than building a bomb now, Iran may want to increase its power by sowing doubt among other nations about its nuclear ambitions. Some point to the examples of Pakistan and India, both of which had clandestine nuclear weapons programs for decades before they actually decided to build bombs and test their weapons in 1998.

What are benefits and costs of ambiguity for the party pursuing ambiguity and potential opponents? Tomas Sjöström and I investigated this issue in a paper “Strategic Ambiguity and Arms Proliferation”. The basic idea is that a policy of ambiguity can strike the right balance between creating deterrence (the party pursuing ambiguity might be armed) and minimizing escalation (the party pursuing ambiguity might not be armed). With that balance struck, there is less incentive to acquire arms and this can even help your opponents who seek to minimize proliferation. In other words, an equilibrium with ambiguity can be better for all parties than an equilibrium with transparency.

The Tyranny of Replication

February 29, 2012 in Uncategorized | Tags: , | by | 2 comments

Not even your thought experiments are safe.

Saul Kripke resigned yesterday from his position as Distinguished Professor of Philosophy at the CUNY Graduate Center.  While similar allegations have been circulating in unpublished form for years, a team of philosophers from Oxford University has just released a damning report claiming that they were systematically unable to reproduce the results of thought experiments reported by Kripke in his groundbreaking Naming and Necessity.

(…) The report, forthcoming in Philosophical Studies, claims that 74% of the book’s thought-experimental results could not be reproduced using the standard philosophical criteria for inter-researcher agreement.  A second version of the analysis, employing a generous application of the principle of charity, still left 52% of the results unverified.

That’s from fauxphilnews. Skullcap skip:  Marciano Siniscalchi.

Playing With Yourself, Or Against

February 29, 2012 in Uncategorized | Tags: , , | by | Leave a comment

As the director of recruiting for your department you sometimes have to consider Affirmative Action motives.  Indeed you are sympathetic to Affirmative Action yourself and even on your own your recruiting policy would internalize those motives.  But in fact your institution has a policy.  You perceive clear external incentives coming from that policy.

Now this creates a dilemma.  For any activity like this there is some socially optimal level and it combines your own private motivations with any additional external interests.  But the dilemma for you is how these should be combined.  One possibility is that the public motive and your own private interest stem from completely independent reasons.  Then you should just “add together” the weight of the external incentives you feel plus those of your own.  But it could be that what motivates your Dean to institutionalize affirmative action is exactly what motivates you.  In this case he has just codified the incentives you would be responding to anyway,  and rather than adding to them, his external incentives should perfectly crowd out your own.

There is no way of knowing which of these cases, or where in between, the true moral calculation is.  That is a real dilemma, but I want to think of it as a metaphor for the dilemma you face in trying to sort out the competing voices in your own private moral decisions.

Say you have a close friend and you have an opportunity to do something nice for them, say buy them a birthday gift.  You think about how nice your friend has been to you and decide that you should be especially nice back.  But compared to what? Absent that deliberative calculation you would have chosen the default level of generosity.  So what your deliberation has led you to decide is that you should be more generous than the default.

But how do you know?  What exactly determined the default?  One possibility is that the default represents your cumulative wisdom about how nice you should be to other people in general.  Then your reflection on this particular friend’s particular generosity should increment the default by a lot.  But surely that’s not the relevant default.  He’s your friend, he’s not just an arbitrary person (you would even be considering giving a gift to an arbitrary person.)  No doubt your instinctive inclination to be generous to your friend already encodes a lot of the collected memory and past reflection that also went into your most recent conscious deliberation.  And as long as there is any duplication, there should be crowding out. So you optimally moderate the enthusiasm that arises from your conscious calculation.

But how much?  That is a dilemma.

Sleeping With The Enemy: Coalition Formation In A Hostile Environment

February 28, 2012 in art of office politics, economics | by | 4 comments

There are three divisions in a firm, A, B and C. Each makes a different kind of product. Resources are allocated from Center and the three divisions compete for them. Over time the members of each division generate ideas for new products that need funding. The ideas may be good or bad and the division members get an accurate signal of the quality of the idea. The members of other divisions get a noisy signal or no signal at all. The three divisions have to send a vote to the Center which will determine whether to fund the idea or not. The greater the number of divisions supporting an idea, the more likely it is to be funded by Center.

Division A is “honest”. They only push their ideas if they are good. They support the ideas of other divisions if and only they become convinced by objective arguments that they are good.

Division B is an “empire builder”. They push all their ideas as if they are all good. They thrash other divisions’ ideas if they feel threatened.

Division C is “honest yet strategic”. They  push their ideas if and only if they are good. How should they vote on other divisions’ ideas? Division A is likely to be on their side when they push an idea. After all, Division C only support their own ideas if they have a good signal. They can then convince Division A of the strength of their case. To convince Center, it would be even better to have a unanimous decision with Division B on board. So, Division C supports Division B’s ideas. If Division A proposes an idea for funding and Division B opposes it, Division C sides with Division B. A quid-pro-quo equilibrium develops between Divisions B and C.

In the long run, Division A will die out. This is bad for Center as Division A’s good products are good for profits and Division B’s bad products are not. So perhaps Center will intervene. Or Division A may also become strategic. They should deliberately destroy some of Division C’s good potential products and persuade them to switch their support to them over Division B.

Middle Seat Or Aisle?

February 28, 2012 in Uncategorized | Tags: , | by | 6 comments

(Based on a conversation with Nageeb Ali)

When you are selecting seats on a flight and you have an open row should you take the middle seat or the aisle?  Even if you prefer the aisle seat you are tempted to take the middle seat as a strategic move.  People who check in after you will try to find a seat with nobody next to them and if you take the middle seat they will choose a different row.  The risk however is that if the flight is full you are still going to have someone sitting next to you and you will be stuck in the middle seat.

Let’s analyze a simple case to see the tradeoffs.  Suppose that when you are checking in there are two empty rows and the rest of the plane is full.  Let’s see what happens when you take the middle seat.  The next guy who comes is going to pick a seat in the other row.  Your worst fear is that he takes the middle seat just like you did.  Then the next guy who comes along is going to sit next to one of you and the odds are 50-50 its going to be you.  Had you chosen the aisle seat the next guy would take the window seat in your row.

If instead the guy right after you takes a window seat in the other row then your strategy just might pay off.  Because the third guy will also go to the other row, in the aisle seat.  If nobody else checks in you have won the jackpot.  A whole row to yourself.

But this is pretty much the only case in which middle outperforms aisle.  And even in this case the advantage is not so large.  In the same scenario, had you taken the aisle seat, the third guy would be indifferent between the two rows and you’d still have a 50-50 chance of a row to yourself.  Even when he takes your row he’s going to take the window seat and you would still have an empty seat next to you.

Worse, as long as one more person comes you are going to regret taking the middle seat.  Because the other row has only a middle seat left.  The fourth guy to come is going to prefer the window or aisle seat in your row.  Had you been sitting in the aisle seat the first four passengers would go aisle, aisle, window, window and you would be safe.

Why Nations Fail, Acemoglu and Robinson Blog

February 27, 2012 in art of office politics, economics, teaching | by | 10 comments

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 Rotten Parent Theorem

February 27, 2012 in Uncategorized | Tags: , , | by | 4 comments

Wealthy kids are usually wealthy because their wealthy parents left them a lot of money.  You might think that’s because parents are altruistic towards their kids.  Indeed every dollar bequeathed is a dollar less of consumption for the parent.  But think about this:  if parents are so generous towards their kids why do they wait until they die to give them all that money?  For a truly altruistic parent, the sooner the gift, the better.  By definition, a parent never lives to see the warm glow of an inheritance.

A better theory of bequests is that they incentivize the children to call, visit, and take care of the parents in their old age.  An inheritance is a carrot that awaits a child who is good to the parent until the very end.  That’s the theory of strategic bequests in Bernheim, Shleiffer and Summers.

But even with that motivation you have to ask why bequests are the best way to motivate kids.  Why not just pay them a piece rate?  Every time they come to visit they get a check.  If the parent is even slightly altruistic this is a better system since the rewards come sooner.

To round out the theory of strategic bequests we need to bring in the compound value of lump-sum incentives.  Suppose you are nearing the bitter end and its likely you are not going to live more than another year.  You want your kids to visit you once a month in your last year and that’s going to cost you 12*c where c is your kid’s opportunity cost per weekly visit.  You could either implement this by piece-rate, paying them c every time they come, or in a lump sum by leaving them 12c in your will if they keep it up the whole time.

But now what happens if, as luck would have it, you actually survive for another year?  With the piece rate you are out 12c and still have to cough up another 12c if you want to see your kids again before you die.  But a bequest can be re-used.  You just restart the incentives, and you get another year’s worth of visits at zero additional cost.

Is it credible?  All you need is to commit to a policy that depends only on their devotion in the last year of your life.  Since you are old your kids know you can’t remember what happened earlier than that anyway so yes, it’s perfectly credible.

(Idea suggested by Mike Whinston.)

Sordid Links

February 24, 2012 in Uncategorized | by | Leave a comment

  1. Daron Acemoglu and James Robinson now have a blog.
  2. The Muppet Show:  Sex and Violence.
  3. What American football looked like in 1903.
  4. Euthanasia by rollercoaster.
  5. “So basically you can buy five vials of Ryan Gosling and one Steve Buscemi and play Russian roulette.”

The Collected Blurbs of Gary Shteyngart

February 23, 2012 in Uncategorized | Tags: | by | 1 comment

Not 100% sure this is real.  Here’s his blurb for Miss Timmins School for Girls by Nayana Currimbhoy:

“Beautifully written, atmospheric…contains entire worlds.  I couldn’t put it down.”
—Gary Shteyngart

And Flatscreen by Adam Wilson:

“OMFG, I nearly up and died from laughter when I read Flatscreen. This is the novel that every young turk will be reading on their way to a job they hate and are in fact too smart for.”
—Gary Shteyngart

He even blurbs his own blurb:

“Gary Shteyngart’s blurbs are touching, funny, and true.  This is a blurber to watch”

Here’s some blurb-related research I’d like to see.  There is a widespread suspicion that editors write the blurbs and the blurber just agrees to sign his name to it.  It would be great to use text-pattern-recognition software to group blurbs according to apparent authorship and check whether this is really true.

The Roman Metro Problem

February 23, 2012 in Uncategorized | Tags: , | by | 2 comments

Here is the abstract of a paper by Christian Roessler and Sandro Shelegia:

In Rome, if you start digging, chances are you’ll find things. We consider a famous complaint that justifies the underdeveloped Roman metro system: “if we tried to build a new metro line, it would probably be stopped by archeological finds that are too valuable to destroy, so we would have wasted the money.” Although this statement appears to be self-contradictory, we show that it can be rationalized in a voting model with diverse constituents. Even when there is a majority preference for a metro line, and discovery of an antiquity has the character of a positive option, a majority may oppose construction. We give sufficient conditions for this inefficiency to occur. One might think it arises from the inability to commit to finishing the metro (no matter what is discovered in the process). We show, however, that the inefficient choice is made in voting over immediate actions precisely when there is no Condorcet winner in voting over contingent plans with commitment. Hence, surprisingly, commitment cannot really solve the problem.

The problem is how to build a majority coalition in favor of digging.  There’s no problem when the probability of an antiquity is low because then everyone who favors the Metro but not the antiquity will be on board.  When the probability of an antiquity is high there is again no problem but now because you have the support of those who are hoping to find one.  Rome’s problem is that the probability of an antiquity is neither low enough nor high enough.

I think this says something about flyouts in Junior Recruiting, and in turn it says something about how candidates should market themselves.

Scaling the Tips

February 23, 2012 in Uncategorized | Tags: , , | by | 4 comments

A question raised over dinner last week. A group of N diners are dining out and the bill is $100. In scenario A, they are splitting the check N ways, with each paying by credit card and separately entering a gratuity for their share of the check. In scenario B, one of them is paying the whole check.

In which case do you think the total gratuity will be larger?  Some thoughts:

  1. Because of selection bias, it’s not enough to cite folk wisdom that tables who split the check tip less (as a percentage):  At tables where one person pays the whole check that person is probably the one with the deepest pockets.  So field data would be comparing the max versus the average.  The right thought experiment is to randomly assign the check.
  2. Scenario B can actually be divided into two subcases.  In Scenario B1, you have a single diner who pays the check (and decides the tip) but collects cash from everyone else.  In Scenario B2 the server divides the bill into N separate checks and hands them to each diner separately.  We can dispense with B1 because the guy paying the bill internalizes only 1/Nth of the cost of the tip so he will clearly tip more than he would in Scenario A.  So we are really interested in B2.
  3. One force favoring larger tips in B2 is the shame of being the lowest tipper at the table.  In both A and B2 a tipper is worried about shame in the eyes of the server but in B2 there are two additional sources.  First, beyond being a low tipper relative to the overall population, having the server know that you are the lowest tipper among your peers is even more shameful.  But even more important is shame in the eyes of your friends.  You are going to have to face them tomorrow and the next day.
  4. On the other hand, B2 introduces a free-rider effect which has an ambiguous impact on the total tip.  The misers are likely to be even more miserly (and feel even less guilty about it) when they know that others are tipping generously.  On the other hand, as long as it is known that there are misers at the table, the generous tippers will react to this by being even more generous to compensate.  The total effect is an increase in the empirical variance of tips, with ambiguous implications for the total.
  5. However I think the most important effect is a scale effect.  People measure how generous they are by the percentage tip they typically leave.  But the cost of being a generous tipper is the absolute level of the tip not the percentage.  When the bill is large its more costly to leave a generous tip in terms of percentage.  So the optimal way to maintain your self-image is to tip a large percentage when the bill is small and a smaller percentage when the bill is large.  This means that tips will be larger in scenario B2.
  6. One thing I haven’t sorted out is what to infer from common restaurant policy of adding a gratuity for large parties.  On the one hand you could say that it is evidence of the scale effect in 5.  The restaurant knows that a large party means a large check and hence lower tip percentage.  However it could also be that the restaurant knows that large parties are more likely to be splitting the check and then the policy would reveal that the restaurant believes that B2 has lower tips.  Does anybody know if restaurants continue to add a default gratuity when the large party asks to have the check split?
  7. The right dataset you want to test this is the following.  You want to track customers who sometimes eat alone and sometimes eat with larger groups.  You want to compare the tip they leave when they eat alone to the tip they leave when part of a group.  The hypothesis implied by 3 and 5 is that their tips will be increasing order in these three cases:  they are paying for the whole group, they are eating alone, they are splitting the check.

(Thanks to those who commented on G+)

Alan Turing’s Report Cards

February 22, 2012 in Uncategorized | Tags: , | by | 2 comments

He was clearly going nowhere:

  • (Mathematics) Not very good.  He spends a good deal of time apparently in investigations in advanced mathematics to the neglect of his elementary work.  A sound ground work is essential in any subject.  His work is dirty.
  • (Greek) He seems to find the subject a very hard one & most of his work has been very poor in quality.  I think he tries.
  • (Latin) His Latin work is for the most part careless & slovenly: he can do much better when he tries.
  • (“House report”) No doubt he is a strange mixture: trying to build a roof before he has laid the foundations.  Having secured one privileged exemption, he is mistaken in acting as if idleness and indifference will procure further release from uncongenial subjects.

The pointer came from Josh Gans on Google+

Chicago Cubs Finally Win At Something

February 22, 2012 in economics, teaching | by | 1 comment

Via Crain’s Business Chicago:

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)

Surfing Lake Michigan

February 21, 2012 in Uncategorized | Tags: | by | 1 comment

It can land you in jail.

Despite growing up nowhere near an ocean, Rex Flodstrom fell in love with surfing at an early age on trips to the West Coast. It’s a spiritual experience, pushing the Chicagoan to brave even the punishing snow and ice on Lake Michigan for the thrill of a winter wave.

But a chilly ride last month landed Flodstrom, 40, in trouble with police. He was arrested Jan. 17 near Oak Street Beach on misdemeanor ordinance violations of surfing more than 50 yards from shore, unlawful presence on a closed beach and jeopardizing the safety of others on the beach.

I lived in view of Lake Michigan for 4 years and I never once saw a surfable wave. And if  the hilarious video at the link is any indication, neither has Rex, bless his frozen heart.

Framing Effects And Game Theory

February 20, 2012 in Uncategorized | Tags: , , | by | 8 comments

Here’s a card game: You lay out the A,2,3 of Spades, Diamonds, Clubs in random order on the table face up. So that’s 9 cards in total. There are two players and they take turns picking up cards from the table, one at a time. The winner is the first to collect a triplet where a triplet is any one of the following sets of three:

  1. Three cards of the same suit
  2. Three cards of the same value
  3. Ace of Spaces, 2 of Diamonds, 3 of Clubs
  4. Ace of Clubs, 2 of Diamonds, 3 of Spades

Got it?  Ok, this game can be solved and the solution is that with best play the result is a draw, neither player can collect a triplet.  See if you can figure out why. (Drew Fudenberg got it almost immediately [spoiler.]) Answer and more discussion are after the jump.

Read the rest of this entry »

A Simple Theory Why Moving To California Doesn’t Live Up To Expectations

February 20, 2012 in Uncategorized | Tags: , , | by | 22 comments

It’s the canonical example of reference-dependent happiness. Someone from the Midwest imagines how much happier he would be in California but when he finally has the chance to move there he finds that he is just as miserable as he was before.

But can it be explained by a simple selection effect? Suppose that everyone who lives in the Midwest gets a noisy but unbiased signal of how happy they would be in California. Some overestimate how happy they would be and some underestimate it. Then they get random opportunities to move. Who is going to take that opportunity? Those who overestimate how happy they will be.  And so when they arrive they are disappointed.

It also explains why people who are forced to leave California, say for job-related reasons, are pleasantly surprised at how happy they can be in the Midwest. Since they hadn’t moved voluntarily already, its likely that they underestimated how happy they would be.

These must be special cases of this paper by Eric van den Steen, and its similar to the logic behind Lazear’s theory behind the Peter Principle.  (For the latter link I thank Adriana Lleras-Muney.)

Strategic Voting In Primaries And Liberal Weakness

February 18, 2012 in art of office politics | by | 2 comments

Liberal website Daily Kos announces Operation Hilarity:

It’s time for us to take an active role in the GOP nomination process. That’s right, it’s time for those of us who live in open primary and caucus states—Michigan,North Dakota, Vermont and Tennessee in the next three weeks—to head out and cast a vote for Rick Santorum.

Why would we do such a crazy thing? Lots of great reasons!…..

The longer this GOP primary drags on, the better the numbers for Team Blue. Not only is President Barack Obama rising in comparison to the clowns in the GOP field, but GOP intensity is down—which would have repercussions all the way down the ballot.

The longer this thing drags out, the more unpopular the Republican presidential pretenders become. Just look at Mitt Romney’s trajectory, which followed Herman Cain’s trajectory, and Newt Gingrich’s trajectory, and Michelle Bachmann’s trajectory, and so on.

But we have naysayers in the comments:

makes a mockery of the democratic process and descends to the level of idiots on the other side of the fence.

casting a false vote is ‘ dirty tricks’ writ small – a stunt for small minds – and is undignified, and imo cynical and even a  bit unamerican.

Is this a Republican voter messing with the minds of stalwart liberals?

Sordid Links

February 17, 2012 in Uncategorized | by | 2 comments

  1. Winter is really beautiful when it happens to somebody else.
  2. Composite sketches of characters from literature.
  3. The value of love according to Bob Dylan.
  4. Richard Dawkins gets a taste of his own medicine.
  5. Mark Twain writing about writing about talking.
  6. Half a thumb is a small price to pay.

Next Restaurant Adopts Auction Scheme

February 17, 2012 in economics, food and wine, teaching | by | 2 comments

We blogged many times about the Next restaurant’s innovative ticket scheme. Potential restaurant goers had to sign up to try to acquire seats at a fixed price for a set meal. Good for the restaurant in terms of knowing what inventory to hold, predictable revenue etc. The scheme turned out to be extremely successful with resale prices of the tickets running into thousands. Why not just auction off the seats – that is what very economist would say? It turns out that Nick Kekonas and Grant Achatz do not want to make too much money and want everyone to be able to afford to come. In response to my blog post Nick commented:

Since we have universally high demand right now, the question is why don’t we flatten the pricing towards the top of what the market will pay? There are a few reasons for this, mostly having to do with customer service and the hospitality industry. Simply, we never want to invert the value proposition so that customers are paying a premium that is disproportionate to the amount of food / quality of service they receive. Right now we have it as a great bargain for those who can buy tickets. Ideally, we keep it a great value and stay full.

I replied

If you want to give it to charity, to start a foundation to teach disadvantaged kids how to cook or whatever is close to your heart, that surely dominates just giving up the money to random lucky people who sign up and sell tickets for profit on Craigslist. And given you have software already, I bet it would be pretty easy to program a simple auction.

My advice was pretty obvious and I’m sure they though of it already. Anyway:

Next created a special page to run a Dutch auction for an El Bulli menu two-top every night, all proceeds to go to the University of Chicago Cancer Center where Grant Achatz was treated….

Not surprisingly, there are a lot of people who couldn’t stand to wait for Next El Bulli tickets to come down in price— as of this writing 46 of the 72 tables, many of them for the $5000 maximum price (compared to about $800 for a regular pair of Next El Bulli tickets; most of that will be tax deductible as a donation) have sold for a total of $215,000. Odds are the entire block will sell out later today, bringing in around $350,000 for the hospital in little over a day. Next’s food fascinates, but it’s hard not to think that Next’s radically innovative business models will prove equally important and influential for the restaurant industry and its extensive charitable involvement over the years to come.

Congratulations to Sandeep

February 17, 2012 in Uncategorized | Tags: | by | 7 comments

He was just promoted to Full Professor.  It’s about time!

People Who Believe That Stories In The Onion Are True

February 15, 2012 in Uncategorized | Tags: | by | 3 comments

Here for your amusement is a collection of Facebook postings by people who don’t seem to understand that The Onion is fake news.  Now, remember that The Onion is satire.  And a piece of satire works best when it bears some resemblance to the object of satire.  If a story in The Onion were not believed to be true by anybody then that would be a clear indication that it was poor satire.  In other words, the credibility of a story in The Onion is optimally chosen so that inevitably a minimal fraction of people will believe it.

So it should not be amusing that some people fall for stories in The Onion, anymore than it is amusing that the Sun rises on Wednesdays. What would be amusing is finding out exactly who it is that lives in that tail of the gullibility distribution. However the web site is anonymized. So to me what is amusing about all of this is discovering  how many exactly which people find this site amusing.

Mixed Strategy Equilibrium Is Tricky

February 15, 2012 in Uncategorized | by | 3 comments

Note that the final plot device where one player does not know the rules of the game has not been encompassed by standard game theory.

Identifying Strategic Voter Turnout

February 14, 2012 in Uncategorized | Tags: , , | by | 1 comment

Models of costly voting give rise to strategic turnout:  in a district in which party A has a big advantage, supporters of party A will have low turnout in equilibrium in order to make the election close.  That’s because only when the election is close will voters have an incentive to turnout and vote, which is costly.

Looking at elections data it is hard to identify strategic turnout. Low turnout is perfectly consistent with non-strategic voters who just have high costs of voting.

Redistricting offers an interesting source of variation that could help. Suppose that a state has just undergone redistricting and a town has been moved from a district with a large majority for one party into a more competitive district. Non-strategic voters in that town will not change their behavior.

But strategic voters will have different incentives in the new district. In particular we should see an increase in turnout among voters in the town that is new to the district. And this increase in turnout should be larger than any change in turnout observed for voters who remained in the district before and after redistricting.

There are probably a slew of testable implications that could be derived from models of strategic turnout based on whether the new district is more or less competitive than the old one, whether the stronger party is the same or different from the stronger party in the old district, and whether the town leans toward or against the stronger party in the new district.

Contraception And The Labor Market

February 14, 2012 in art of office politics, economics | by | Leave a comment

Many people’s thoughts turn to contraception on Valentine’s Day. But thanks to the election campaign and the implementation of the Affordable Care Act, Americans have been thinking about contraception for several days. The ACA mandates provision of contraception by healthcare plans including those managed by Catholic hospitals.

What is the rationale for a mandate in a competitive labor market? The Becker model of discrimination predicts the mandate is unnecessary. Suppose employers choose not to offer contraception benefits in healthcare plans. But talented workers may value these benefits. Then an employer can deviate and offer contraception benefits or a new firm can enter and offer benefits. They can attract individuals who value the benefits, produce higher quality products at lower costs etc. etc. The classic textbook economics model. The mandate requires the contraception benefits be free. But the insurance companies will simply include them in the price they charge for other services. Nothing is really free.

I suppose that if the government simply makes it illegal for any healthcare plan to offer contraception benefits, this argument breaks down. But is any politician advocating this position, even Santorum? Instead, the Republicans run the risk of alienating independent and moderate voters. They have a coherent libertarian style argument against the mandate and have succumbed to a weaker argument. Meanwhile President Obama seems to have “turned a crisis into an opportunity” to use a MBA teaching cliche. According to Andrew Sullivan,

The more Machiavellian observer might even suspect this is actually an improved bait and switch by Obama to more firmly identify the religious right with opposition to contraception, its weakest issue by far, and to shore up support among independent women and his more liberal base….

Take a look at the polling. Ask Americans if they believe that contraception should be included for free in all health-care plans and you get a 55 percent majority in favor, with 40 percent against. Ask American Catholics, and that majority actually rises above the national average, to 58 percent. A 49 percent plurality of all Americans supported the original Obama rule forcing Catholic institutions to provide contraception coverage.

If the GOP really makes this issue central in the next month or so, Santorum (whose campaign claims to have raised $2.2 million in the two days following his victories last week) is by far the likeliest candidate to benefit..—especially since Romneycare contained exactly the same provisions on contraception that Obamacare did before last week’s compromise was announced. That’s right: Romneycare can now accurately be portrayed as falling to the left of Obamacare on the contraception issue. This could very well be the issue that finally galvanizes the religious right, especially in the South. Imagine how Santorum could use that on Super Tuesday. In fact, it could be the issue that wins him the nomination. And do you really think that would hurt Obama in the fall?

Love: A Continuous Time Approach

February 14, 2012 in Uncategorized | Tags: , , | by | 7 comments

Consider a Man and a Woman. Time flows continuously and the horizon is infinite. At time T=0 they are locked in an embrace, and every instant of time t>0 their lips draw closer. Let \delta_t be the distance at time t, it declines monotonically over time.  At each t, the two simultaneously choose actions a^i_t which jointly determine the speed at which they close the space that separates them, governed by the rule

\frac{d \delta_t}{d t} = - f(a^M_t, a^W_t)

where f is strictly increasing in both arguments. In addition, both the Man and the Woman can pull away at any moment by choosing action a_0, thereby spurning the kiss and ending the game.

The closer they get the clearer they can see into one another’s eyes, revealing to each of them the true depth of their love, captured by the state of the world \theta which they receive private, and increasingly precise signals about as the game unfolds.

In this game, the lovers have common interests. Each wants to kiss if and only if their love is true, i.e. \theta >0.  However, they know the risks of opening their heart to another:  neither wants to be the one left unrequited. When \theta > 0, each prefers kissing to breaking the embrace, but each prefers to pull away first if they expect the other to pull away.

Along the equilibrium path their lips move fleetingly close. At close proximity every tiny fluctuation in the speed of approach communicates to the other changes in the private estimates \hat \theta_i each lover i is updating continuously over time, i.e.  a^i_t varies monotonically with the estimate \hat \theta_i.

But then: does he see doubt in her eyes? Did she blink? He cannot be sure. A bad signal, a discrete drop in his estimate and this causes him to hesitate.  And since \theta is a common state of the world, his hesitation is informative for her and so she pauses too. Not just because his hesitation raises doubts that their love is everlasting, but worse:  he may be preparing to turn away.  She must prepare herself too.

But she doesn’t. She sees deeper than that and instead she lurches ahead ever so slightly. He is looking into her eyes:  he can see that she believes with all her heart that \theta is positive. And now he knows that these are her true beliefs because if in truth her estimate of \theta was close to the negative region, his hesitation would have pushed her over and she would have turned away pre-emptively. Instead her persistence implores him to have faith in their love and to stay there in her arms with his lips so tantalizingly close to hers.

His doubts are vanquished. He loves her. She knows that he knows that she loves him too. And at last it is common knowledge that their love is true and they will kiss and in their moment of deepest passion they discover something about their payoff functions they haven’t before. This moment is the first moment in the rest of their lives together. They will not rush. Time is standing still now. Together, as if coordinated by the eternal spirit of amor, they allow a_t^i to fall gradually to zero, just slow enough that their lips finally meet, but just fast enough that, when they do,

\frac{d \delta_t}{d t} \rightarrow 0

so that their convergence occurs smoothly but still in finite time.

Happy Anniversary Jennie

(drawing:  Chemistry from www.f1me.net)