A blog about economics, politics and the random interests of forty-something professors
Neither the Labour Party nor the Conservative Party has won an absolute majority in the British elections. Each can try to rule as a minority government. This means roughly that each policy proposal would be voted on in an ad hoc fashion. If a key vote fails to win majority support, the minority government would fall and there would be another round of jostling for position. An alternative is to form a coalition with another party to form a government with majority support. This would mean the large party in the coalition would have to compromise on its ideal policy positions.
Both Labour and the Conservatives need the Liberal Democrats if they are to go the latter route. The Liberal Democrats suffer under the British electoral system where power is related to seats won in Parliament not total vote won across districts. Hence, they support “proportional representation”. Can the Liberal Democrats play the two parties off against each other to win this prize?
The difficulty for the Liberal Democrats is that the other two parties are in an asymmetric situation. The Conservatives are in better shape for running a minority government than Labour because they won more seats in Parliament. They are willing to offer less than Labour. Labour is willing to offer more but even the total number of seats held by the Liberal Democrats and Labour is not enough to form a majority coalition government. Plus it would involve a deal with a party mired in scandal and win a dark, brooding unpopular leader who refuses to step aside. Neither option looks good.
Hence, the real issue is the next election which may happen in days not years. The Liberal Democrats had great hopes of breaking out of their third party status and replacing the Labour party as the alternative to the Conservatives. It seems that in the end, voters were too worried about putting their faith in an unknown unknown. To break out of this hole, the Liberal Democrats have to look statesmanlike and work in the national interest not party interest. If neither party offers them a solid commitment to electoral reform, the Liberal Democrats should stay out of any coalition and maximize influence and publicity in Parliament. They can support sensible common values policy proposals put forward by the minority government and build themselves up in the eyes of the electorate. Only if they win significantly more seats in the next election will the Liberal Democrats get electoral reform
Native English speakers never have difficulty learning which prepositions to use. On the other hand I often hear even quite fluent second-languagers stumble over things like “Independent from, er… independent of.” (As in, X is independent of Y.) Is this just because children are better at learning language than adults? That probably explains a lot. But as I have speculated before I think there are some aspects of the difference between adults and children that don’t require an appeal to brain differences.
Adults are building on stuff they already know, children are learning for the first time. Adults know what a preposition is and that “from” and “of” are both prepositions. They know grammar and they think in terms of grammatical structure. So they search through the prepositions they know that would play the right grammatical role.
Children don’t think about language, they just copy what they hear. They don’t hear “independent from” so they never consider saying that. Of course adults learning English don’t hear “independent from” either. The fact that they still make the mistake means that they don’t learn purely by imitation like children. They make use of the rules they already know.
And yes, I am just making this up. Claire?
That’s the subject of a 2006 paper by Bo Honore and Adriana Lleras-Muney. From the abstract:
In 1971 President Nixon declared war on cancer. Thirty years later, many have declared the war a failure: the age-adjusted mortality rate from cancer in 2000 was essentially the same as in the early 1970s. Meanwhile the age-adjusted mortality rate from cardiovascular disease fell dramatically. Since the causes underlying cancer and cardiovascular disease are likely to be correlated, the decline in mortality rates from cardiovascular disease may in part explain the lack of progress in cancer mortality.
If more people are surviving cardiovascular disease then more will die of cancer. So if there were really no progress in cancer treatment then cancer mortality would in fact be increasing. By how much? That counterfactual question gets at the true benefits of the war on cancer.
In the case of white males, the probability of surviving past age 75 increased by about 19.5 percentage points, from 56.1% in 1970 to 75.6% in 2000. From row 3 [of table 4 in the paper] we see that, in the absence of cancer progress, this probability would have been between 66% and 73.8% in 2000. Therefore from this vantage point progress in cancer ranges from 2 to 10.6 percentage points and accounts for somewhere between 10% and 55% of the total increase in survival.
They identify bounds on cancer progress for other groups as well. The published paper is gated, here is a 2005 working paper version.
The owners get peak-load pricing and volume discounts:
Like Disney, however, Mr. Achatz and Mr. Kokonas will sell tickets to their Magic Kingdom. Yes, tickets. (That’s a direct quote from the trailer.)
While the ticket sales portion of the web site hasn’t been worked out yet, anyone wishing to eat at Next will pay for the time slot in advance. Prices will be lower for off-peak hours and will also vary depending on the menu, but will run from $45 to $75 for a five- or six-course meal. (Wine and beverage pairings will begin at $25.) Annual subscriptions — seasons tickets — will also be sold.
They also get cost control:
“We now pay three or four reservationists all day long to basically tell people they can’t come to the restaurant,” Mr. Achatz said. “People call and say, ‘I want a reservation for four for next Saturday,’ and we’re like, ‘No, I’m sorry, it’s been booked for three months.’ Most people don’t realize how much of the cost of a meal is the cost of running a restaurant.” He said Next will strip away this and other hidden costs of dining out: “It allows us to give an experience that is actually great value. The guest will actually benefit. That’s the theory.”
I coach my 7-year-old daughter’s soccer team. It’s been a tough Spring season so far: they lost the first three games by 1 goal margins. But this week they won something like 15-1.
I noticed something interesting. In all of the close games the girls were emotionally drained. By the end of the game they didn’t have much energy left. Many of them asked to be rotated out.
But this week nobody asked to be rotated out. In fact this week they had the minimum number of players so each of them played the whole game and still nobody complained of being tired. Obviously they were having fun running up the score but they didn’t get tired.
Incentives are about getting players to want conditions to improve. So incentives necessarily make them less happy about where they are now. Feeling good about winning means feeling bad about not winning. That’s the motivation.
But encouragement is about being happy about where you are now. And it has real effects: it energizes you. You don’t get tired so fast when you are having fun.
There is a clear conflict between incentives and encouragement. At the same time incentives motivate you to win, they discourage you because you are losing. A coach who fails to recognize this is making a big mistake.
And I am not giving a touchy-feely speech about “it’s not whether you win or lose…” I am saying that a cold-hearted coach who only cares about winning should, at the margin, put less weight on incentives to win.
If my daughter’s team loved losing, is it possible they would lose less often? Probably not. But that’s because the love of losing would give them an incentive to lose. They would be discouraged when they win but that would only help them to start losing. (Unless the opposing coach used equally insane incentives.)
Nevertheless, to love winning by 10 goals is a waste of incentive and is therefore a pure cost in terms of its effect on encouragement when the game is close. Think of it this way: you have a fixed budget of encouragement to spread across all states of the game. If you make your team happy about winning by 10 goals, that directly subtracts from their happiness about winning by only 1 goal.
My guess is that, against a typically incentivized opponent, the optimal incentive scheme is pretty flat over a broad range. That range might even include losing by one goal. Because when the team is losing by one goal, the positive attitude of being in the first-best equivalence class will keep them energized through the rest of the game and that’s a huge advantage.
Hertz is making an offer for Dollar-Thrifty. Consolidation of this sort helps all players in the industry by reducing capacity and allowing all firms, including those outside the merger, to raise prices. (I already talked about this in a post about the United-Continental-US Airways merger dance.) There is an incentive then to stay outside the merger and gain from it. There has to be a countervailing force to overcome the positive externality of a merger. In the rental car case, it seems Dollar has access to a leisure-traveller market that Hertz would like to get their hands on. And there is an interesting twist to the merger deal they signed with Dollar. The Avis CEO would like to bid for Dollar (or so he says) and writes to Dollar:
“[W]e are astonished that.. you have compounded these shortcomings by agreeing to aggressive lock-up provisions, such as unlimited recurring matching rights plus an unusually high break-up fee (more than 5.25% of the true transaction value, as described by your own financial advisor), as a deterrent to competing bids that could only serve to increase the value being offered to your shareholders.”
Hertz has built in a nifty-seeming “match the competition” clause into its agreement with Dollar, If other bidders emerge, Hertz gets to match their bids and there is a break-up fee that deters Dollar from accepting another suitor.
There are several strategic effects. If Avis truly wants the Dollar leisure market access, this clause clearly makes it hard for them to acquire it. But it leaves Hertz vulnerable to a spoiling strategy by Avis: Avis can start bidding up the price Hertz pays for Dollar by make high bids for Dollar. Avis won’t win Dollar but will leave Hertz stuck with a big payment.
Spoiling may backfire if its triggers a future price war if Hertz is forced to take a short-run perspective and slash prices to survive . We will see what happens in the next few days.
The New York Post reports that the FTC and the Justice Department are deciding which of those two entities will conduct an inquiry into Apple’s ban on iPhone-iPad development using cross-platform tools such as Adobe’s Flash-to-iPhone.
An inquiry doesn’t necessarily mean action will be taken against Apple, which argues the rule is in place to ensure the quality of the apps it sells to customers. Typically, regulators initiate inquiries to determine whether a full-fledged investigation ought to be launched. If the inquiry escalates to an investigation, the agency handling the matter would issue Apple a subpoena seeking information about the policy.
An inquiry is harmless in theory, often a slippery slope in practice. While there is certainly much to complain about, the general principle of not meddling when the market is still in its fluid infancy is the dominant consideration here. Remember the Microsoft case?
A water pipe to the Greater Boston area has broken. Two million residents have to boil water before they drink it. We were moving apartments so we were a bit slow off the mark. By the time I got to Walgreens this morning, all the water was sold out. Even the San Pellegrino at Whole Foods was gone. The water shortage has all the features of a classic bank run.
Of course everyone needs more bottled water than they usually buy. Who knows when the pipe will be fixed? So, everyone buys extra water for insurance. But then, this increases an individual’s incentive to buy lots of water yet further as there is greater risk of having no water. This is like a classic bank run: the more others’ withdraw money, the more I withdraw money as there may be nothing left for me to withdraw later. Lo and behold bottled water is all gone within hours, just like all the deposits in bank facing a run.
Luckily, there was no beer run. So, I’m safe.
Interesting conference at BU and view from conference room
From The McKinsey Quarterly:
Long before behavioral economics had a name, marketers were using it. “Three for the price of two” offers and extended-payment layaway plans became widespread because they worked—not because marketers had run scientific studies showing that people prefer a supposedly free incentive to an equivalent price discount or that people often behave irrationally when thinking about future consequences. Yet despite marketing’s inadvertent leadership in using principles of behavioral economics, few companies use them in a systematic way. In this article, we highlight four practical techniques that should be part of every marketer’s tool kit.
Among the key points, the one that stands out is “Make a product’s price less painful.” This includes profiting from hyperbolic discounting and exploiting mental accounting. Manipulating default options and harnessing choice-set-dependent preferences also figure prominently.
Evidently marketing will soon supplant finance as the relevant outside option for new Economics PhD’s bargaining over academic salaries.
Like me, ants like dark houses/nests with small entrances. Facing a choice between a dark nest with a large entrance (option A) and a light nest with a small entrance (option B), an ant colony faces a trade-off. Some go this way to A and some go that way to B. Suppose we add a third decoy nest option D. Option D is as dark as A but has an even larger entrance. It is thus dominated by A but not by B. How will the ant colony’s behavior change when they face the three options together versus just A and B?
Rational choice theory says that the fractions choosing A and B should not change. Option D is dominated and should never chosen and hence is an irrelevant alternative. Its presence or absence should not affect the choice between A and B.
One psychological theory suggests that the proportion choosing A should go up. Option D helps to crystallize the advantages of option A (the smaller entrance). This may increase the perception of the advantages of A over B as well leading to a change in the proportion of ants choosing A over B.
So what actually happens?
A controlled experiment by Edwards and Pratt answers this question. Edwards and Pratt built nests with the properties above and made ant colonies make repeated binary and ternary choices. They randomized the order of choices, where the nests were located etc. And because they were experimenting with ants, they could cruelly force the choice of nest upon the ants by destroying the old nest the ants lived in by removing it’s roof.
They find no significant change in the proportions choosing A vs B when the decoy D is present. Ant colonies are rational and do not violate the axiom of independence of irrelevant alternatives (IIA).
In other work, Pratt shows that ant colonies obey transitivity (i.e. if a colony prefers A to B and B to C, it prefers A to C).
Why are ant colonies more rational than individual humans? The authors offer a cool hypothesis: choice between colonies is typically made by sending independent scouts sent to the different options. No scout visits different locations. The scouts reports are simply compared and the best option is chosen. A human being contemplates all the choices by herself and has a harder time comparing the attributes independently leading to a violation of IIA.
An ant colony is like a well performing and coordinated decentralized firm with employees passing information up the hierarchy and efficient decisions coming down from the center Can we import lessons into designing firms? Alas, I believe not. A human scout evaluating a decision/option will not be as impartial an ant scout. He will exagerrate its qualities, hoping his option “wins”. He hopes to get the credit for finding the implemented option, get promoted, receive stock options and retire young to the Bay Area. In other words, career concerns ruin a simple transfer of ant colony principles to firms. If we eliminate career concerns within the firm, we will induce moral hazard as there is no incentive to exert costly effort to find the best decisions for the firm. Ants in the same colony do not face the same issue as they are genetically related and have “common values”.
Still, a thought-provoking paper and it has many references to other papers that it builds on. I am going to read more of them.
(Hat tip to Christophe Chamley for the reference)
Via Barker, a pointer to a theory from evolutionary psychology that tears are a true signal that the person crying is vulnerable and in need.
Emotional tears are more likely, however, to function as handicaps. By blurring vision, they handicap aggressive or defensive actions, and may function as reliable signals of appeasement, need or attachment.
Usually you should be skeptical that signaling is evolutionarily stable. For example if tears convince another that you are defenseless then there is an evolutionary incentive to manipulate the signal. Convince someone you are defenseless and then take advantage of them.
A typical exception is when the signal is primarily directed toward a family member. Family members have common interests because they share genes. Less incentive to manipulate the signal means that the signal has a better chance of being stable. And babies of course have few other ways of communicating needs.
Of course children eventually do start manipulating the signal. They learn before their parents do that they are becoming self-sufficient but they still have an incentive to free-ride on the parents’ care. Fake tears appear. But this is a temporary phase until the parents figure it out. Not surprisingly, once the child reaches adulthood, crying mostly stops: Nature takes away a still-costly but now-useless signal.
What is the point of a big speech outlining your intentions when everybody already knows that when push comes to shove you are just going to do what’s in your interest? Usually such a speech is all about the reasons for your stated intentions. If you can change people’s minds about the facts then you can change their minds about your intentions.
But the public facts are already that, public. There’s no changing minds about those. At best you can change minds about how you perceive the public facts or about facts that only you know. But here we are in the realm of private, unverifiable information and any speech about that is pure cheap talk. You will invent facts to support whatever intentions you would like people to believe.
Except for two wrinkles.
Together these imply that cheap talk always reveals information. It reveals that the story you are telling is one of the few coherent stories you could think of. And if that story is complicated enough it becomes more and more likely that this is the only story that complicated that a) is coherent and b) you could think of. Since the truth always satisfies a) and b), this makes it ever more likely that what you are saying is the truth.
This is why when we want to change minds we make elaborate speeches full of detail. It convinces the listener that we are telling the truth. And this is why when we want to be inscrutable the listener will pepper us with questions in order to require so much detail that only the truth will work.
About twice a year the Chicago “classic rock” station does something strange. Instead of its regular programming sequence, it sets aside about a week to play through all the greatest songs in alphabetical order. And this is advertised as a big event, a restoration of order out of chaos that the audience has apparently been desperate for since the last time they did it. They are at it again this week and in between “Boys of Summer” and “Brain Damage/Eclipse” I started to wonder why this was thought to be a good marketing strategy.
If it is any one of the demand-side explanations (like 2 and 5) there is a residual puzzle. Presumably listeners have some given satiation point for classic rock and this trick is just getting them to inter-temporally substitute their listening. They listen more now, less later. Why is that good for the station?
I think the answer has to do with the convex value of advertising. Advertisers’ willingness to pay increases more than proportionally with the size of the audience. This is due to “bandwagon” and “water cooler” effects. (Michael Chwe has a paper about this.) With that in mind the station would prefer everyone listen this week and nobody listen next week rather than half and half.
You can see the whole list (up to now) here.
Threeway merger that is. Or more accurately, how does a two firm merger depend on the possibility that one of the firms can merge with a third if their deal falls through?
This is the key issue in the potential United-Continental merger. The deal has stalled because they cannot agree on the price. Things were going well just after Continental learned that United was in merger talks with U.S. Airways. Talks between United and U.S. Airways have collapsed because United started talking to Continental. And as the United-U.S. Airways talks have collapsed, so have the Continental-United talks.
A man who has many girlfriends must find it hard to keep all their names straight. I have a similar issue with this threeway merger post. Back to the economics which I am also having a hard time keeping straight but here goes.
If two firms merge, the third firm standing outside gains:
The merged firms cut capacity and raise prices. This is the main incentive to merge in the first place. In the airline industry with its overcapacity and low profits, consolidation and merger is a key strategy to regain profitability. No wonder these firms flirt with each other periodically. But if the merged firms consolidate, everyone else in the industry gains as prices go up. The firms in merger talks do not take this positive externality into account in their flirtation. They merge less than is ideal from the perspective of industry profitability. They date but don’t commit and the industry stays too large and unprofitable.
This analysis is consistent with the U.S. Airways strategy. In a letter to employees, the C.E.O. says:
Whether we participate in a merger or not, consolidation will create a more efficient domestic industry that can better withstand economic volatility, global competition and the cyclical nature of our industry as a whole. As I have said many times, it is not necessary for us to be direct participants in a merger because the entire industry benefits when consolidation occurs.
But the same logic should apply to Continental: if the other two firms merge, Continental gains. So, why did they go back to the negotiating table when they learned the other two firms were in merger talks? There has to be some negative externality to Continental caused by a United-U.S. Airways merger. Continental and United coördinate heavily even now – they are both in the Star Alliance, their flights link up etc. (I just flew to Newark on some joint Continental-United flight). Antitrust authorities are going to take another look at the Continental-United relationship if the merger with U.S. Airways goes through. A U.S. Airways merger can cause the Continental-United marriage to collapse. So Continental has the incentive to work even harder at the marriage.
But of this was true before, it is still true now: if Continental and United can’t agree on a price, United can always go back to U.S. Airways. This should lend some urgency to the merger talks. To make a United-Continental merger more likely, the U.S. Airways C.E.O. should go back to talks with United. The arrival of the ex-girlfriend can make the new girlfriend nervous and willing to commit.
Here’s an interesting experiment I would like to see. Look at adults who learned a second language as a child from one of their parents. For example, the father speaks only English but the mother speaks English and Hungarian. English is the standard language outside of the home.
Profile the personalities of the parents. Now have a Hungarian speaker interview the subject and profile his personality and separately have an English speaker profile the subject’s personality. Is the subject’s personality different in the two languages and is he more like his mother when speaking Hungarian?
Round the corner from where we live right now but as we are closer to Anna’s Taqueria we never ventured the extra couple of blocks. When we decided Anna’s offerings were limited and greasy, we did eventually go in to Dorado.
It was great and very reasonable. The cemitas are particularly good. Burger style bread with a black bean paste, chipotle salsa, guacamole and you filling of choice – I’m partial to the spicy mushrooms. All for $6. The yucca chips are great. You can ask for the super-hot sauce if you dare. Other things we like: the steak cemita, the quesadilla and shrimp taco. Get the frequent buyer card as you’ll be going twice a week if you live nearby.
1. Market Design meets the N.F.L. draft.
2. Gaming the credit rating agencies.
From Barking Up The Wrong Tree:
What determines reciprocity in employment relations? We conducted a controlled field experiment and tested the extent to which cash and non-monetary gifts affect workers’ productivity. Our main finding is that the nature of the gift, not its monetary value, determines the prevalence of reciprocal reactions. A gift in-kind results in a signicant and substantial increase in workers’ productivity. An equivalent cash gift, on the other hand, is largely ineffective or even though an additional experiment showed that workers would strongly favor the gift’s cash equivalent.
It probably has nothing to do with reciprocity. If I pay you money you have to share it with your family and then buy a car out of your share. If I give you a car it is all yours.
This logic also often provides a psychology-free explanation of the endowment effect. You are willing to pay at most $10,000 for a car. But if I give you that car for free and offer to buy it back from you, you require $20,000, because you will get to keep only half of that money.
(inspired by discussions with my Behavioral Economics class.)
Update: See Ben’s comment below for another variation on the theme which also came up in class. If you have present-biased preferences you have an endowment effect because cash will be shared with future selves, whereas instantaneous consumption is all for your present self.
Tyler (you can call him T, you can call him C, you can call him TC, you can call him Professor TC, you can call him Dr. Ty, you can call him Ty Cow, you can call him Tyce, you can call him T-Dice, you can call him Dr. T Dice Disco Dorang…) asks how California might redesign its constitution.
The underlying problem here is that California is simply a beautiful place to live. It’s not just the climate, or the people, or the geography. It’s that something floating around in the air that just makes you happy all the time you are there. And then the second problem is that there is free entry.
So it really doesn’t matter what you do with the constitution. You can fix the referendum system, you could change the budget process, you could turn the government into Singapore. But that only means that something else has to get hosed to bring the quality of life again back down to the level that maintains the zero-rent equilibrium condition with free entry.
Given that the question boils down to which part of California do you want to screw up in order to achieve that? This is mostly a distributional question. Bad state government saps rents in one way. Give those back and bad local governments will do just fine to take up the slack.
Of course all that is really required for equilibrium is that the quality of life of the marginal resident (or resident-to-be) is sufficiently low. This is completely consistent with high average quality of life but its not clear to me why a well-functioning government would be better at achieving such a distribution than the one they’ve got now. That is, who but the marginal resident is more affected by high taxes and dysfunctional government?
(The cheapest way to target the marginal resident is to make it infinitely costly to enter. But that gives huge rents to those lucky enough to live there already and the temptation to take those away would be too great for any government.)
I loved Mark Bittman’s no-knead bread recipe. The inventor is New York breadmaker Jim Lahey. Lahey reviews the new Domino’s Pizza.
People have analyzed strategic thinking long before the academic field of game theory started in the 1950s. I argue that Jane Austen’s six novels, among the most widely beloved in the English language, can be understood as a systematic analysis of strategic thinking. Austen’s novels do not simply provide interesting “case material” for the game theorist to analyze, but are themselves very ambitious and wide-ranging theoretically, providing insights not yet superseded by modern social science.
That is the abstract of a talk that Michael Chwe will give at UCLA on April 23. Unfortunately for those of us who can’t attend, there doesn’t seem to be a paper available. But Michael Chwe is an extremely creative and broad-minded theorist so you can bet that it’s going to be good. And if we can’t read his thoughts on Jane Austen, there’s always Michael’s paper “Why Were the Workers Whipped? Pain in a Principal-Agent Model.”
You are an ambitious, young Presidential-wannabe. This makes you a trifle immodest and you decide to write an autobiography, Volume 1. It’s going to set the stage for your Presidential bid. Some may say you have yet to do anything so said volume may not sell too well, even though you have an exotic cocktail of a family background and were President of Harvard Law Review. They may be right so you are not willing to pay a lump sum fee to employ an agent to sell your manuscript: not only might your book not work out, you would be stuck with a bill from an agent to add to your law school debts.
Luckily for you, pretty much every guy who writes a book is in the same position as you: immodest enough to write a book and yet knowing that it might not sell. So, there is a standard contract that is signed with a book agent: they work for you to get you a contract and if the book actually sells they get 15%. This way you share the risk: if the book fails, at least you do not also lose the amount you paid the agent; in return, if it succeeds, you do not get to keep all the benefits. The 15% contract gives you a form of insurance. Plus, it gives the agent the incentive to work hard, helping to alleviate the moral hazard problem.
Miracle of miracles, the book does actually sell eventually. It lies ignored but you become kind of famous anyway and then people buy it. Now you’re ready for Volume 2. Is the old book agent contract still the best option for you?
Well, Volume 2 is almost certainly going to fly off the shelves. You do not need to share the risk. All you care about is the getting the best price and you don’t need protection in case of failure as it ain’t going to fail. Best just to go with a great negotiator. In fact, a well-connected Washington lawyer might be just the thing. You just pay him upfront and he calls his contacts. And he’s done it before. It’s expensive if your book fails and you don’t get the rest of your advance or even have to give back the chunk they gave you. But Volume 2 is your road to the Presidency, Volume 1 was just laying the foundation. Everyone will read it as you’re intriguing and you’ll get to keep your advance and even get royalties. Now, you can afford to be President as your law school debts are paid and you can even send your kids to a spiffy private school.
I am starting a new club. Charter membership is hereby bestowed upon everyone who would never be in a club that would have them as a member. You may quit for $100.
(By the way, I asked around nobody wants you in the club consisting of the complement of my club.)
Agatha Christie didn’t decide who did it until most of the story was already written.
I always assumed she just knew who did it, in the same way that, well, a murderer knows exactly who they want to kill. Certainly, at the end of her books, she always made you feel that the story couldn’t have happened any other way. It had only ever seemed otherwise because you couldn’t see it. But it turns out that for many of her books, Christie often ran through multiple scenarios for the victim, the method of death, and the identity of the murderer. Curran finds that even the denouement of Endless Night, in which you innocently follow the narrator until you find in the last few pages that he is the murderer, was one of the later parts of the plot to be sorted out.
Isn’t that the easiest way to do it? Just like multiplying numbers is easier than factoring, it would be simpler to take some facts as given and thread a murder plot through them than to start with the plot and think up facts that fit. After all it is supposed to be a surprise in the end. Writing the facts before you know the mystery ensures you don’t give away the surprise. via kottke.
Is solving a coordination problem part of libertarian paternalism?
In a complicated undertaking, the FDA would analyze the salt in spaghetti sauces, breads and thousands of other products that make up the $600 billion food and beverage market, sources said. Working with food manufacturers, the government would set limits for salt in these categories, designed to gradually ratchet down sodium consumption. The changes would be calibrated so that consumers barely notice the modification.
Here is the link. I guess this is the theory: if all foods have less salt then our taste buds adjust. (This seems true anecdotally. Is it really?) So there is at least some small coordinated reduction in salt that would make everyone better off. But this only works if you prevent unraveling at the individual level. I.e. ban salt shakers.
Trilby trill: Doktor Frank.
She, like many artists, doesn’t want to raise the price of her concert tickets even though there is excess demand. By keeping the price low she allows fans who could not afford the market clearing price to see her concerts. She is effectively paying to allow them to enjoy her shows. Does this make her an altruist?
A textbook argument against, but one that is wrong, is the following. At the low price there is a market for ticket scalpers. Ticket scalpers will raise the price to the market-clearing level. Those fans who would sell their tickets to scalpers reveal that they prefer the money to the tickets. And they get the money in exchange for the tickets. Likewise those that buy tickets from scalpers reveal that they value the tickets more than the money. So the secondary market makes everyone better off. So if Miley Cyrus were truly an altruist she would allow this to happen rather than paying a price to prevent it.
The problem with the argument is that it works only because the ticket scalper was unanticipated. If all parties knew that tickets would sell at the market clearing price then the “true fans” that Miley is targeting would never actually get a ticket in the first place and this would make them worse off. They would never get a ticket either because they couldn’t afford it, or if they were originally allocated by lottery, the additional rents would attract more entrants to that lottery.
So we can’t argue that Miley is not an altruist. But we can argue that Miley’s refusal to raise prices is perfectly consistent with profit maximization. Here is a model. A fan’s willingness to pay to see Miley Cyrus in concert is a function of who else is there. It’s more fun if she is singing to screaming pre-teen girls because they add to the experience. It’s no fun if she is singing to a bunch of rich parents and their kids who don’t know how to cut loose.
With this model, no matter how much Miley would like to raise the price to take advantage of excess demand, she cannot. Because the price acts as a screening instrument. Higher prices select a less-desirable composition of the audience, lowering willingness to pay. The profit maximizing price is the maximum she can charge before this selection effect starts to reduce demand. At that price and everywhere below there is excess demand.
This is related to a paper by Simon Board on monopolistic pricing with peer effects.
Cheap Talk 