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  1. Facebook’s business problem is that it is the social network of people you see in real life.  All the really interesting stuff you want to do and say on the internet is stuff you’d rather not share with those people or even let them know you are doing/saying.
  2. What is the rationale for offsides in soccer that doesn’t also apply to basketball?
  3. If the editors of all the journals were somehow agreeing to publish each others’ papers what patterns would we look for in the data to detect that?
  4. I need to know in advance the topic of the next 3 Gerzensee conferences so that I can start now writing papers on those topics in hopes of getting invited.

Presh Talwalker tells us about this study of parking strategies:

They observed two distinct strategies: “cycling” and “pick a row, closest space.” They compared the results. “What was interesting,” [Professor Andrew Velkey found], “was although the individual cycling were spending more time driving looking for a parking space, on average they were no closer to the door, time-wise or distance-wise, than people using ‘pick a row, closest space.’”

And commenters are inferring that hunting for the best spot is a sub-optimal strategy.  But those that are searching for the best parking spot are not interested in reducing their expected parking time, rather they care about the second moment.  When we have an appointment there is a deadline effect:  our payoff drops precipitously if we arrive past the deadline.  Faced with such a payoff function we are typically wiling to increase our expected parking time if in return we can at least increase the probability of getting lucky with a really good spot.  “Pick a row, closest space” guarantees we will be a bit late.  “Cycling” may increase the average searching time but at least gives us a chance of being on time.

Why does it seem like the other queue is more often moving faster than yours?  Here’s MindHacks:

So here we have a mechanism which might explain my queuing woes. The other lanes or queues moving faster is one salient event, and my intuition wrongly associates it with the most salient thing in my environment – me. What, after all, is more important to my world than me. Which brings me back to the universe-victim theory. When my lane is moving along I’m focusing on where I’m going, ignoring the traffic I’m overtaking. When my lane is stuck I’m thinking about me and my hard luck, looking at the other lane. No wonder the association between me and being overtaken sticks in memory more.

Which is one theory.  But how about this theory:  because it is in fact more often moving faster than yours.  It’s true by definition because out of the total time in your life you spent in queues, the time spent in the slow queues is necessarily longer than the time spent in the fast queues.

I just had one of my worst travel experiences. On United.

I was flying with my two kids and we got to O’Hare at 9 am in plenty of time for our 10.30 am flight to Seattle. The plane was delayed for one hour initially but then, after the airplane arrived, it turned out there was some malfunction so we had to wait for another plane. That one was due to leave at 2 pm.

My kids are pretty good but they were getting a bit restless so I decided to let them pick a treat for every delay. They opted to have lunch at Wolfgang Puck’s in the other of the two United terminals. They got to veto Frontera Fresca. So far so good.

The next bit of news – easy to forecast – further delay till 2.25. Peanut M&Ms. But then things got interesting. The pilots on the incoming flight had timed out given the additional 25 minute delay and we had to wait for new pilots to turn up. Ice cream for the kids. But no-one was insuring me so I was getting more and more pissed off. This pilot time out was news to me but surely eminently foreseeable for United? We left at 4.30 pm. Kids were on a sugar high and I was on a United low.

Spouse A (henceforth “she”, the driver) prefers the air inside the vehicle to be a little warmer than the preferred temperature of Spouse B (“he”, the navigator, not because he is a worse driver –quite the contrary– but because he is an even better passenger.) In their regular confrontation with this dilemma they are seemingly blessed with the optional dual-zone climate control in their decked out Volvo SUV.

And indeed there is an equilibrium of the dual climate-zone game in which each spouse enjoys his/her temperature bliss point. This equilibrium is unfortunately highly unstable. Because of the exchange of heat across the thermal gradient the only way each can maintain the constant target temperature is to adjust their controllers so that the air blown out their respective vents deviates slightly from that target further in the direction of the extreme. Hers must be set somewhat warmer and his somewhat cooler.

Now from that starting point, the slightest perturbation upsets the delicate balance and can set off a dangerous chain reaction. Consider for example what happens when, due to random alterations in air flow she begins to feel a bit on the cool side of her comfort zone. Her response is to adjust her controller one peg toward the red. This restores her comfort level but very soon as a result he will begin to feel the discomfort of unexpectedly hot and dry air blowing into his zone and he will react by moving his controller one peg toward the blue.

This is not likely to end well.

I miss you like this title misses the point

And I have been to many very good Chinese restaurants in China, Taiwan, Singapore etc.  This place is called Peter Chang’s China Grill.  Here’s Wikipedia about the chef.  Here are the badly misguided Yelp reviews.  Note that from the look of the restaurant, the location, the service you would never guess what was in store for you.  Indeed I was terrified when the folks at UVA told me we were driving off campus to go have Chinese for lunch, even moreso when I saw the place they were taking me to.  But the food was a revelation.  You probably do need to know what and how to order.  For that I suggest getting invited to give a talk at the University of Virginia Economics department.

It’s called Coffee Places Where You Can Think, and its right there.  A word of caution though.  Ariel is a connoisseur of coffee houses but his preferences are guided mostly by the atmosphere of the place and not at all by the quality of the coffee.  Indeed his bad taste in coffee rivals only his bad taste in web site designs. So use this guide accordingly.  (Here is a series of pictures of Ariel’s tin can of instant coffee traveling to exotic locales across the world.)

But the picture above is from The Mudhouse in Charlottesville, Virginia which is a place I can also highly recommend, having been there and had an exquisite cappuccino just last month with Federico Ciliberto.

The clocks in Grand Central are off by 1 minute:

But Grand Central, for years now, has relied on a system meant to mitigate, if not prevent, all the crazy. It is this: The times displayed on Grand Central’s departure boards are wrong — by a full minute. This is permanent. It is also purposeful.

The idea is that passengers rushing to catch trains they’re about to miss can actually be dangerous — to themselves, and to each other. So conductors will pull out of the station exactly one minute after their trains’ posted departure times. That minute of extra time won’t be enough to disconcert passengers too much when they compare it to their own watches or smartphones … but it is enough, the thinking goes, to buy late-running train-catchers just that liiiiiitle bit of extra time that will make them calm down a bit. Fast clocks make for slower passengers. “Instead of yelling for customers to hurry up,” the Epoch Times notes, “the conductors instead tell everyone to slow down.”

Not everyone is going to equilibrate, just the regulars.  But that’s exactly what you want.  If you set the clock right then everyone is rushing to the train just when its departing.  If you set the clock 1 minute off and everyone equilibrates then still everyone rushes to the train when its departing.

The system works because some of the people adjust to the clock and others don’t.  So the rush is spread over two minutes rather than one.


Here’s a thought I had over a lunch of Mee Goreng and Rojak.  As the cost of transportation declines there is a non-monotonic effect on migration.  Decreasing transportation costs make it cheaper to visit and discover new places.  But for small cost reductions it is still too costly to visit frequently.  So if you find a place you like you must migrate there.

For large declines in transportation costs, it becomes cheap to frequently visit the places that you like and you would otherwise want to migrate to.  So migration declines.

The same non-monotonic effect can be seen as a function of distance.  For any given decline in transportation costs migration to far away destinations increases but migration to nearer destinations declines.

For the vapor mill it means that over time between any two locations you should first see migration increase then decrease.  And the switching point from increase to decrease should come later for locations farther apart.

By the way if you would like to see more pictures of delicious food in Singapore you can follow my photo stream.  But beware it might make you want to migrate.

Mee Goreng

From the blog (?)

The average New York City taxi cab driver makes $90,747 in revenue per year. There are roughly 13,267 cabs in the city. In 2007, NYC forced cab drivers to begin taking credit cards, which involved installing a touch screen system for payment.

During payment, the user is presented with three default buttons for tipping: 20%, 25%, and 30%. When cabs were cash only, the average tip was roughly 10%. After the introduction of this system, the tip percentage jumped to 22%.

He calculates that the tip nudge increased cab revenues by $144,146,165 per year.

There is a pattern to how people arrange themselves in elevators depending on the number of other passengers. (via The Morning News.)

If someone else comes in, we may have to move. And here, it has been observed that lift-travellers unthinkingly go through a set pattern of movements, as predetermined as a square dance.

On your own, you can do whatever you want – it’s your own little box.

If there are two of you, you take different corners. Standing diagonally across from each other creates the greatest distance.

When a third person enters, you will unconsciously form a triangle (breaking the analogy that some have made with dots on a dice). And when there is a fourth person it’s a square, with someone in every corner. A fifth person is probably going to have to stand in the middle.

I liked the part where it is explained why we are socially awkward in elevators.

“You don’t have enough space,” says Professor Babette Renneberg, a clinical psychologist at the Free University of Berlin.

  1. A pescatarian?
  2. Its the Game Theory Society World Congress, I am presenting this new paper on Tuesday.

Microsoft Research will open a lab in New York City.

The research community is highly connected, so we’re well aware of and have long admired the incredible work being done by the researchers we are welcoming to Microsoft Research, including thought leaders such as Duncan Watts, David Pennock, and John Langford. But as we in Microsoft Research connected with them to begin a meaningful dialogue about their plans and aspirations, we began to fully appreciate not only their individual talents and expertise, but also their uncanny ability to work together with unrivaled energy and passion. The conversations left me and other Microsoft Research researchers inspired to expand our East Coast presence. I’m thrilled to share that David Pennock will take the reins as MSR-NYC’s assistant managing director, overseeing the day-to-day operations at the NYC facility.

I’m excited as well for the collaboration opportunities between the research interests of this phenomenally talented team in NYC and the work being done by my team in the New England lab around social media, empirical economics, and machine learning. The approaches of the two labs to social science and economics research are distinct but highly complementary, and, indeed, we expect that the whole will be much greater than the sum of its parts.

I spent a week last fall at MSR Cambridge and it was one of the most pleasant and productive weeks I have had in a long time.  If they can recreate the same environment in Manhattan it would be an incredibly attractive place for visitors and full-time scholars.  Here’s more.

For a much-needed Spring Break holiday, we faced the Naples FL vs “somewhere exotic yet family friendly” trip dilemma. I was firmly in the Naples FL camp but was outvoted so we ended up in Andalucia. Here are my tips for a trip with young kids.

First, do not fly Iberia across the Atlantic. They are on strike a lot of the time. Our flight out got cancelled because of a strike and we have (so far!) narrowly escaped a cancellation of our return trip. For local trips, you are stuck with Iberia or Spanish trains which can also go on strike (or you can drive).

Since we actually got here, things have gone pretty smoothly.


If you are driving in, you can avoid the city by using the ring road and access the Alhambra parking lots and deposit yourself there. You can walk down via the pedestrian walkway just outside the Alhambra walls. This walk is wonderful in itself.

Book ahead for the Alhambra and get your tickets from the machines near the entrance hall. Tickets sell out quickly each morning and people start lining up at 6 am if they forget to book ahead. I can’t do justice to the Alhambra in this brief post but can confirm that there is enough interest to satisfy young boys – the castle watchtowers are fun, all the water canals that feed the gardens are fascinating and this is enough to sustain them on the walk through the Nasrid Palace. BTW, you have to arrive at the Palace at the specific time on your ticket.

The main other activity I enjoyed was the walk up the Albayzin hill, the old Moorish quarter. You are transported to an earlier time and you traipse up winding, narrow streets up the hill to the Mirador de San Nicholas for a spectacular view of the Alhambra

We did not have a good meal. The recommended place in the guidebooks is Bodegas Castenada. We had a passable meal and had to send the bill back when we noticed that it had many items added on. We loved the gelato at Los Italianos near the cathedral.

Our trip was shortened by the cancellation of our flight so we actually ended up not staying in Granada but in the countryside at El Amparo, a kind of B&B run by a British couple, Jeff and Sally Webb. It was extremely good value and we got a two bedroom. There were many other families staying. We all loved it even thought he swimming pool was not open as the weather was pretty cold. It is a bit isolated so you can’t just pop out to pick up provisions. But Jeff was great. He is a great cook and is happy to lay on toasted sandwiches for those with tapas ennui. El Amparo is a ten minute drive to Alhama de Granada which has many nice restaurants and is spectacularly located on a gorge. We had several short hikes including ones to a Roman bridge and Moorish dungeons.


The main attraction is the Mezquita, the former church, then Moorish mosque, now Christian Cathedral. The majority of the interior is made up of symmetrical arches designed to resemble date trees. These are simple and starkly beautiful. In one corner, the mihrab has ornate designs but non-traditionally does not point directly towards Mecca. And yet the decorations are appropriate and do not go over the top into kitsch. It is easy to imagine the devotion the architecture might have inspired. The cathedral is plonked right in the middle and could not be more different in style. No communication between religions.

The Jewish quarter is right outside the Mezquita. We mainly encountered the tourist shops before kid tiredness drove us home.


A real city. And we arrived here in Easter Week, Semana Santa. Each church has its own procession, many in the middle of the night. We woke many times. Navigating the town was hard with processions and crowds preventing any easy route from A to B from ever being fully completed. On Easter Sunday we latched onto a procession. The drummers announced the arrival of the main float. Cloaked and hatted devotees tossed candies to kids. A band followed the float. At many points we stopped so the men carrying the float could be swapped out. Their fervor and effort signaled the strength of their belief.

The Moorish Alcazar took us back to the pre-Christian era. I must admit to the notion that I actually prefer it to the Alhambra. Less hectic, the palace being equally beautiful and the gardens magnificent. Or it could be that we had good weather in Seville finally and it rained while were in the Alhambra. Try out the simple maze and play hide and seek in the peacock-filled gardens.

We finally had a meal without fried calamari, patatas bravas or tortilla. Pacador near the Alameda de Hercules displayed a level of sophistication we had not encountered so far on our trip, at least at the tapas level. As usual, they padded the bill but we noticed despite the vino tinto we had imbibed.

Now we have a kid with the flu so we are just resting in our overpriced and under-maintained apartment. We will skip the cathedral.

I have loved the trip and we could easily spend another week in Andalucia and enjoy it more. But in Naples FL I know where the CVS is when I need ibuprofen for kids.

Hotels provide you with two different media with which to cleanse your corpus after a long day of giving talks and going for coffees:  plain old soap and then a substance packaged under various labels whose modal variant is something like bath and body gel.

The soap is delivered in the form of a solid bar and the bath and body gel is poured out of a plastic vessel like the shampoo that it’s usually paired with. Now I generally prefer to shower with a liquid detergent, (Lever 2000 is my go-to solvent, it’s hard to resist the industrial counterpoint to the traditional fay branding and the pitch on the squeeze bottle is “for all your 2000 parts.”  My lifelong project is to count my 2000 parts one shower at a time) but I never reach for the shower gel in a hotel.

The reason ultimately stems from the fact that there are two choices available to begin with, but lets work backward to that.  The proximate reason is that shower gel makes me smell like a geisha at a tropical fruit stand.  Not that I have any objection to that smell, indeed it’s exactly how I would like a geisha to smell, especially when I am in the mood for a refreshing snack. It’s just not a smell that I personally wear very well.  On the other hand, you can usually count on hotel soap to smell like soap or at least something more manly than the bath gel.

Liquid/gelatinous soap doesn’t have to smell girly, viz. Lever 2000, but in hotels it always does. What gives? As usual when pondering the deepest puzzles of lavatory accoutrements, the answer can be found in the theory of labor market discrimination.  The little bottle of shower gel is like a job market applicant.  It is sitting there asking you to try it out on your body.  And indeed you will only really discover its cleansing qualities when you are fully awash in its lather. Whether you want to take that risk depends on how you expect it to smell, not on how it actually smells. This is just the theory of statistical discrimination where the true quality of a worker matters less at the hiring stage than what the potential employer expects based on her demographic characteristics.

Once we arrive at an equilibrium in which everyone knows that the shower gel is for her and the soap is for him, everyone who opts for the gel is expecting a girly fragrance.  Just as in the theory of statistical discrimination this feeds back to the initial investment decision of the applicant, in this case the decision of how to scent the product.  There’s no choice now but to make it as attractive as possible for the sub-market appearances have restricted it to.  Thus the girly scent, and thus the expectations are confirmed.

The population of Singapore is 85% Chinese and they have a Chinatown. That’s like putting a Honkytown in Cincinnati.

(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.

He seems to have mixed feelings:

There are three lanes, with the left two lanes narrowing into one.  A slight bit further ahead, the traffic from Gallows Road merges into the right lane, map here.

Many people from the far left lane merge “unethically,” driving ahead as far as they can, and then asking to be let in at the near-front of the queue.  The traffic from Gallows Road, coming on the right, merges ethically, as it is a simple feed of two lanes nto one.  They have no choice as to when the merge is, although de facto the construction of the intersection puts many of them ahead of the Rt.50 drivers.

The left lane merge is slightly quicker than the right lane merge, in part because not everyone is an unethical merger.  Yet it is more irksome to drive in the left lane, because you feel, correctly, that people are taking advantage of you (unless you are an unethical merger yourself, which I am not).

In recent times, I have switched my choice to the right lane.

I will be there Feb 13-14, and I need to book a hotel. Never been there before. Here is a list of hotels to choose from along the Orange Metro Line,  I care more about the neighborhood (walking/hanging/restaurant scene, breakfast joint) than the hotel. Any suggestions?

Someone you know is making a scene on a plane. They don’t see you. Yet.  As of now they think they are making a scene only in front of total strangers who they will never see again.  It might be awkward if they knew you were a witness.  Should you avert your eyes in hopes they won’t see you seeing them?

If they are really making a scene it is highly unlikely that you didn’t notice. So if eventually he does see you and sees that you are looking the other way he is still going to know that you saw him. So in fact it’s not really possible to pretend.

Moreover if he sees that you were trying to pretend then he will infer that you think that he was behaving inappropriately and that is why you averted your eyes. Given that he’s going to know you saw him you’d rather him think that you think that he was in fact in the right.  Then there will be no awkwardness afterward.

However, there is the flip side to consider.  If you do make eye contact there will be higher order knowledge that you saw him. How he feels about that depends on whether he thinks his behavior is inappropriate.  If he does then he’s going to assume you do too.  Once you realize you can’t avoid leaving the impression that you knew he was behaving inappropriately, and the unavoidable mutual knowledge of that fact, the best you can do is avoid the higher-order knowledge by looking the other way.

So it all boils down to a simple rule of thumb: If you think that he knows he is behaving inappropriately then you should look away. You are going to create discomfort either way, but less if you minimize the higher-orders of knowledge. But if you think that he thinks that in fact he has good reason to be making a scene then, even if you know better and see that he is actually way out of line, you must make eye contact to avoid him inferring that you are being judgmental.

Unless you can’t fake it.  But whatever you do, don’t blog about it.

During my recent unexpected visit to New York I tried to make the best of things and hit up a legendary pizza place in Brooklyn, di Fara Pizza.  It’s a real hike from midtown Manhattan but I had an afternoon to kill.  I was hoping it was going to brighten up an otherwise gloomy day, but guess what?

Damn you Health Inspectors!

So to make it up to myself I headed back to Manhattan for my go-to Napolitano Pizza, La Pizza Fresca in the Flatiron district.  A second tragedy.  The pizza guy there was a master, and now he has gone.  I didn’t find this out until the pizza was before me but it was obvious immediately.  Same oven, same ingredients, different pizza guy; amazing the difference between superior pizza and just average.  Here’s your picture of the not-, and won’t-be-empty plate:

It’s for those days when you are supposed to be flying to Milan to give a talk, and you are connecting and when you are checking in to your connecting flight and you pull out your passport thinking wistfully about how much you love your wife for thoughtfully packing your passport for you and just generally breathing in the beautiful life you have to be able to take a little time away to fly to Milan, meet people, give a talk, do a little work on your laptop which is tucked away in your suitcase because you are getting on a redeye and you plan to sleep on the plane, you’ll get that work done while you are in your hotel in Milan, or maybe you won’t because you might just stroll the city and enjoy a little solitude, putting out of your mind the hundreds of job market letters of recommendation that you have to submit online to hundreds of distinct websites each with their own password amounting to about 3 hours of work just logging in, figuring out what to click, copying and pasting passwords, etc and also taking the opportunity to just let your mind wander and think abiut whatever, sorry hordes of coauthors whom I have left in the lurch I know I am already a maddeningly irresponsible partner but please permit me a couple more days after all I am in Europe and for all you know I don’t have Internet access or I am scheduled to be meeting with people all day long and wouldn’t have time to correct thirty pages of typos or rewrite the introduction for the third time because after being rejected at journals 1 and 2 we better write it in the way that journal 3’s referees are going to like; and anyway I need a little escape to get over the sting of those rejections and this time to myself in a faraway European city is just what the doctor ordered and that brings an extra smile to my face as I open up my passport to show to the friendly TSA agent and that smile and it’s associated feeling of intoxication explains why it’s the TSA agent who is the first to notice that the picture on the passport is of my lovely wife and not me.

And my passport is back home in chicago, and I am not getting on this plane and I am not going to Milan today and the only time I am going to be having by myself is stuck in this airport trying to figure out how I am going to get that passport to me from Chicago and all the while fighting back the relentless thoughts of what a ridiculous life I am living, flying to Europe for two days just to give a pointless talk wasting all this time while my students still don’t have their application letters uploaded and all those papers need to be revised and I am sure my coauthors think I am a useless primadonna, and after these recent rejections I know I will never have a top 5 publication again and I won’t even be getting any work done because my laptop is soon going to fly without me to Milan,

It’s for those days, you know those days, it’s for those days that you are so thankful that your connection was through Newark airport and Manhattan Penn Station is a 30 minute train ride away, and you have that favorite little hotel on midtown which has a room for $129 and so what you don’t have any clothes and you will have to buy a toothbrush for what like $30 at a pharmacy in the middle of manhattan but to make up for all of that when you wake up in the morning you will get your stroll and ok it’s smelly New York but look Milan was going to be smelly too you were just fantasizing that stroll anyway and 1 block into that stroll you stumble onto Cafe M, a tiny cafe’/bakery on 32nd and 5th avenue where the coffee is lovingly made one at a time the croissants are the best you have ever had, certainly in the US and arguably rivaling even Paris, beautiful oneofakind people come in and out as you sit each with their own unique beautiful lives and you can sit and enjoy that coffee and croissant and listen in on their lives as they pass through 5 minutes at a time and what better life can one person have than to sample the uncanny diversity of life and where else can you get such a sample as in New York City.

(blogged from my phone)

You went early to the Tower of London hoping to avoid the long line to gawk at the Crown Jewels. Many tour buses were on the same schedule. You went to the Science Museum on a Tuesday to avoid the weekend hordes.  What you found were the weekday hordes of uniformed primary school children, pressing all the buttons on the interactive exhibits and leaving a trail of British germs for you to pick up.  Anal, misanthropic, germaphobe though you are, of course you forgot the hand sanitizer.

Under family pressure, you decide to go on a ride on the London Eye.  The lines are going to be horrible. You go to their website and are pleasantly surprised.  They must be private or have a non-London eye firmly trained on profit-maximization because they have come up with a price discrimination scheme exactly for last-minute-planning, people-hating, elitist b’stards like you. You have the option of Flexi Fast Track.  You can turn up anytime and swan to the front of the queue!

The Science Museum is free (wow!) and publicly owned so they can’t pull a stunt like this (but why not Science Museum, you really should, you need the money!).  The Queen is already so elitist that any further sign that there is a class system would cause a huge backlash.  So, there is no two-track procedure for seeing the Crown Jewels.  But the London Eye faces no such constraints.  You can decide where you lie on the forward-planning/value-of-time dimensions and pick from several options. Why not go the whole hog and get drunk on the London Eye with a Pimm’s experience (with optional extra fee for second glass) or a wine tasting?

You may have one other quibble.  Don’t expect to board like United Premier 1K travelers, before all the plebs come on with their crappy baggage.  They will let in around ten of you Fast Track princes and ten of us plebs.  But the Fast Track line is short because it is so bloody expensive (just like everything else in London!) and you will get on sooner. But you will be sharing a EyePod carriage with some plebs – get used to it.  On United, you can recline in your b-class bed secure in the knowledge that the plebs like me in Economy can’t even come into your section to pee. But on the London Eye, you will be breathing the same air as me.  Sorry.

Do you get annoyed when someone boards the elevator with you only to ride up one floor? The stairs are right there, could they not just walk up a single flight? Well, consider this.  Someone boards the elevator on the first floor with a 3rd floor destination,  but instead of getting off at floor 2 and walking the last flight of stairs, they ride all the way to 3.

Doesn’t seem as annoying, right?  So what explains the difference? It can’t be that you are just appalled at their laziness. Because riding to floor N rather than getting of at N-1 is just as lazy.  It must be the externality.

Getting on the elevator only to ride up a single floor delays everybody else. The decision to ride to the second floor rather than the third isn’t the same because whichever he chooses the elevator is going to have to stop once.

Ah, but what if he gets on, floor 2 is already pushed but 3 is not. Then the tradeoff is the same.  Because if he were to get off at floor 2 and walk he would spare everyone else the additional stop at 3. So you get annoyed at a single-floor rider you if and only if you get annoyed at this marginal-floor rider.

Well, not quite.  Becuase there is one more difference.  After he makes the sunk decision to get on the elevator, but before he makes the marginal decision, the problem changes.  In particular, as he is riding he gains some new information:  he can observe how many other people get on the elevator and are going to be affected by his decision.

This puts the marginal-floor rider in a different position than the single-floor rider in terms of social welfare. Because the single-floor rider’s decision whether to board at all is made without knowing how many other riders will be on the elevator.  The marginal-floor rider can condition his decision on the number of riders.

Indeed, this means that you may even have cause to forgive Mr. Single-Floor and yet be annoyed at Ms. Marginal-Floor.   He may have reasonably expected that few people, if any, were going to be inconvenienced.  But if it turns out that the elevator is nearly full then the sum total of their delay due to Mr. SF’s decision to board is a sunk cost, but it’s an avoidable cost for Ms. MF.  If she doesn’t get off at 2 and walk an extra flight, you all have plenty of reason to be annoyed.

This is all very important.

Also, this explains the otherwise inexplicable glass elevators, and raises the puzzle of why we don’t see them in office buildings.

A meditation on tipping in Australia versus the United States.

And Manhattan is really cool these days. Especially with the Aussie kicking seven kinds of Chinese tripe out of the greenback. But that rest room, it was a marvel. If it was a person I’d say it’d been scrubbed until its bellybutton shined. The mountain of crisp, white, freshly laundered hand towels never got any smaller despite the constant stream of punters using and discarding them. The wash basin, gleaming and shining, fairly groaned under the weight of the vast selection of cleansing gels, moisturizers, and other masculine hygiene products with which I must profess myself completely unfamiliar. Not one stray, errant drop marked the floor of this restroom. Nary a single pubic hair had escaped to run wild on the immaculate tiling. And it was all thanks to the dude from Senegal who was doing it for minimum wage and tips.

It seems that the toilets are not so clean in Oz.  And tipping, evidently an American import, hasn’t exactly captured the imagination down under.  The comments following the article are especially entertaining.

Complaining about TSA screening is considered by the TSA to be cause for additional scrutiny.

Agent Jose Melendez-Perez told the 9/11 commission that Mohammed al-Qahtani “became visibly upset” and arrogantly pointed his finger in the agent’s face when asked why he did not have an airline ticket for a return flight.

But some experts say terrorists are much more likely to avoid confrontations with authorities, saying an al Qaeda training manual instructs members to blend in.

“I think the idea that they would try to draw attention to themselves by being arrogant at airport security, it fails the common sense test,” said CNN National Security Analyst Peter Bergen. “And it also fails what we know about their behaviors in the past.”

Predict which flights will be overbooked, buy a ticket, trade it in for a more valuable voucher.

Still, there are some travelers who see the flight crunch as a lucrative opportunity. Among them is Ben Schlappig. The 20-year-old senior at the University of Florida said he earned “well over $10,000” in flight vouchers in the last three years by strategically booking flights that were likely to be oversold in the hopes of being bumped.

“I don’t remember the last time I paid over $100 for a ticket,” he boasted. His latest coup: picking up $800 in United flight vouchers after giving up his seat on two overbooked flights in a row on a trip from Los Angeles to San Francisco. Or as he calls it, “a double bump.”

The full article has a rundown of all the tricks you need to know to get into the bumpee business.  I was surprised to read this.

Most of those people volunteered to give up their seats in return for some form of compensation, like a voucher for a free flight. But D.O.T. statistics also show that about 1.09 of every 10,000 passengers was bumped involuntarily.

On the other hand, it is not surprising because involuntary bumping only lowers the value of a ticket.  Monetary (or voucher) compensation can be recouped in the price of the ticket (in expectation.)

Garrison grab:  Daniel Garrett.

I am always surprised in Spring how suddenly there are cars parked on the residential streets in my town where just a month ago the streets were empty. These are narrow streets so a row of cars turns it into a one-lane street that supposed to handle two-way traffic.  And that is when we have to solve the problem of who enters the narrowed section first when two cars are coming in opposite directions on the street.

On my street cars are only allowed to park on the North side.  So if I am headed West I have to move to the oncoming traffic side to pass the row of parked cars.  If I do that and the car coming in the opposite direction has to stop for just a second or two, the driver will be understanding (a quick royal wave on the way by helps!) But if she has to wait much longer than that she is not going to be happy.  And indeed the convention on my street would have me stop and wait even if I arrive at the bottleneck first.

But of course, from an efficiency point of view it shouldn’t matter which side the cars are parked on.  Total waiting time is minimized by a first-come first-served convention.  And note that there aren’t even distributional conseqeuences because what goes West must go East eventually.

Still the payoff-irrelevant asymmetry seems to matter.  For example, a driver headed West would never complain if he arrives second and is made to wait.  And because of the strict efficiency gains this is not the same as New York on the left, London on the right. The perceived property right makes all the difference. And even I, who understands the efficiency argument, adhere to the convention.

Of course there is the matter of the gap. If the Westbound driver arrives just moments before the Eastbound driver then in fact he is forced to stop because at the other end he will be bottled in.  There won’t be enough room for the Westbound driver to get through if the Eastbound driver has not stopped with enough of a gap.

And once you notice this you see that in fact the efficient convention is very difficult to maintain, especially when it’s a long row of cars.  The efficient convention requires the Westbound driver to be able to judge the speed of the oncoming car as well as the current gap.   And the reaction time of the Eastbound driver is an unobservable variable that will have to be factored in.

That ambiguity means that there is no scope for agreement on just how much of headstart the Eastbound driver should be afforded.  Especially because if he is forced to back up, he will be annoyed with good reason. So for sure the second best will give some baseline headstart to the Eastbound driver.

Then there’s the moral hazard problem.  You can close the gap faster by speeding up a bit on the approach.  And even if you don’t speed up, any misjudgement of the gap raises the suspicion that you did speed up, bolstering the Eastbound driver’s gripe.  Note that the moral hazard problem is not mitigated by a convention which gives a longer headstart to the Eastbound driver.  No matter what the headstart is, in those cases where the headstart is binding the incentive to speed up is there.

All things considered, the property rights convention, while inefficient from a first-best point of view, may in fact be the efficient one when the informational asymmetry and moral hazard problems are taken into account.

(Pictures are worth some number of words you know.)

If markets are efficient then price movements happen because of news that changes the value of assets.  Often however stock prices seem to fluctuate even in the absence of any new information.  On Black Monday in 1987, US stocks dropped by more than 20% without any obvious reason in terms of information about fundamentals. Are asset price movements simply random, or worse, a result of manipulation?

The question is impossible to answer using data from today’s markets.  How can you independently identify what is news?  And even when there is verifiably no news how can you rule out the possibility that prices moved precisely because of the absence of some expected good or bad news?

Peter Koudijs has found a wonderful historical episode in which it is possible to identify precisely the days in which news arrives and to measure the effect of news on stock prices.  During the 18th century there were a few English companies whose stock was traded both in London and in exchanges in Amsterdam. When the prices of these stocks changed in London, information about the price movements reached Amsterdam via mail boats that crossed the North Sea. When weather prevented these boats from crossing, news was delayed.  These weather events enable him to show that a large component of price volatility is directly attributable to the arrival of news. This dramatic picture pretty much summarizes it:

On the 19th of November, shares of the British East India Company (EIC) began to drop in response to a speech given by British Prime Minister Fox who spoke of  “the deplorable state” of its fiances.  Bad weather delayed the arrival of boats from England to Amsterdam until around the 27th of November.  In the intervening period, there was little change in the price of EIC shares on the Amsterdam exchange.  But as soon as the boats arrive, the stock price dropped to the level seen on the London exchange a week earlier.

Of this (via MR):

It’s an auction conducted at the airport terminal.  In this auction you are a seller and you are bidding to sell your ticket back to the airline.

Optimists look at this and contemplate the efficiency gains:  this is a mechanism for appropriately allocating scarce space on the plane. Pessimists detect a nasty incentive:  now that the lowest bidder can be bought off the plane the airline has a stronger incentive to overbook.

The pessimists are right precisely because the optimists are right too.

Consider standard airline pricing with no overbooking.  You buy a ticket in advance for a flight next month.  Lots of uncertain details are resolved between now and then which determine your actual willingness to pay to fly on the departure date.  One month in advance you can only form an expectation of this and that expected value is your willingness to pay for a seat in advance.

This is inefficient.  Because, after the realization of uncertainty it could be that your value for flying is lower than somebody else who didn’t buy a ticket. Efficiency dictates that you should sell your ticket to him on the day of the flight.

One way to implement this is to hold an auction on the day of departure.  Put aside the issue that flyers want advance booking for planning reasons.  Even without that incentive, just-in-time auctions solve the inefficiency problem with conventional pricing but airlines would never use them.

The reason is that an auction leaves bidders with consumer surplus (or in the parlance of information economics, information rents.) As a simple example, suppose there is a single seat avaiable on the flight and two bidders are bidding for it.  An optimal auction is (revenue-equivalent to) a second-price auction so that the winning bidder’s price is equal to the willingness to pay of the second-highest bidder.  That is lower than the winner’s willingness to pay and the difference is his consumer’s surplus.

The airline would like to achieve the efficient allocation without leaving you this consumer’s surplus.  That is impossible in a spot-auction because the airline can never know exactly how much you are willing to pay and charge you that.

But a hybrid pricing mechanism can implement the efficient allocation and capture all the surplus it generates.  And this hybrid pricing mechanism entails overbooking followed by a departure-day auction to sell back excess tickets.

The basic idea is standard information economics.  The reason you get your information rents in the spot auction is that you have an informational advantage:  only you know your realized willingness to pay.  To remove that informational advantage the airline can charge you an entrance fee to participate in the auction before your willingness to pay is realized, i.e. a month in advance as in conventional pricing.

Here is how the scheme works in the simple example.  There is one seat available.  Instead of selling that single seat to a single passenger, the airline sells two tickets.  Then, on the day of departure an auction is held to sell back one ticket to the airline.  The person who “wins” this auction and makes the sale will be the person with the lowest realized value for flying.  The other person keeps their ticket and flies.  On auction day, the winner gets some surplus:  the price he will receive is the willingness to pay of the other guy which is by definition higher than his own.  (Delta is apparently using a first-price auction, but by revenue equivalence the surplus is the same.)

But in order to get the opportunity to compete in this auction you have to buy a ticket a month in advance.  And at that time you don’t know whether you are going to win the auction or fly.  The best you can do is calculate your expected surplus from participating in that auction and you are willing to pay the airline that much to buy a ticket. Your ticket is really your entrance pass to the auction. And the price of that ticket will be set to extract all of your expected surplus.

Note that the only way that the airline can achieve these efficiency gains and the accompanying increase in profits is by overbooking at the stage of ticketing.  So the pessimists are right.

(You can write down a literal model of all of the above.  The conclusion that all of your surplus is extracted would follow if travelers were ex ante symmetric:  they all have the same expected willingness to pay at the time of ticketing.  But the general conclusion doesn’t require this:  all of the efficiency gains from adding a departure-day sellback auction will be expropriated by the airline.  That follows from a beautiful paper by Eso and Szentes.  To the extent that fliers retain some consumer surplus it is due to ex ante differences in expected willingness to pay.  The two fliers with the highest expected surplus will buy tickets at a price equal to the third-highest expected surplus.  This consumer surplus is already present in conventional pricing.)

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