My Principles of Microeonomics textbook (with Stephen King and Greg Mankiw) uses a dog ‘mess’ example to illustrate the concept of negative externalities. No solution is proposed.
Click here to see the Freakonomics solution. Costly but perhaps effective.
Last year, in a piece for The Age, I wrote about what appeared to be a change at the Lego company as to how they received user innovations.
That article talked about the Lego Factory concept that had users design new lego sets for a share of the royalties. This was a good example of user-based innovation as described by MIT’s Eric von Hippel in his book Democratizing Innovation.
It turns out that that was just the tip of the iceberg according to February’s Wired. User-based innovation has appeared to have infiltrated the whole innovation process at Lego.
News for Econ Students
Just to show that I ain’t that evil, here is another blog with interesting exam ideas and other information for economics students.
I particularly liked this post on price discrimination at Starbucks. I’ll have to ask for a ‘secret’ cappucino the next time I am there.
This morning’s news reported intentions by AOL and Yahoo! to provide certain delivery of email for the price of stamp.
We all know the current situation that email sent may not be delivered or may be delivered into a spam filter. As Ariel Rubinstein identified almost two decades ago, this presents real problems for reliable coordination. (His paper is conveniently available on-line).
The problem is simple: if you and I need to coordinate our activities and a lack of coordination is really costly, then if communication between us is even slightly unreliable, we may shy away from such activities altogether. Moreover, doing simple things such as acknowledging the receipt of email can’t help (and indeed may make things worse!) if the acknowledgment cannot be reliably sent.
What this means is that AOL and Yahoo!’s solution is going to have to be perfect if it is going to provide real value.
On the way to Melbourne airport there was a billboard for Villa and Hut. If you just glance at it (as you do when you are driving) you will notice that they claim to be “voted the best homewear store in the world.”
Sounds impressive but drop your eyes down and you will see in much smaller print a qualification “by internal staff poll.” Not that that is bad — if it wasn’t true that might be a problem. But really, isn’t this just a tad misleading? The homepage of their website says the same thing and much as I have tried I haven’t seen a hint that this is all tounge-in-cheek.
When you embark upon writing a blog like this (as I have done), you can’t help but turn to wonder how you get a readership. Even if what you say is interesting, there are so many alternatives for most people, that getting noticed is a problem.
My approach was to see if I had any sources of power I could leverage (at least in away that was not ultimately self-destructive. That is, I turned immediately to the dark-side of market power.
Here is what I have done. I have 80 fresh faced MBA students starting the compulsory Managerial Economics subject here at Melbourne Business School. I like to come up with exam questions based on current business topics (that is, true). So I told them that I would use this blog as the source for those questions. If the students want a little less surprise in the exam, they should read this blog regularly.
So there you have it: I have some power to get my student’s attention and have leveraged that to build readership of this blog.
Fortunately, there is a subtle efficiency here. My main trouble in getting good ideas for exam questions is not coming up with them (I think of them all the time). It is remembering them. By commiting myself to write interesting ideas here I also make it easier for myself in writing the exam.
Actually, even this little exercise has given me an exam idea: am I really going to gain a good following from my dark-side eyeballs strategy? Tune in on exam day to find out!
The season premiere of Survivor: Panama began in the US on Friday. It will be shown here but as usual it is unclear when. And, as usual, it will be with enough lag that those of us using the Internet will have to keep off to avoid knowing who won.
CBS — the US owner and broadcaster of Survivor — are offering two non-free to air TV means of watching Survivor. First, it is available at Google’s new video store. Second, it is available from CBS’s own web-site as an ‘on demand’ option (viewable for 24 hours after downloading). Each will cost US$1.99. And each can be played on any Window’s based PC. Moreover, they were available only a few hours after broadcast (in time for an evening showing here) and ad-free.
But, just as in Apple’s iTunes Music Store, both sites restrict purchases to the US only. Actually, for Google the check is an IP address and so you must actually be in the US. For CBS, a US credit card address appears sufficient.
The question is why? And the answer is easy — because presumably CBS has done deals with local broadcasters that give them exclusivity (for some period of time) or at least until they are broadcast locally. Although there are indications the restrictions may be indefinite. (For example, old episodes of Star Trek available on Google are restricted to the US; long after broadcast and DVD availability everywhere).
But that is only half the answer. From an economics perspective, a channel of distribution should only be shut down by a producer if it is inefficient. Downloads are not inefficient and offer improvements in quality to some. So we have to ask ourselves: would the amount of revenue (in advertising) that a local broadcaster (such as Channel 9) loses from downloads available elsewhere exceed those that CBS could gain from making those downloads widely available? With regard to local affiliates in the US, CBS has decided that the answer is no. Why would the answer be different for Australia?
Moreover, it is unclear to me (although, I am not a lawyer) why such a restriction does not violate our parallel importing laws. After all, no local broadcaster could prevent DVDs of Survivor from being brought to and sold in Australia by an importer but what about downloads that compete with local broadcasts? There appears to be an import(ant) parallel here (pun intended!).