Category: Other

Can you negotiate at Target?

Price tags are an interesting phenomenon when you consider that it wasn’t all that long ago that negotiating in stores was a common practice. Price tags improve efficiency because they present full information for customers who don’t have to worry about negotiating, but it doesn’t mean that the price is the most efficient price. There are markets all around the world that display one price, but involve sellers willing to negotiate. Jia Jiang finds out that Target is not one of those markets.

Thanks to Bryan Sloss for sending in this clip!

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Mumbai Police — A Solution for Noise Pollution

Mumbai drivers are apparently notorious for honking, even when the light is red and people can’t move. The Mumbai police decided to incentivize drivers in order to reduce some of the noise pollution in the city. The police installed noise meters and if the decibel level reaches a certain threshold, the timer on the lights resets. A message flashes to let drivers know that the more they honk, the longer they wait!

Another fun policy intervention occurred in Europe to help drivers slow down.

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Hot Ones — Gordon Ramsey

 

On Hot Ones, celebrity guests are interviewed while eating progressively spicier wings. In Season 8, Episode 1, Gordon Ramsey discusses the makings of a $25 hamburger as well as the costs that are often “hidden” from the customer. This is a fun, and relevant way, to introduce concepts like labor and rent to students who are unfamiliar with the costs of running a business. Toward the end, Ramsey discusses the notion of excess capacity, whereby firms are not necessarily producing at minimum average total cost. If firms can fill the excess capacity (perhaps through price discrimination), they may become efficient.

A big thank you to my student, Abdullah Al Otaibi, for sending me this clip!

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Trading a Paperclip for a House

 

Kyle MacDonald started with a red paperclip and ended up with a house. Trade and barter requires a double coincidence of wants, but Kyle was able to find people willing to give up something he valued more than his holdings. Mutually beneficial exchange makes both parties better off. This is a great clip to start the process of discussing why trading can grow an economy and why centrally planned economies are harder to coordinate.

Thanks to @AlcovyEconomics on Twitter for the clip!

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Speed Camera Lottery

 

How can we convince people to drive a safer speed? Kevin Richardson proposed setting up a speed camera (which are common across Europe) and take some of the money that is spent on ticketing speeders to redistribute to drivers who were driving the correct speed. Instead of using the potential fine as an incentive to discourage bad behavior, it cane be re-framed as an opportunity to be rewarded for good behavior.

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Construction Site in Thailand

 

A few years back there was a popular video of a human powered ferris wheel in India. I use that clip to talk about labor abundance in the Heckscher–Ohlin model of trade since India is so labor-abundant. Earlier we came across this fantastic video of a construction site in Thailand (another labor rich country). For small construction jobs, the workers will use manpower (literally) instead of machines to drive piles into the ground.  This clip could also be used in a labor economics setting if you’re talking about substitutes in production. Either way, this is a fun-video for class with a pretty nice beat from the tambourine-wielding foreman.

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John Stossel — The Fight Against Food Trucks

John Stossel, through ReasonTV, looks at the regulations behind the food truck industry. From a competitive market standpoint, food trucks have the ability to respond to high demand areas by relocating at any given moment. For brick-and-mortar businesses, however, food trucks enter the market as a low-cost competitor and steal customers from permanent restaurants. Many cities in the United States have setup regulation limiting the location of food trucks or the hours they may operate. This rent seeking behavior, however, limits the amount of options available to consumers in the name of “fairness.”

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Los Angeles Clippers — Dynamic & Variable Pricing

The LA Clippers explain the difference between variable and dynamic ticket pricing, which are often confused by fans. Variable pricing refers to changes in ticket prices based on factors like opponent, day of the week, or time of the game. Dynamic ticket pricing takes things a step further and actually bases the ticket price off demand and supply for a particular game.

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Northwestern — Purple Pricing Plan

Northwestern University unveiled one of the first dynamic pricing models for college sports in 2014. Students can reserve seats for upcoming sporting events and if prices fall to lower prices because of low demand, anyone who paid higher prices would be refunded. This incentive was meant to encourage students to reserve their seats early for big games. The two also introduce a Dutch Auction for tickets where students can set their reserve price and if they fall within the window then they’ll be assigned tickets.

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TedTalk — Dan Ariely on Cheating

 

I’m teaching an Economics of Crime course soon so I’ve been on the look out for great clips related to cheating. I think my current plan is to have a series of goofy examples of cheating. In this Ted Talk, Dan Ariely discusses some of the research from his books on honesty by describing the idea of irrationality related to honesty. The rational model of crime first flushed out by Gary Becker assumed that criminals performed a cost-benefit analysis for cheating and would only cheat if the expected benefits outweighed the costs of being caught. Ariely brings the behavioral aspect of economics into play with his discussion on the nuances around decision making, even in criminal enterprises.

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