Thursday, October 22, 2009
I think this line tells you something about the donut makers.
The people in line have both a monetary cost (the price of the donuts) and a non-monetary cost (waiting in line). But the non-monetary cost can’t be captured by the donut makers to help them increase their donut production. That non-monetary cost is paid by the customers, but it produces little benefit for anyone. It’s just wasted. If the donut maker were to increase prices (but not too much), the line would still exist but it’d be *much* shorter. In both cases, a signal is sent to additional consumers: the cost of these donuts is high - you might want to consider skipping the donuts. Both cases turn away customers unwilling to pay the high costs. But in the case of the long line, a large portion of the costs are wasted.
We are tempted to think that in this situation the donut makers are innocent and the line wait is entirely the fault of the customers who are the ones with the high demand. Conversely, if donut prices were higher, the fault for the high cost would be entirely on the donut maker and not at all on the customer. But both views are wrong. In both cases, the combined costs (monetary & non-monetary) exist because the producer makes something that the customer demands. Put another way, the combined costs of the donuts are high because they provide such great value to the customers.
My guess as to why the donut maker doesn’t raise prices is that they don’t want to be viewed as "mean" by their customers. If that’s true, then I’d argue that the donut maker is reacting to customer ignorance and that’s why this wasteful line exists. Average people seem to be very willing to substitute time (which, once spent, can’t ever be recovered) for money (which can be made back in lots of different ways - even in a recession). And I think it’s a fool’s tradeoff. Time is unbelievably more valuable than money. And when the donut makers force their customers to waste time instead of money for the purpose of saving face, I think that’s "meaner" than if they just raised donut prices.
Unfortunately, most people don’t see it that way, and inadvertently waste an unbelievable amount of time waiting in line, being grateful to the producer who doesn’t give them the option of substituting higher priced donuts for waiting in line.
What would be interesting to me is if the donut maker had two lines. Both lines served the same donuts, but one had higher donut prices. Then customers could choose which was more valuable to them: time or money. I think I’d start with the 2nd line being having donuts at much higher prices than the 1st line - maybe 2.5x-3x the price of the 1st line. If that were too high (so that no one bought donuts from that 2nd line) then lower it slightly until people started choosing the higher priced donuts to skip the long wait.
Of course, maybe what this post tells you about me is that I really hate lines.
Update: My friend, the one who went to the apple orchard, and accidentally got me thinking about this (that's right, John, I said "accidentally") had a comment that made sense to me. Which, IMHO, he should have posted either as a comment on my blog or a response on his blog. Anyway getting on with the update... he said that the two line deal simply could not work. There's no way that anyone would ever go for the idea of the exact same donut for slightly higher prices in the 2nd line. Which makes me think of Tim Harford and price discrimination.
Harford makes the case in his book (The Undercover Economist) that Starbucks sells lots of different versions of essentially the same thing for widely varying prices. The mocha is just a normal coffee with a tiny bit of inexpensive extra ingredient thrown in to spice up the flavor. But, he says, the cost of the mocha is quite a bit higher than the cost of the regular coffee. The purpose? To find the maximum price that you're willing to pay. (Read it on line, chapter 2)
Perhaps the donut maker should create a 2nd line for sprinkled donuts. Or donuts with raisins or some such thing so that the customer thinks they're getting more in the 2nd line and would be willing to pay a lot more in profit. Maybe that would make it palatable to customers to have 2 lines: one long line with cheap donuts and one short line with expensive (but essentially the same) donuts.
Each year in my 500-student principles class I gather a group of eight students and tell them that I will auction a $20 bill to the highest bidder. If two or more students bid the same thing, the difference between $20 and their joint bid will be divided among the winning bidders. They can collude to fix the price just like oligopolists who violate antitrust laws, but they must mark down their bids in secret.
Today seven of the students stuck to the collusive agreement, and each bid $.01. They figured they would split the $20 eight ways, netting $2.49 each. Ashley, bless her heart, broke the agreement, bid $0.05, and collected $19.95. The other 7 students booed her, but I got the class to join me in applauding her, as she was the only one who understood the game.It showed that, even in a market like this one with very few players, collusion is difficult to maintain. There are tremendous incentives for one or more parties to cheat and move the market toward a competitive outcome. Unfortunately nobody has ever gone as high as the predicted equilibrium bid of $17.50.
Cheating for a $20 - Freakonomics Blog - NYTimes.com
Monday, October 19, 2009
What a feeling to have children. Wanting to hug them, spank them, kiss them, and yell at them, all at once. Poor little guy. Poor parents.
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- God did it
- It was good
It does not say how God did it. And, frankly on the evidence, I think evolution is the best candidate.
But what's frustrating to me is how many people see this stupid argument and then find themselves with only two options: God or Evolution? If evolution is demonstrably true, then God can't be.
And it's *us*, the Christians who put them in that position. Shame on us for putting God in a box. For forcing an interpretation of His word that doesn't match reality. That interpretation is killing the message. It's making enemies of intelligent people who can and do look at the world.
Why can't we Christians get passed this stupid argument? Evolution appears to have happened. Get over it. Get onto a more important message.
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I like this, not for its humor, which I didn't find that funny. But for the fact that the TSA is horribly inconsistent.
They are in a difficult situation w/laptop batteries. If they prohibit them, then the airline business will tank as business customers find alternatives to airline travel that allow them to operate their laptops.
Trains between DC & New York would love this rule. As would the remote meeting services like GoTo Meeting, WebEX and Windows Live Meeting. Be suspicious of intentions if you ever hear any of the web conferencing providers advocating for tighter security at TSA.
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Sunday, October 18, 2009
Friday, October 16, 2009
AddThis :: Add-ons for Firefox
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Thursday, October 08, 2009
NOTE: If you are reading this from facebook, the comment system for you is the facebook comment system. I've only changed the comments on my blog. If you're reading this on facebook, you can ignore!
Tuesday, October 06, 2009
To illustrate my confusion, let me describe an internal dialogue I have with a woman at my office whom I find more than normally attractive. I see her daily, but I avoid talking to her - mainly because I know I'm attracted and I need safe distance. Here's the entirely made up conversation that I have with her in my head.
Me: I don't understand why I'm attracted to you. It doesn't make sense.
Her: You mean you're attracted to me despite my obvious unattractiveness?!
[Note: in my subconscious, women are always trying to find some way to make what I say into a personal insult. It might have something to do with the fact that it frequently works that way in reality, too]
Me: No! I mean that I'm attractedd to you despite there being absolutely no upside to it, at any level. Think about it:
- You're a real person, but I'm only talking to a figment in my head. So being attracted to you has already made me slightly less sane.
- The odds of being rejected by you are pretty high, because
- Your ring tells me you're married.
- I'm just not that attractive
I suspect that being rejected now is not any more fun than it was in high school and college.
- I'm married, so finding you attractive causes pain to my wife, whom I adore.
- In the unlikely event that you did *NOT* reject me, acting on this will ultimately cause me pain as all of the following would almost certainly happen:
- I'd get caught
- I'd damage my marriage, probably irreperably
- I'd lose my kids (at worst) or lose their respect (at best)
- I would (correctly) become a fool in the eyes of my friends and family
What is the possible benefit to *ANYONE* for me to continue to find random women attractive? Yet it still happens. And with a disturbing frequency. I wish there was an off switch. Because I can see no benefit to having this feature remain active.
From talking to my male friends, they seem to experience this about as much as I do. So it seems relatively normal. However, many of my friends simply can't talk to their wives about this at all, out of fear that just mentioning it will hurt their feelings and result in a huge fight. I count myself lucky that my wife (at some level) understands this, even if she doesn't feel it. To her, there is an off switch - at least from a visual sense. She got married. She's stopped searching for attractive men. She recognizes them, but it simply doesn't have any impact on her. For her to be really attracted to someone takes *much* more than just seeing them. At least she understands that it doesn't work that way for me. And she wishes that there was an off switch for me, too.
But the off switch doesn't seem likely to happen. So I keep my distance from women whom I find attractive. I just don't understand why this feature of being a male is necessary. I could really do without it.