Thursday, December 29

Should charities threaten potential donors?

Earlier this year, I blogged about my dislike for charities who try to guilt donors by mailing out unsolicited gifts. While I find this to be an offensive practice, my friend Tom recently received a mailing from a charity called Smile Train that may have topped this. (In case you're wondering about the picture below, Smile Train "is dedicated to helping the millions of children in the world who suffer from cleft lip and palate").

Thursday, December 22

Last-minute Christmas gift idea

If you need a last-minute Christmas gift for an economist — or indeed anyone who is interested in the financial crisis — you might want to pick up This Time is Different: Eight Centuries of Financial Folly from your local bookstore.

The book, written by economists Carmen Reinhart and Ken Rogoff, goes back hundreds of years and looks around the globe to show that financial crises really aren't anomalies — when you look at the grand scale of history, there are clear patterns that emerge.

Monday, December 19

Betting on the bad guys

Should sports fans bet against their favourite team?

It's an intriguing question that piqued my interest when I happened upon a working paper by South African economics student Bart Stemmet, titled Hedging one's happiness — Should a sports fan bet on the opponent?

Hardcore sports fans know that it can be painful when your favourite team loses a big game. But what if you could buy insurance against the pain? As Stemmet points out, you can: just bet on the opposition. If the good guys win, you'll lose your bet, but it's a small price to pay for the sweet taste of victory. And if the bad guys win, the money you'll pocket from winning the bet will at least make you feel better.

Thursday, December 15

Game Theory of The Price is Right: Part 2

In my last post, I discussed some game theory behind the Cliffhangers game on The Price is Right. And while watching the stupidity of Cliffhangers players got me angry, what really got me thinking was the bidding itself.

To get up on stage (which comes with a chance to win bigger prizes), four contestants take turns guessing the value of an item (usually several hundred dollars). The one with the closest guess to the item's actual value, without going over, wins the item and gets to go up on stage.

Frequently, people make really dumb guesses. Someone will bid, say, $420 for an item, and another contestant will subsequently bid $415, giving themselves a $5 window in which to win the item. But more interesting is whether or not contestants decide to bid $1 above someone else. Frequently, someone will bid, say, $475 after another contestant has bid $420. They could have bid $421 (and indeed this does happen, as in the video below), but in the unwritten etiquette of The Price is Right, it's viewed as a low blow.

Monday, December 12

Game theory of The Price is Right: Part 1

In an attempt to improve my French, I have discovered a newfound appreciation for The Price is Right. Having watched the show as a kid but forgotten about it in recent years, I was excited when a Québecois version of Bob Barker's classic game show was launched this fall. I have found that it is an enjoyable way to keep up my French vocabulary.

It's also the first time that I've watched the show on a regular basis since studying economics, which can make for a surprisingly frustrating experience. For instance, on Cliffhangers (the "yodelling game"), I find myself cringing when contestants make their final bid.

Thursday, December 8

One issue per visit: A health-care inefficiency

When you have a public health care system (as we have in Canada), it can lead to inefficiencies.Carleton University's Health and Counselling Services provides a great example of this (hat tip to my fiancée, Laura). They have a rather strange policy: "Only one issue per visit will be addressed."

Let's say I have two issues I want to discuss with a doctor. Perhaps I'm concerned I have strep throat. Since I'm going to the doctor anyway, it would probably make sense to discuss a refill on a prescription that is expiring soon. Is it more efficient to tackle both these issues in one visit or in two separate visits?

Monday, December 5

Doggone unintended consequences

My friend Alixe sent me a cute newspaper article a while ago about the proliferation of purse dogs in the Yaletown neighbourhood of Vancouver. It seems that strata rules limiting dogs to 20 pounds or less in Yaletown condos means the small dogs are favoured. But the economist in me started thinking: could these strata rules have an ugly downside? At the margin, could they incentivize condo-dwelling dog owners to underfeed their pets?

The strata policies can put dog owners in an awkward dilemma. Let's say I'm a Yaletown condo owner with a very cute Boston terrier puppy, which according to Wikipedia has a weight range of 10 to 25 pounds. After several months, it grows to its healthy weight of 25 pounds. If my fellow strata members don't like my dog, I've got three options: get my dog's weight under 20 pounds, give away my dog, or move. Which option is least drastic? Probably weight control.

Wednesday, November 30

A dark side to diversity

We are lucky to live in a very multicultural society in Canada, where our differences are tolerated and celebrated. But can diversity have a dark side?

I am a co-author of a recent working paper, with James Andreoni, Abigail Payne and Justin Smith. Our study, titled Diversity and Donations: The Effect of Religious and Ethnic Diversity on Charitable Givinglooks at the role a neighbourhood's diversity plays in determining how much people donate to charity (the paper is gated, but most people with a university email address should be able to get a free copy from the link above). I encourage anyone who is interested to give it a read and send us any feedback you have (there is also an interesting discussion in the comments feed of the Freakonomics blog).

In neighbourhoods that are more diverse — in terms of ethnicity or in terms of religion — Canadians tend to donate less to charity. This is disappointing, and could have potential implications for public policy. Governments and charities often provide similar types of social services, and if charitable giving decreases down as neighbourhoods continue to diversify, there may be more pressure on government to provide benefits that have historically been provided by charities.

Monday, November 28

Winnipeg's ticket gouging ban makes matters worse

In Manitoba, it's against the law (specifically, section 60 of the Amusements Act) to sell tickets for more than what you paid for them, punishable with a fine up to $5,000. There are good intentions behind the law — it's a nice ideal to have a society where no one gouges you on ticket re-sales. But in reality, this law exacerbates the precise problem it is supposed to solve.

A great case study is the Atlanta-Thrashers-turned-Winnipeg-Jets' first-ever regular season NHL game. While the face value of Winnipeg Jets tickets range from $49 to $200, tickets were selling for more than $3,000 on the resale market.

Ticket resellers are clearly flouting the Amusements Act. And despite the act's name, police appear to be anything but amused, with busts being made against scalpers. So it's not one of these strange, antiquated laws — it's a law that's being enforced.

Friday, August 19

Are early Christmas sales an indicator of tough economic times?

If we're headed for more tough economic times, Thursday's Le Droit may have found an unconventional leading indicator to support this: Christmas sales are coming early this year. Ottawa-area Costcos are already selling artificial Christmas trees and snow globes, apparently. And the Bay is planning on kicking off its Christmas sales a month early, starting in mid-October instead of mid-November.

The retailers aren't citing pending economic doom as their motivation. Costco is running with an-early-bird-catches the worm strategy; its spokesman told Le Droit, "We strongly believe in the concept of 'first on the shelves, first sold.'" The Bay, meanwhile, says it has found people like to put out their Christmas decorations before the weather turns really cold.

But pretend for a moment that you're a retailer, and you expect that the economy is going to implode smack dab in the middle of the busiest sales period of the year. What would you do? I'd try to get people to do their Christmas shopping as early as possible, before stock markets have a chance to collapse, companies lay off employees and consumers shut their wallets.

Monday, August 1

Oh, the irony!

Every so often, when the privatization of liquor sales comes up, someone makes the argument that public liquor stores are less likely to encourage overconsumption than private liquor stores. Pardon my cynicism, but the skeptic in me believes governments run liquor stores to make money, not to stop people from getting drunk.

This gem in my weekend newspaper supports my suspicion:

Friday, April 29

Is pay-what-you-want a viable hotel pricing strategy?

My fiancée and I are taking a trip to Halifax this summer. I booked a mystery hotel online using Priceline's name-your-own-price function, and ended up with the Westin Nova Scotian.

In researching the hotel, I discovered that they ran a very interesting promotion over spring break, where they set aside 60 rooms for guests to pay what they wanted. Pay-what-you-want is a unique (if not gimmicky) pricing strategy that seems to have been popping up quite a bit in recent years, perhaps thanks to Radiohead's use of the strategy to sell their album In Rainbows.

Monday, April 25

Why aren't car sales going down?

When I was writing my previous blog post, I used shoes and shoelaces as an example of complements (in economic theory, when the price of one good goes up, demand for its complement will go down).

As I continued writing, I realized that shoes and shoelaces was a lame example and that perhaps cars and gasoline would be a better example. Unless you've got an electric car or you just want somewhere to sit, a car isn't much use without gasoline. Likewise, unless you're an arsonist, you can't do much with a jug of gasoline if you don't have a car.

Wednesday, April 20

B.C. cruise tax would hurt Washington and Alaska

When one jurisdiction raises its consumption taxes, it's usually good for the neighbouring jurisdiction. This is common sense — if the cigarette tax is almost four times higher in Montana than neighbouring North Dakota, for example, Montanans will drive to North Dakota to save money on cigarettes. Montana businesses lose cigarette revenue and the government loses tax revenue, while North Dakota gains.

But a potential tax on cruise ship passengers visiting Victoria (hat tip to Andrea Craig), as advocated by consultant and UVic lecturer Brian Scarfe, could actually be a bad thing for neighbouring jurisdictions.

Friday, April 1

An ingenious nudge

I discovered a very bright "nudge" while meeting up with some friends at the local Royal Oak last night (for non-Ottawan readers, it's probably the biggest pub chain in the nation's capital).

The Royal Oak does a good job of providing a decent atmosphere, decent food and a decent pint. They are also do a surprisingly good job of using anchors to their advantage. Anchors are quite simple and can be very effective — by triggering a customer's mind to a specific price or rate, you can affect how much they value a product.

Wednesday, March 30

Charities' guilt gifts overstep the bounds

My fiancée received an interesting gift in the mail recently from a charity called Plan Canada. They were asking for money to lift poor girls from around the world out of poverty.


The gift was "a small friendship bracelet of hope," accompanied by a picture of a cute young girl. The back of the photo reads, "This is Lina from Peru. She has already found a sponsor. Please sponsor a child like her. Many thanks."

Monday, March 28

Don't blame women

I have lacked inspiration for blog posts over the last couple months, but a Times Colonist article today has got me worked up enough to end my two-month hiatus. In a nutshell, there was a horrific crime in Victoria over the weekend; police allege four men forced a female university student into a car, driving around while repeatedly sexually assaulting her.

The crime is disturbing and does not require further commentary. What does is the warning issued by police after the crime:
"Police issued several warnings to women following the attack. Women are advised to travel in groups and stick to well-lit areas, carry a cellphone, refuse drinks from strangers and not leave drinks unattended. If drinking alcohol, women are urged to plan a safe ride home by cab or with people they know."

Wednesday, January 26

One of life's biggest mysteries

I love pineapple juice. It is full of deliciousness — and economic mysteries.

Monday, January 24

A lose-lose proposition

It is normal for a collective agreement to have win-lose propositions. Some clauses clearly favour management at the expense of employees, and some perks for workers clearly hurt a company's bottom line.

But collective agreements should not have lose-lose propositions. If management and workers can both do better by eliminating a provision in a collective bargaining agreement, there's no logical reason for the clause to be there in the first place.

Wednesday, January 19

Pogs, surgeries and consent

I've been trading since I was a kid. Whether it was hockey cards, recess snacks, Magic cards, Pokémon cards or pogs, we were always trading something.

There was a tacit understanding that the buyer-beware policy applied when making a trade. But it was also understood that it was bad practice to take advantage of an ignorant trader. No one liked situations where a kid went home to boast to their older brother about a trade, only to hear he'd been duped. It inevitably led to a big argument the next day: "I didn't realize the card I gave you was so good. No fair — I want it back."

Should a kid who unknowingly trades away a valuable pog be able to undo the trade? This was one of the tougher ethical questions we dealt with on the playground. You shouldn't make a trade if you're not sure about it. But on the other hand, if you didn't understand the trade you were making, how can you consent to it?

Monday, January 17

Hairdressing is also way too socialist

I thought Vancouver's taxi industry is way too socialist. But I found another example that might top it.

In the Outaouais region (the Quebec portion of Greater Ottawa), central planners have been controlling hair cuts: who you can get them from, the minimum price hairdressers can charge, and what hours they can work. According to an article in Le Droit, it's a depression-era practice that was repealed decades ago everywhere else in Quebec, but for some reason still exists in the Outaouais area.