Canadian content requirements a bad idea

Vancouver Whitecaps captain Jay DeMerit fired off a tweet yesterday that piqued my interest: is the criticism leveled at his team for their lack of Canadians justified?

The Vancouver Whitecaps have just four Canadians on their 30-man roster. But three (Bryce Alderson, Caleb Clarke and Russel Teibert) have yet to see any playing time in regular season matches this year. The fourth, defensive stalwart Alain Rochat, is only nominally a Canadian, having moved to Switzerland when he was two — he plays his international soccer for Switzerland.

The Whitecaps' lack of Canadians has been the focus of some attention recently. They are currently in the finals of the Canadian championship against Toronto FC, who in contrast to the Whitecaps have nine Canadians on their roster. Five of them played in the first leg of the finals against Vancouver. Plus, the Canadian Soccer Association has a new president, Victor Montagliani, who has called for more stringent quotas on the number of Canadian players teams this side of the 49th parallel must carry.

Does salience make sense for Air Miles?

Air Miles has decided to do a curious thing: tell you how much they're actually worth.

Air Miles, for those who don't know, is a customer loyalty program. If you shop at particular businesses, you earn "miles," which you can then redeem for rewards. Businesses use these programs in an attempt to retain customers. They're particularly useful when businesses offer a fairly generic product that customers could easily buy from a competitor.

Moneyball and the "Occupy" movement

I recently finished reading Moneyball (I haven't gotten around to watching the movie yet). I'm not a baseball fan by any stretch of the imagination, but I really enjoyed this book. It is a David-and-Goliath story about how the nerdy-but-cheap Oakland A's used their knowledge of stats to outsmart the baseball establishment.

Reading Moneyball, I couldn't help but think about the "Occupy" movement. I empathize with the protestors to some extent — it's difficult to comprehend how the "one per cent" can make so much more money tha everyone else, especially when times are tough for many people right now.

Kickstarter a boon to entrepreneurs

Many entrepreneurs take a big risk when they start a business.

There are usually significant fixed costs. A retail store, for example, has to lease its space, buy a sign, cash registers, advertising, etc. — before they sell their first product. It's intimidating. There's the potential for major rejection — customers might not like what you're selling, and the business goes bankrupt.

What if you could remove that potential for rejection? What if you knew with certainty that the moment you opened your doors, your business would have enough customers?

Marketing value of 1¢

A few months ago, an ad in the newspaper caught my attention:

The 1¢ figure perplexed me. I understand why phone companies might want to give you a free phone if you sign a three-year contract for phone services. But why charge 1¢? From a revenue standpoint, the 1¢ must be inconsequential to Rogers. Isn't free more attractive?

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").

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.

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.

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.

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.

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?

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.

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 Giving, looks 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.

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.

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.

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:

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.

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.

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.

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.