Friday, March 29, 2013

Smartphones and Impulse Shopping

I came across an interesting article from Time that suggests that smartphones are pushing back against impulse shopping.
The people waiting in a store checkout line are considered a captive audience—one that might be tempted into buying candy, soda, celeb magazines, and any number of goods, without thinking much of it. But smartphones seem to be more interesting than the magazine cover featuring Kim Kardashian’s latest antics. Single sale copies of magazines, largely purchased while waiting in line at the grocery store, are down 8.2% from last year. Sales of gum have taken a hit, too, declining 5.5% last year. Evidently, instead of amusing ourselves examining new gum flavors, we’re checking our emails or playing Angry Birds.
I'm sympathetic to this argument (see this post), but there is another dimension to the waning of the popularity of magazine purchases at the checkout.  In a world full of smartphones, all we need is the headline, and our smartphone will bring us to 20 articles online about that same incident.  In other words, more than just distracting us from the magazine, the smartphone is partially replacing it, too.

On a different (more comical) note, if you are the supermarket manager, one response to the decline of impulse sales is to sell magazines and products that are not easily replaced by a Google search in the racks - for example, instead of People magazine, Chickens magazine.

In all seriousness, I found this magazine in a Chicago supermarket, and because of its novelty, I took a picture... with my smartphone.

Tuesday, March 26, 2013

Day Old Pastries and the Evolution of a Sign

In this post, I am going to admit to a strange obsession of mine.  Maybe obsession isn't the right word (past time might be a better characterization), but let's get on with it.  I really enjoy reading signs, and thinking about what went through the author's mind to convince himself to make and post a sign.  This is incredibly trivial, but it is also incredibly commonplace... so maybe it is not so trivial.

Anyway, last June (June 23rd to be exact), I noticed this sign near a rack of day old pastries at Walmart.

The sign caught my eye because it seemed incredibly genuine.  The sign looked like it was made in a hurry after some worker made way too many doughnuts to sell the previous day.  I could just see the manager telling one of the workers to quickly make a sign to let customers know about the great deal they could get on some slightly stale pastries... and then in the hasty construction of the sign, they didn't make enough o's for "too."

Flash forward two months.  On August 25th, I was walking by the same spot in Walmart.  By now, the bakery apparently made a habit of of making too many baked goods.  The sign was spelled correctly, and laminated, but the sign still looked locally produced.  It also still contained the word "oops."  Amused by the change, I snapped a picture.  Maybe the bakery realized the benefits of a peculiar form of price discrimination. That is, make too much on day 1, and use the staleness to give bargain seekers a discount.

In case you're wondering if that was the end of the evolution of the sign, it was not.  Just 10 days ago (March 16), I was walking by the same spot in Walmart, and I noticed this really nice professional sign on the day old pastry rack:

This is a sharp-looking sign!  And, notice that they dropped the "oops."

In my mind, what started as a mistake that workers frantically tried to cover up with a homemade sign became profitable enough to justify making a high-quality sign to announce to the world that there's a bargain to be had.

Now, I don't know about you, but I think this is incredibly entertaining.

Monday, March 18, 2013

Capitalism and Uselessness

This post is about connecting two posts that might not otherwise meet.

Almost two weeks ago, Greg Mankiw posted this image, calling it "not completely fair, but funny nonetheless."  I saw several follow up posts in my reader, including an entertaining caption contest post by John Cochrane.  Cochrane's caption, "When you're done, another half box will magically appear on the wall."

In unrelated news, Steve Landsburg wrote a post today about "Triumphs of Capitalism" in which he offers evidence of our abundant wealth (by historical standards) by pointing to recent innovations that are so frivolous that we could only afford them if we were wealthy.  His second example, The Useless Machine, struck me as a capital-intensive video version of Mankiw's comic.

To modify Cochrane's caption from Mankiw's comic, "In case of nothing to do, flip switch and the machine will turn itself off."

If you were wondering, you can have such a machine for $30 (Canadian Dollars), plus the time it takes to assemble it.  Their website claims having sold over 14,000 Useless Machine assembly kits.

Thursday, March 7, 2013

Digital, Physical, or Both: The Case of Twilight

Today, Ryan Dorow wrote an interesting post on the pricing of digital versus physical products in which he cites another UChicago graduate student Mickey Ferri for his work.  Here's a key excerpt:
Pricing gets even trickier when there are digital and physical versions of the "same" product (I will use "same" here to denote same underlying intellectual property that is the basis for the product). For example, you can buy a CD or an mp3 or iTunes format of the same album. Video games can be downloaded or purchased on a disk or cartridge. You can buy books or eBooks. Here's the tricky part: Being exposed to one version of the product may make consumers more likely to purchase the other version. For example, downloading a song may expose you to new music and may make you more likely to purchase a physical album. This would lead to prices on digital products that are below the price a company would set in the case where there is no relation between the products. Maybe it should even be free -- or maybe the company should pay consumers to take the digital copy! On the other hand, having one version may make you less likely to purchase the other. For example, if you have a digital copy of a song, you may decide you don't need the physical copy. In this case, assuming it has control over the distribution of the digital copy, the company may have to optimally price the digital version higher than it otherwise would in order to prevent cannibalization of its physical products. So it's not clear how a company should set its prices without understanding the market and how consumers use the products.
I found this to be particularly relevant today because I have had some interesting recent experience with the dual-versioning of a product.  My wife and I recently purchased Twilight: Breaking Dawn Part II on Blu-Ray from Amazon.  Not only did the purchase come with a digital copy (something the studio does with most Blu-Ray products, I think), but because we made the purchase on Amazon, our purchase came with a free rental of Twilight: Breaking Dawn Part II through Amazon Prime's streaming service.  As a result, we were able to watch the movie immediately after purchase.  I'm not sure exactly how this fits into Mickey's research design, but I found it to be an interesting example of pricing and bundling.

Wednesday, March 6, 2013

Gates on Why Nations Fail

Ryan sent me a link to Bill Gates' review of Acemoglu and Robinson's book, "Why Nations Fail."  I haven't read the book, but I am familiar with the literature on which it is based.  Although I tend to think that Acemoglu and Robinson's perspective is the dominant one, I believe that Gates gives a fairly even-handed review.  The rest of the review is worth reading, but here is the competing theory according to Gates:
This points to the most obvious theory about growth, which is that it is strongly correlated with embracing capitalistic economics—independent of the political system. When a country focuses on getting infrastructure built and education improved, and it uses market pricing to determine how resources should be allocated, then it moves towards growth. This test has a lot more clarity than the one proposed by the authors, and seems to me fits the facts of what has happened over time far better.
I wonder what Gates thinks about Hernando de Soto's "The Mystery of Capital," which more explicitly recognizes the role of capitalism and its relation to political institutions.  Hernando de Soto's point is that capitalism does not work to its full extent if it is not inclusive.

Friday, March 1, 2013

On the timing of private experience for PhDs

An interesting post from Greg Mankiw.  The whole post is good, but here's the part that is most relevant to me:
[...] if your goal is to be the kind of economics professor who engages more directly with the real world, as it seems to be, then some real-world experience is indeed helpful. It broadens your perspective, and it teaches you the skills to understand and communicate with non-economists.

Two years, however, is probably longer than is optimal. My guess is that you will run into rapidly diminishing marginal value from the experience by the end of the first year.
Moreover, a PhD these days often takes five years and sometimes more. That argues for starting sooner rather than later. My experience is that as people start approaching the age of 30, their tolerance for living the life of a grad student declines significantly. As marriage and children start entering your thoughts, you begin to want a real job and a grown-up income. That may be hard to imagine now while you are a college student, but these thoughts will creep up on you faster than you think and when you least expect it.
The point of the post is to respond to a question from a student: Should I take a management consulting job before applying to PhD programs, or go straight to graduate school?  

Mankiw's answer is useful, but a hidden third option is to seek real world experience during graduate school.  Along these lines, several of my classmates have taken summer jobs / internships / working experiences, and have found the experience to be helpful in grounding their research, thinking about data, and gaining perspective on where academic research fits with society at large.

This seems fairly common, and it is healthy to gain perspective.  Before going on the job market, one of the most important things you need to consider is what kind of economist you want to be.  Some experience with an alternative to academic life can be useful.