Tuesday, October 30, 2012

Speeding tickets and the end of the world!

Good morning economists. I am inclined to discuss today the whole idea of speeding tickets. I have mentioned in a previous post that the probability of someone performing a crime is largely based on the perceived chance of getting caught. In the case of speeding tickets, this is the opportunity cost of rushing to get to your destination.

There was a debate lately, that the police is entrapping drivers by hiding on bridges with radar guns and then communicating the license plates of speeding cars to colleagues who stop the driver 2-3 miles further down. While the police argues that this is not really entrapment as drivers should always uphold the speed limit, it is well within the rights of the driver to ask to be shown the radar gun with the speed that the car was traveling at. Obviously this is not possible in this case.

If your excuse for speeding does not work, you can always try writing a 10 page paper about the end of the world! That's right! A man from Kemerovo region in Russia, was caught speeding. According to Moscow times instead of paying his fine of $32 he wrote a 10 page paper about the Mayan calendar and the end of the world which is supposed to occur in December of this year. It would thus be redundant, he argues, to pay the speeding ticket.

In this case, a speeding ticket IS the end of the world!

Drive safely!

Monday, October 29, 2012

First date recession index

Good morning economists. Did you notice lately that your single friends are going on dates more often? This is not because your friend has suddenly become a hit with the ladies/men (depending on gender) but because of the economic recession.

Match.com, a dating website reports that during economic downturns, people tend to date more as a way of compensating their economic misfortunes with a more successful social life. If I was to make a prediction, I foresee many new couples coming together during the upcoming Christmas period. Problem is, with wages and Christmas bonuses being cut, where will people go for a first date?

Have a nice day!

Sunday, October 28, 2012

Drug lord arrested for raising money to support anti-abortion!

Good morning economists. It is safe to say that most of us average people, have set goals at one point in our lives. Each day we strive to achieve those goals. But does the end justify the means? If you were given a choice, would you achieve your goals in an ethical or unethical manner. Of course we all want to be ethical, but what if your goals would be easily achieved if you behaved unethically while ethical behavior would almost guarantee failure? What would you do then?

Back in March of 2012, Michael Bennet Gardner, 58, from Australia, was sentenced to 13 years in prison because he was growing $68 million worth of marijuana. Last Friday, Gardner appeared in front of the judge appealing his sentence. He argued that he deserved a more SEVERE sentence of 20 years instead of 13!!!! During his appearance he was wearing a t-shirt which read "Abortion is killing". He argued that the prosecutor did not emphasize the severity of the actions of the accused and that he was growing marijuana to raise money for an anti-abortion campaign. His appeal was denied.

The case of Gardner raises this whole question of ethical vs unethical behavior. If you own a business and you uphold an ethical code, how would you react if your main competitor behaved unethically? In other words, what is the price of ethics?

Have an ethical day.

Friday, October 26, 2012

Careful where you invest you hard earned money!

I have recently come across a lot of weird investments that promise ridiculously high returns and offer to make people millionaires overnight. My advise to everyone is to be extremely careful where you invest your hard earned money.

The other day I noticed a web advertisement on forestry investment. I will not reveal the website as I do not want to hurt anyone's feelings, but here is the main idea behind forestry investment.

In a few words, you invest some money on a tree. The tree grows in size thus more timber can be sold once the tree is cut and more money is returned on your investment. Even though the investment promises an 8%-14% return per year, the so called entrepreneurs seem to ignore demand for timber. If demand is low, price of timber and trees will be low no matter whether a tree is growing in size or not. Return is not only based on supply but on demand as well.

Have a green night. 

Thursday, October 25, 2012

How much does a slap on the face worth?

Good morning everyone. Apparently these days a slap on the face is worth $350. Mawan Sombuntham, who co-owns Tata Massage in San Fransisco argues that a slap session will cause blood flow in the cheeks to increase thus making the face slimmer and the pores smaller.
Now I am not going to judge anyone for using this service. I do have a couple of observations though. How did the owner come up with the $350 price tag? I mean if price is the result of the interaction of the forces of demand and supply and the equilibrium price is indeed $350 then why not slap yourself silly when you wake up in the morning? You will save a whole bunch of money that way!

I can just imagine the following scenario. You have an argument with your friend, slap him on the cheek and then ask for $350. I just hope Mike Tyson doesn't get into face slapping!

Have a slap free day!

Wednesday, October 24, 2012

Meet the millionaire that refuses to spend money!

Good morning economists. A lot of people nowadays are looking for investments that will give them a high return and thus make them rich. A woman named Victoria, who lives in the US was recently featured in an episode of "Extreme Cheapskates" and has found the answer to becoming a millionaire. Victoria simply does not spend money.

How can this be done you may ask. It seems that the aforementioned millionaire, uses such techniques as showering in the local YMCA (free gym) even though her shower at home is working fine. Also she pees in bottles so that she does not have to flush the toilet.

Her family does not really approve of her lifestyle, especially when she goes scavenging for food in the woods. Anything that is edible, makes its way on the family's table.

Victoria is a millionaire in that she has millions of dollars in the bank, but in the end, would YOU live this way on your way to becoming rich? Talk about opportunity cost of money!

Have a toilet flushing day!

Tuesday, October 23, 2012

Real fire caused by imaginary cigarette

Good evening everyone. In the world of economic theory we often talk about simplifying assumptions. The problem with these assumptions is that sometimes they simply do not represent reality. For example not all people are selfish utility maximizers who only think about themselves. What happens when an assumption goes wrong?

I was reading the news today when I came across a story which depicts the impact of assumption failure. Apparently, a patient in the University of Michigan at Ann Arbor Hospital attempted to light a cigarette, causing a fire to break out which resulted to a nurse sustaining minor injuries. Now I know what you are thinking...Why in the world would he light up a cigarette in a hospital room? Why not step outside?
It turns out that THERE WAS NO CIGARETTE to begin with. The patient was assuming that he had an imaginary cigarette which he attempted to light. His bedding was torched!

This is what happens in real life as well. When economic theories are based on false assumptions they end up torching the economy. Something like what we see today in the form of the recession.

Have an assumption free day!

Monday, October 22, 2012

Brothel sponsored football team!

Good morning economists. I think it is safe to say that we will witness strange financial decisions in the midst of the financial crisis. For the rest of this week, I will present the most weird of investment choices and comment on their potential for success.

Voukefalas football club is an amateur club in Larissa, Greece, that requires around $13.000 yearly in order to operate. As fund sources are becoming scarce (especially in Greece) the club chairman found it difficult to refuse a sponsorship offer from a local brothel!. Villa Erotica, owned by Soulla Alevridou, offered to pay the required amount if the team agreed to advertise its "services" on a newly designed pink shirt. Here was the result:
  (photo courtesy of New York Post)

The players, who are mostly bartenders, waiters,  students and delivery guys, did not believe at first the choice of sponsor but were quick to revise their opinions when they saw the pink football shirts. The local league reacted by banning the shirts from the field as they were considered inappropriate for under aged fans.

Ms. Alevridou, is confident that the decision will be overturned and in fact attended a football match together with some of her....employees. As an aside, it is vital to remind that prostitution is legal in Greece but brothels must follow strict guidelines.

From an economic standpoint, that investment will undoubtedly pay off as news of this have traveled all over the globe and plus a football match is mostly attended by men who are potential customers. So hat off to the businesswoman who thought of the idea.

On the other side, the scandal of prostitutes that were found to operate without a license and were infected with HIV is still fresh in the minds of the people of Greece. Financially, it may look like a good investment. But should a good investment also be ethical?

Have a sporty day!

Sunday, October 21, 2012

The way of the samurai

Good morning economists and have a nice week! Continuing our discussion of satisfying the excess demand for law enforcement another incident which included a vigilante samurai warrior(!!!) took place this time on a Phoenix light rail train. Apparently the fight broke out at around 2 a.m. on Oct. 6th near Central Avenue and Camelback Road. A couple of younger men attacked another passenger when this happened:
I have sooo many questions about this one. Where did the man find the sword? Why was he carrying it with him? How was he able to hide a full length katana sword? What did the police do once they found out?

The "samurai" also seems to possess some skills with the sword as he takes the normal samurai attack stance when faced with his opponents.

Although the incident is rather funny for the video clip viewers, it enforces the fact that crime on rail trains  has increased from 350 incidents in 2006 to 1200 incidents in 2011 according to Washington Metropolitan Police data. Maybe we need some more public service providers that will raise rail security such as...samurais.

よい一日を (translation: have a nice day)!

Thursday, October 18, 2012

Batman arrested!

Good morning economists. I was surprised this morning to read in the news that a person who was dressed up as Batman was arrested in Michigan for obstructing police work. Apparently the 33 year old was walking around in a cape trying to keep the world safe. He was trying to help the police to find a driver who was involved in an accident but fled the scene. The police did not appreciate his willingness to assist.

Sometime ago, Batman was also pulled over while driving his Lamborghini because he had a batman sign instead of a license plate!!Here is the raw police video. Funny thing is that the policemen are asked to be photographed with the superhero.

The world needs more superheroes nowadays since crime is at an all time high. Which actually brings up an interesting question. Do we need more volunteers to provide this public service (citizen protection)? And if the only thing these volunteers require is to wear superhero costumes, should they be allowed?

Have a superhero day!

Wednesday, October 17, 2012

Beer stealing...nun

Good morning economists. Usually when we go grocery shopping we make a list of the items we need and we try to buy according to our budget. The problem is one of utility maximization subject to a budget constraint. But what happens when your budget is not enough to cover your basic needs...say beer drinking? Apparently this nun in Oklahoma found the solution:
The nun stole a couple of cans of beer and water. Even though we do not know whether the nun was actually charged of a crime, I can imagine her reaction to a possible interrogation. "Jesus turned the water into beer!"

On a more serious note, should we be worried when nuns are forced to steal?

Have a religious day!

Tuesday, October 16, 2012

Fake medical student upsets campus

Good morning all. We have all been asked at one point in our live what we aspire to become when we grow up. According to Otago Daily Times an unnamed individual at the at the University of Auckland Medical School in New Zealand aspired to become a doctor so badly that he was not disheartened when the University turned down his application. Instead, he started attending classes at the University without being registered and was doing so for TWO YEARS before Professors found out. He discovered the secret to free education without the burden of doing homework or taking tests.
The unnamed student was apparently very popular with his classmates and was attending classes regularly. He was cheating the system by not taking exams or submitting assignments mainly because the classes were so large. The student was also practicing at the local hospital by using a fake doctor's ID.

Talk about expectations and the self fulfilling prophecy actually not applying in this situation.Given the current recession, could there be more fake university students or professionals out there?

Have a nice day!

Solo geeky speed dating

I just had to comment on the results of the Sci Fi speed dating event during the New York Comic con this year. Just to give you an idea of what is going on during speed dating, people, who are not familiar with each other, have the chance to talk to each other for a limited amount of time. After the time is over, they rotate partners and at the end of the event they pick out the ones that they really liked with the hope that the reverse is also the case. Of course a Sci Fi speed dating is not just another event as one can see some really strange stuff such as this one:
But no matter the dress code, a scandal occurred during the event as a person who was dressed up as Baine and was really popular with the speed dating ladies turned out to be married! Talk about disappointment! In such cases, the result is not Pareto optimum (the best you can get) because one of the players is not eligible to play the game of speed dating. How would we solve the problem in this case? Pareto optimality is when it is not possible to make someone better off without making someone else worse off. In this case though we could remove Baine from the event and we would immediately have Pareto optimality. Why? Look at the following photo:
Turns out that there was one extra guy who did not have a partner. Although funny, seeing the guy sitting there alone while the rest are doing their thing, he is really the answer to the scandal.

Have a geeky afternoon!

Monday, October 15, 2012

What do baby diapers and suit ties have in common?

Good morning economists. The answer is that they are both types of economic indicators. Allow me to explain.

In 2008, because of the recession, diaper sales decreased by 9% since parents were changing the child's diaper fewer times a day. This of course led to an increase in diaper rash cream by 2.8% according to Symphony IRI.
 On the contrary, the demand for ties actually increased dramatically when new layoffs were announced in 2008 in the UK. This is because employees wanted to look their best in order to impress their employers and send signals as to the seriousness of their work. In a past post we have already discussed the positive impacts of how looking good can actually help your career.

Have you bought a tie lately? (scarf applies for ladies)

Have a nice day!

Sunday, October 14, 2012

Popcorn and zombies!

Good morning economists. Did you know that the popcorn industry is one of the few markets where demand is increasing during times of recession? As soon as the recession hit the US in 2009, cinema theaters were filled with eager viewers who were trying to avoid the problems of everyday life even for an hour or two. Consumers filled movie theaters irrespective of the movie quality (from Harry Potter to Jason Bourne) and since popcorn is a complement (is usually consumed while watching a film), its demand also increased dramatically.
The second strange story of the day comes from Detroit where in 2009 the number of unclaimed dead bodies in state morgues was doubled in a period of two months. It seems that the relatives did not claim their dead because they wanted the state to pay for the burial cost. Suddenly, the John and Jane Does of the world increased. Talk about macabre! Maybe this story was the inspiration for a prank sign that made its appearance roadside in Arizona.
What will we see next? Visit the Everyday Economist tomorrow to find out!

Have a nice day!

The story of the $1 robbers

Good morning economists. When you hear about bank robberies you usually think about large sums of money right? Well in the Jeffrey McMullen case, this did not apply. Apparently the 50 year old entered a well known bank in Pennsylvania and demanded $1. In fact, he let the bank teller know that this was a federal robbery.

Even though the bank employees thought that it was a joke, the man was insisting that he was robbing the bank. In the end he was arrested and is now waiting a preliminary hearing. His bail is set at $50.000. For some reason, his motive from robbing the bank was to get caught in order to be sentenced in the federal jail in central Pennsylvania.

Is it worth it, one may ask to risk imprisonment for a buck? At first glance the answer is no, however, I would not be surprised if the man's financial situation was so bad that he wanted to go to jail where he would have free accommodation and free food. Think about it. How long do you think he will be sentenced for?

A similar robbery took place in the Carolinas  a year ago when a man who was so desperate for medical attention, robbed a bank for a $1 and then waited for police to arrive. It will be interesting to see whether the dollar robbery streak continues. 

Have a nice Sunday!

Saturday, October 13, 2012

Hands off my pension check!

Good morning everyone. I was surprised today to hear about a pair of old ladies who were taking a relaxing cruise, when they suddenly discovered that one of their purses was missing. Containing their cabin keys, the pair was worried so down to their cabin they went.

They caught the burglar in action and according to Haninge Police report, they became "bloody furious". One of the poor old ladies pushed the burglar against the corridor wall while the other put him in an arm lock position. They said that they were inspired by the classic television "Beck" films. The crook was finally apprehended by the cruise ship security.
 I think the incident gives a whole new meaning to "insuring pension plans". When will burglars understand that there are no easy targets nowadays!

Have a nice weekend.

Friday, October 12, 2012

Reverse high heels?

Another crazy product! In the world of economics we often talk about the first mover advantage. This is when a company is introducing a new product in the market thus capturing a large proportion of the market share and enjoying huge profits. Examples of the first mover advantage include Apple in the case of the iPod and the MP3 players and Amazon for the sale of ebooks.

Apparently, artist Leanie van der Vyver and shoemaker René van den Berg came up with a new pair of REVERSE high heels which are sort of controversial to say the least.
Is this an example of an attempt to a first mover advantage payoffs, or the creation of a ________ artist? (fill in the blank)

I am wondering how many women would consider wearing these just to stand out (literally) from the crowd.

Have a "flat" day!

Goat gets stolen to receive a...manicure!

Oh boy, this is a strange one. Apparently a pair of suspects in San Diego were caught on tape stealing a goat from a local petting zoo. The goat, "Billy" was eventually returned but it had its hooves manicured in pink! Apparently the zoo employees tried to remove the polish but it is not coming off.
What were the motives of the culprits? Were they practicing their nail polishing techniques? Were they making a prank? Or were they under the impression that they were making the goat look better for all the kids to enjoy? (Or they were so drunk that none of the above applies).

No matter the motive, I find it hard to explain this using the rational agent hypothesis. If the couple were utility maximizers then I am really curious to know what led them to this act.

Enjoy the rest of your day!

Thursday, October 11, 2012

The Gangnam style phenomenon

Good morning economists. Today I will discuss the phenomenon of Gangnam style. For those of you not familiar with the song, here it is:
The song is the inspiration of PSY and even though it has an upbeat music, it first became popular in Korea because it talks about "Gangnam" a trendy district in Seoul where everyone who live there is supposedly a member of the upper class. The Gangnam district is very much like Beverly Hills in California and in the midst of the worst recession in the last decades, who wouldn't like to live his/her life Gangnam style?

The song also talks about a girl who is refined yet knows when to party and "Oppan" is a translation of a "Brother" who is supposedly Gangnam style.

Nice place to live in Gangnam, isn't it. Perhaps the song owes its success to the image it portrays during the difficult time periods.

Have a Gangnam style day!

The price of hormones

Good evening everyone. I just heard the news of two teenagers in Germany being accused of pawning their mother's jewelery in order to visit a brothel!

Apparently the jewelery was worth 3000 Euros, and the two 14 year olds got 300 Euros in order to satisfy their hormonal needs. So to put it in economic terms, the opportunity cost of hormones was the jewelery they pawned. They were prepared to take a loss of 2700 Euros to do their thing.
I am wondering what they would have pawned if they were 15 or 16 years old. Do hormones have positive relationship with the value of pawned jewelery?

Have a good night!

Wednesday, October 10, 2012

Starbucks kebab, Quiznos gyros and Bugs Bunny

Good morning economists! Today I would like to discuss the benefits of consumer loyalty to a brand. Even though this topic largely falls under the field of marketing, economic studies have been conducted to calculate the value of brand recognition and the potential profits this brings to companies. I would like to share a few stories with you to show how small businesses try to capitalize (illegally) on big name branding.

Five years ago, I was driving along a quiet neighborhood when my eyes caught a Starbucks sign. That was curious to me because I knew for a fact that there was no Starbucks store anywhere near that area. I stepped in the store out of curiosity. I was met with an elderly lady who informed me that their specialty was the greek souvlaki. "Why the sign" I asked. "We have been here for many years now. They (the real Starbucks) just opened in this town. They are copying us!" was the reply. That seemed funny to me at the time. The store closed down a couple of months later.

My second story has to do with a gyros fast food store which opened a year ago in my town. As soon as I saw their sign, I knew they were up to something...

Recognize the logo? A very very VERY familiar logo of a well established business. When I told the local manager of the potential infringement, he acted surprised and blamed their marketing agents who designed the logo. One year later, the logo is still there.

Last story of this post. How can a local butcher who is selling rabbits capitalize on a name that everyone knows? But of course he is advertising that he is selling Bugs Bunny. Problem is, this ain't the "BAGS" (instead of Bugs) bunny Elmer Fudd is chasing all these years.
By the way, do not forget to check out Marketing Cache a blog by a good friend and colleague.

Have a wonderful day!

QVC: we advertise until we drop!

Good evening everyone. Just came across this video on youtube and I was stunned. QVC is an advertising television channel where consumers can buy the products either online or through the phone. Nothing wrong about that...

But what happens when one of the co hosts of the show suddenly feels ill and faints? What does the second host do?

a) help his co-host
b) interrupt the program
c) continue with the sale pitch

And the correct answer is......

It was afterall a HOT pick! I am really wondering what impact the host's choice had on the orders of the product that day.

Have a great night!

Tuesday, October 9, 2012

We need to APPRECIATE!

Good morning economists. Have you ever been in a situation where you appreciate something or someone in your life only after you lose it (or him/her)? Why is it that we do not appreciate what we have? And why is it that we desire what other people have even though they may not even compare to ours?

My friends over at "Trust me I am an economist" posted the following picture which got me thinking.
Think about it...this little graph basically describes our life cycle. We are usually excited when something new is about to enter our lives, then we get bored with it after an appropriate amount of time and once we lose it, we remember the good times when we had it. Apparently this applies both to material goods and human beings as well.

If I were to theorize about this I would argue that the creation of habits decreases our utility or enjoyment we get from having that particular something. Indeed, a study conducted in 2011 in England found that 60% of UK home owners undervalued the stuff they had in their homes. This in turn, caused them to buy lower insurance coverage.

Have you lost something or someone lately? 

Have an appreciative day!

Monday, October 8, 2012

Brazilian politician bribes voters with cocaine

Good morning economists! I was discussing the impact of recession on different goods markets the other day with a few of my students. I asked for some examples of a good that would exhibit no change in quantity demanded no matter the change in price (in other words a perfectly inelastic demand curve). A student was quick to suggest that illegal substances such as drugs can have such characteristics due to the addictive qualities that they have on people. Although, not the example I was looking for, I did have to agree with his remarks and then a question popped in my head.

Are drug addicts consuming the same, decreased or increased quantities of the drug during times of recession? Are they looking for a way out of their problems by increasing consumption or are they victims of the bad economy therefore reducing their usage? And independently of consumers, are drug dealers more inclined to provide less pure of a product?
No matter the answers to these questions, a Brazilian politician who was running for city council found that the best way to attract voters was to attach a bag of cocaine to the leaflet that was advertising her campaign. Needless to say, she was arrested by the police and incriminating evidence was found in her car. 

I am wondering whether voters would have a clear enough head to pick her out of the ballot if they used the cocaine before going to the polls. 

Have an addiction free day (does not include coffee)! 

Sunday, October 7, 2012

It takes a university degree to become a scarecrow

Good morning everyone. I wish you all a lovely week. Today I would like to discuss the story of 22 year old Jamie Fox, a recent college graduate from Norfolk England, who beat the economic recession odds and was recently hired to be the first human...scarecrow.

Apparently Jamie's duties include chasing partridges away from a field of oilseed rape. To assist him with his task he is dressed in an orange jumpsuit and uses an accordion and a cowbell to chase away the evil birds.

Though strange, Jamie's case brings up an important point. With the unemployment level of the under 25 year old group reaching a record level of 26% in most countries it appears that people in this younger age group are prepared to do any type of job to secure at least a minimum pay. The problem is that a significant time period will have to pass in order to witness a return on their educational investment. Jamie gave up looking for his dream job to become a scarecrow. How much is YOUR dream worth?

Have a nice day!

Auctioning off virginity for charity

Greetings economists! Although I do not normally post on Sundays, I came across an article today describing the attempt of Catarina Migliorini, a 20 year old Brazilian college student, to auction off her virginity as a means of raising money for charity. Admittedly, there have been other attempts in the past that created controversy of people auctioning off their virginity as a means of raising money. But the goal then was to raise money to satisfy other more selfish needs. 

Here is where the matter gets tricky. In the vast majority, society would normally reject such behavior as auctioning off people could considered to be unethical. Indeed, serious auction houses including Ebay do not go anywhere near such auctions. Does the fact that the "seller" is offering to donate some of the money to provide housing for poor families in Santa Catarina in her native Brazil make this action ethical? And if so what is the price of "ethical"?
The image capture above shows the current highest bid as well as the name of the bidder. Is the bidder a fornicator or a charity donor? 

The inclusion of the charity promise in the description will most likely increase the bidding price because it attempts to remove any negative labels for the winning bidder. 

Sad but true. Have a nice Sunday!

Friday, October 5, 2012

Stealing iPhone from a baby

Bonus post everyone! I simply could not leave this piece of news without comment. A CCTV camera caught an unidentified man stealing an iPhone from a 20 month old baby. Here is the video:

This gives a whole new meaning to the saying of "like stealing candy from a baby". Apparently the mother gave the baby the iPhone to watch "Barney and his friends" while she was shopping in the store. I just don't get it! Why would anyone leave a baby alone, in the mercy of every pervert, thief or passer by who could harm it?

Yes the thief is to blame and he should be punished accordingly. But as far as I am concerned the mother is also responsible for leaving her baby unprotected.

As a closing remark I would like to add that the iPhone is one of the most sought after items for stealing. In Japan alone $100.000 worth of iPhone 5 units were stolen just a few days before they were released. I am guessing, that took a lot more effort than the case above.

What kind of person would steal an iPhone from a baby? Have a nice weekend!

Thursday, October 4, 2012

The value of cyber sabotage

Good morning everyone. Yesterday I was discussing the idea of the ethical company and the impact that ethical practices have on profitability. Can we actually place a value on an example of unethical behavior?

A while back I was playing around with google and facebook ads as a way of promoting this website. I found out the hard way that this was not really financially smart as each ad click which was leading to my site was costing me 25 cents. Given, the cost per click may not appear to be high enough, but if you aggregate the clicks on a daily basis they were quickly adding up to a three digit amount per day. Given that the website's sole purpose is to inform readers about how economics is used on a daily basis, I quickly abandoned this strategy. My experience though gave me an idea of how a company can sabotage a rival.

If companies advertise through google or facebook, it is not unheard of paying prices that can reach up to $1 per click, sometimes even more. The reason for such high of a price is that through google ads a company can target a particular viewer  who in turn has a higher probability of purchasing the product or service. In most cases advertising companies will set a daily budget that cannot be exceeded.

A rival company can cyber sabotage by repeatedly clicking on google ads, therefore increasing the cost of advertising and also eating away the daily budget so that the campaign becomes ineffective. (And yes for the computer geeks among us the only thing we need is to hide the ip address or access the internet from multiple locations).

If cyber sabotage is a probability, why do companies advertise at all?

Have a sabotage free day!

Wednesday, October 3, 2012

What do you do for a living?

Good morning everyone. I would like to share with you today something that happened to me a couple of weeks ago. Before I do that, though, allow me a short introduction.

 A well known branch of economics that is gaining momentum is behavioral economics. Behavioral economics differs from traditional economics because it does away with the assumption of a rational selfish agent who is after maximizing unemotional enjoyment. Instead behavioral economics studies human reaction which sometimes may deemed to be irrational.

Although there is a school of thought which attempts to marry behavioral and traditional economics (I am an avid supporter of this school), there is a general belief that during the past few years the traditional rational agent is becoming extinct. Could it be that an economic recession could alter human behavior in ways that are not financially motivated?
Sometime ago I attended a function where I met a lot of people that I was not acquainted with. Traditionally, the flow of conversation would have started with the "what is your name" question,  "nice to meet you" greeting, to "how are you". Naturally, to keep the conversation going, my next question would normally be "what do you do for a living"? This time around, I avoided asking this question as the probability of someone being unemployed is rather high. I wanted to avoid the awkward discussion that would eventually follow. I had to alter my normal behavior because of the recession impact on unemployment.

I figured if the other person was employed, he/she would probably ask the question themselves...or would they? If we employ the theory of rational expectations, then other people would also avoid asking such question out of fear that the other conversing party is unemployed. Result? A change in social behavior which in under different circumstances would have deemed to be normal.

So, what do you do for a living? Have a nice day! 

Tuesday, October 2, 2012

Coupons for happy marriage

Good morning economists. Yesterday night I was watching an episode of "Extreme Couponing" on TLC. We already discussed the financial advantages of couponing in an earlier post, although I can add that US consumers saved a total of 4.6 billion dollars in coupons in 2011 alone (perhaps the government can pay part of the money it owes using coupons). What I did not realize at the time is the importance of couponing on maintaining a happy marriage. In the United States specifically, the divorce rate is approximately 50%. The large majority of these couples (80%) cite financial problems.

In the show that I was watching last night, a couple of people admitted that they were on the verge of a divorce because of their inability to purchase even basic items like bread and milk. It seems that the answer to their prayers was lying in the neighbor's trash can in the form of unused coupons.

 They quickly realized that they could save a bundle by using a ridiculously large number of coupons at the grocery store. A couple of months and many many coupons later, they had stocked up food and other household items that would last them a lifetime and they did all that with no extra money. And the best thing...they were happy!

Marriage saved! Interesting economic approach to an otherwise social problem.

Have a great couponing day!

Monday, October 1, 2012

Louis Vuitton....condoms!

Good morning everyone. A while back I posted an article on fake Louis Vuitton bags and the conclusion there was that no matter the authenticity of the bag, others' perceptions of the bag holder's social status were the most important.

What happens when the knockoff economy (fakes) are taking the market a step further? During my travels abroad, I came across some really unusual items like a Chanel bicycle, or a Hermes mobile phone. It is interesting to see the innovative products the knockoff economy provides even though it is rather obvious that these products are not authentic. The latest creation was photographed by Donna Ivanisevic as part of a freakonomics contest and depicts the following:

I never realized that Louis Vuitton would ever be interested in entering that market, but apparently the darn things became a hit. Can the knockoff economy become the testing ground for designer brands? Something to consider.

Have a nice knockoff day!