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Product Placement at Universities

Public higher education in the U.S. is not in good shape—and the main reason is lack of funds.  States will not increase their funding, and often they severely limit tuition increases.  My university appears to have hit upon a solution:  product placement and direct advertising.  The new computer building, the Gates Building, is part of the Dell Computer  Science Center, and has a Dell logo and signs for eBay and PayPal in front of the building.

But why stop here?  Five hundred students stare at me for 1-1/4 hours 28 times each fall semester.  The university could ask me to advertise—wear a cap, or a t-shirt, just like a tennis star—showing the product of whichever companies bid the most for the rights to advertise on my apparel during class.  While I would probably insist on some of the royalties, the bilateral monopoly between the university and me would surely raise funds for the university.  With enough professors required to do this, public universities could alleviate some of their financial problems. No doubt readers have similar clever ideas for product placement that would help fund public universities, albeit at some cost in dignity.



In Praise of Big Prizes

An honors course of 150 students at the University of Texas requires short written assignments each week.  The instructor had given prizes of $,1500, $1,000 and $500 to the top three papers at semester’s end. He abandoned this prize structure and now gives prizes of $100 to the three best papers each week.

The instructor, an English professor, is unfamiliar with tournament models and the idea that larger top prizes and a steeper prize gradient will elicit more effort than a flatter gradient, one with more prizes of smaller amounts (Lazear and Rosen, 1981).  My guess is that he wants to be fair rather than confer such unequal prizes; but he would get better written work if he went back to the old system, just as Tiger Woods is better motivated by a big winning prize for a whole tournament than he would be by small prizes for having the best score in a particular round. Alternatively, combine equity and efficiency by offering two $100 prizes each week, then one $1,000 prize at the semester’s end.

(HT: L.C.)



Economists Needed in the Music Business!

For the first time, Austin City Limits, one of the two biggest music festivals in town, is running on two weekends instead of just one.  Unfortunately, the price for a pass for the second weekend on Craigslist is now down to half the festival sponsor’s original asking price.  Why?

1. The asking price for the second weekend was the same as for the first—not smart when you’re doubling the number of offerings; and the headliners are identical on the two weekends. The amount supplied is double in quantity, but no different in quality or even in variety; double supply, no change in demand.

2. Demand is almost certainly lower on the second weekend, since that is the weekend of the UT-Oklahoma game in Dallas.

It was probably a bad business decision to price the second weekend the same as the first. 

(HT: KM)



The Opportunity Cost of an Email

There’s a midterm this week in my class of 550 students, and I have been deluged with emailed questions, many procedural, that are covered in the online daily class summary. (For example, is the test being given in class?)  In the old days, when students came to office hours to ask questions, I wouldn’t have gotten most of these queries.  Regrettably, a student’s opportunity cost of emailing is much less than the cost of an office visit.

Why don’t I raise the cost to students by refusing to answer these emails?  If I thought that would deter all such questions and visits, I would refuse. But even if 20 percent of the emails translate into student visits, I’m better off answering the emails, since each takes me at most 1/5 as long as dealing with the question face-to-face in my office.  This is annoying, but I believe I save time this way.



No Camping in Faculty Offices

A student appears to have enclosed the commons: for the last two weeks, he has camped in a small public area in the vestibule of a suite of faculty offices, making it unusable for other students to meet in groups (its use in all previous years).  Believing that this is a public area, and absent my colleagues saying anything, I asked the chap to vacate the place to allow others to use it.  This is a classic case of the difficulty of maintaining property rights in a public setting with no way of enforcing public ownership other than moral suasion. This may be more of a problem in universities than in businesses, given what I find as the self-selection into faculty jobs of people who want to avoid confrontation.



Dismantling the Social Safety Net

One of the major complaints of right-wing politicians against the Affordable Care Act (Obamacare) is its imposed mandates that individuals obtain health insurance and that larger businesses offer health insurance to employees.  The professed opposition is to the mandates, per se.  It ignores the mandates that both employers and workers pay taxes for Social Security coverage—old-age, disability, Medicare, and unemployment compensation.  Mandates are not new—nor is “government interference” in private choices about private insurance.

Opposition to the ACA mandates is really just a stalking horse for the eventual dismantling of the American social safety net. If the new mandates were to be dropped (unlikely, thank goodness), I would expect that their opponents would quickly move on to removing mandates for other programs that have been in effect for 70+ years.



Choosing Your Reward

Last spring, I blogged about the $5/day for in-house food purchases that many Sheraton hotels give guests who waive house-cleaning.  In some hotels, they offer a choice between the $5 and 500 frequent-guest points.  Which is better?  For infrequent guests like me, the $5 is better.  But in some of the best Sheraton hotels, it only takes 10,000 points to obtain a free night—i.e., 20 days of no house-cleaning.  If you are a frequent guest, that seems like a much better deal—the opportunity cost of one free night is $100, typically far below the price of a night.  The Sheraton’s offer creates a separation between infrequent and frequent guests, benefiting the latter (and giving people an incentive to become frequent guests). (HT: DJH)



Why Something Won’t Sell, Even at Fire-Sale Prices

Deuteronomy 28:68 states “ye shall sell yourselves unto your enemies for bondmen and for bondwomen, and no man shall buy you.”  Oh dear, even at a price of zero, supply would exceed demand.  (Josephus noted that there were so many slaves on the market when the Romans destroyed Jerusalem in 70 C.E. that many couldn’t be sold even at fire-sale prices.) 

Why not buy a slave at no cost?   The answer, presumably, is that potential buyers already owned so many low-priced slaves that they believed that another slave’s marginal product would fall short of his or her upkeep.  The variable cost of maintaining the slave must have exceeded his/her output.  Is there a contemporary analogy to teaching assistants?