Friday, January 28, 2011

Economists meet at MIT

As part of the 150th Anniversary Celebration, top economists gathered at MIT.

Here's a summary based on the MIT Sloan Management Review blog:

MIT PhD and MIT Professor Peter Diamond pointed out that the credit crunch hit small businesses hardest and as a result:
“Employment growth by small business — relative to employment growth by large business — is way down,”

MIT PhD and Stanford Professor Bob Hall on the causes of the recession:
“It’s entirely the result of a very substantial enforcement policy lapse, of allowing extremely highly leveraged financial institutions to have important roles in the economy without proper regulation,”

MIT PhD and Northwestern Professor Bob Gordon on the stimulus package (with the concurrence of MIT PhD and Princeton Professor Paul Krugman) said that
Obama stimulus did not increase the share of government spending in potential output, because the increase in spending by the federal government wasn’t enough to offset the decline in state and local government spending that was also going on. State and local governments in the U.S., he said, have shed 200,000 jobs in the past year — and they’re just beginning.

MIT PhD and Harvard Professor Greg Mankiw said he was skeptical of infrastructure projects as source of stimulus because they take so long to get going.

Wednesday, January 26, 2011

Driving can't be frictionless, but can shopping for gas?

Pull into a parking lot, open the right [mobile] app and you may be able to save a dollar or two on your next fill-up. Over the course of a year, you might even save enough money for a decent meal out.

That's from an article by Bob Tedeschi in the New York Times on an emerging set of mobile apps that help you find cheaper gasoline. It won't be long until they're bundled with GPS maps and factory-options in cars.

These apps join RedLaser and host of related tools that bring low cost search from the online world to the rest of retailing. The result is not likely to be frictionless commerce, any more than it was for Internet merchants, but it certainly should reduce the importance of geography and customer ignorance as sources of competitive advantage.

Tuesday, January 4, 2011

Good, but could it be better?

Alex Tabarrok and Jim Ward point out that Delta is now auctioning off travel vouchers when they overbook their seats.

This is appears to be a first price auction, where you get paid your bid if you win. Unfortunately, your optimal bid depends not only on your own value, but also what you think other people will bid and the number of seats needed.

Should Delta switch to a generalized second price auction instead? That would make it more attractive for bidders to just enter their true reservation value without trying to size up and outguess everyone else. Winners would be pleasantly surprised when they were paid MORE money than they bid.