Friday, October 25, 2013

When the Value of Information is Negative

It's 2023, and data scientists develop a DNA test that perfectly predicts each person's future disease and thus each person's exact lifetime medical expenses.
  • In one country, insurers price all "insurance policies" to fully reflect these future costs. Everyone pays exactly what they will get back.
  • In a second country, insurers are required to provide insurance at standardized rate which ignores the DNA test and everyone is required to buy it.
Question 1: Ceteris paribus, which country has better insurance? Which has higher overall welfare? If you haven't taken the DNA test yet, which would you rather live in?

Question 2: Would any of your answers change if the test was imperfect and only predicted some of your medical expenses?

Thursday, October 3, 2013

France Protects Booksellers from Amazon through Legislation

According to an article on today:
France’s parliament has passed a law preventing internet booksellers from offering free delivery to customers, in an attempt to protect the country’s struggling bookshops from the growing dominance of US online retailer Amazon.
The report highlights a risk that Amazon faces - its cost leadership in France is seen as a threat against which local bookshops need to be protected through legislation. Rather than be seen as an isolated incident, this perhaps is an indication that Amazon has reached a size where its action will attract law makers’ attention.

Is Mass Media a Myth in the Information Economy?

Hal Varian, Chief Economist at Google, recently gave an interesting speech where he discussed the economics of the newspaper industry. Varian proposes that tablets give newspapers a way to reclaim some lost audience.

Jeff Jarvis, author of the book entitled 'What Would Google Do?' takes an opposing viewpoint. He contends that that mass media is a myth and that newspapers should personalize content to stay relevant.