econlife - Why There Is No Such Thing as a Free Coupon by Elaine Schwartz

Last week, I paid $25 for three hours at an NYC parking garage. Others though paid $50 for the same amount of time.

We could say that it cost me less.

But there is much more to the story.

What the Coupon Cost Me

To get my $25 discount, I had to…

1. Download the Icon Parking app. (Icon is a parking garage owner in NYC.)
2. Find the link to the garage I had selected among their hundreds of locations.
3. Open the link and enter my email.

Then I received an email that said this. (I added the arrow.):

You can see that I had to remember to download the email at least 30 minutes before getting my car.  It would have been much easier to download when I paid. But Icon did not want to make it easy.

Our Bottom Line: Price Discrimination

An economist would say that Icon Parking was engaging in price discrimination. They were targeting a lower price to a specific segment of their market. That market segment would be willing to trade time and hassle for money. That market segment also was more price sensitive or we could say, elastic. By elastic, an economist means that the quantity demanded goes up or down by a greater proportion than the change in price.

A firm’s price discrimination typically is based on a customer’s willingness to pay. The goal is to maximize the revenue from the group that can pay more and also from those that cannot. Movie theaters have senior citizen discounts because the elderly tend to have less discretionary income while everyone else can theoretically pay full price. Educational institutions have financial aid based on need. Airlines have discovered how to identify the observable traits of a business traveler and then charge more for those characteristics.

And it need not even be entire groups. Once websites know more about online shoppers, they can individualize pricing as well as the entire shopping experience. They can treat the valued customer, the repeat customer, the new customer and the price conscious customer differently.

Returning to Icon, you can see what they had in mind. They created a time sacrifice that would cater to the consumer that was price sensitive. The result was getting my $25 as well as $50 from many other patrons.

My sources and more: Price discrimination is usually related to monopoly power. If you would like to read more on the topic, I recommend the always insightful Conversable Economist.

I did want to note that today’s featured image was from the Icon Parking website.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Attention to Detail by Andy Jobson

Working at a military academy brings its own set of priorities.  Our literature promotes the JROTC program as a structural support for academic success, and in many ways that is true, despite occasional conflicts between military and academic goals. 

One element that I have grown to appreciate more over the years is the emphasis on attention to detail.  For a JROTC officer, that entails making sure your gig line is straight, your insignia is correct, your shoes are shined, and your room is “squared away.”  As a teacher, I emphasize the same thing in different ways.  Have you followed the directions as written?  Have you produced neat work?  Have you paid attention to margins and the heading I require?  Are you using punctuation appropriately?

Sometimes the boys get frustrated with my demands.  I work with eighth- through twelfth-graders, and like many teenage boys, they tend to overlook ‘minor’ details.  (How many times have my own boys at home simply not ‘seen’ the piles of clothes and toys in their room?)  There was a time in my educational journey where I might have been willing to forgive such niceties; did it really matter if the boys used the heading I suggested or something else?  The older I get, though, the more I find myself insisting that the boys pay attention to my expectations and meet them.

I think I resisted some of this because I didn’t like the ‘factory’ model, where we were training our boys to be laborers under the industrial system.  The ‘new education,’ we were told, was to prepare students to be critical thinkers, not clock-punchers and automatons.  I agree that critical thinking and independence is vital (hence my association with izzit!), but I also see that paying attention to the directions is a vital skill for success.  Can you say “tax returns”?

If all I’ve done is to train my boys to follow directions, I have failed.  At the same time, though, if I haven’t trained them to read and follow directions, including MLA citation format and the works, then I think I have also failed.  Details matter.

An educator of 22 years, Andy Jobson has taught government, economics, and U.S. History. Currently teaching English literature at Riverside Military Academy in Gainesville, GA, he’s also been an administrator, a STAR teacher twice, and taught elementary school with Teach for America.

econlife - Why Albums Are Longer by Elaine Schwartz

We are streaming more of our music with the newest albums having as many as 45 tracks.

Where are we going? To some marginal thinking.

But first, a bit of history…

Music Industry Revenue

Does anyone remember LP records?

In 1980, the music industry was dominated by LP/EP. With LP standing for long play and EP, extended play vinyl records, both represented almost 60% of the revenue generated by different musical formats. Next, we had cassettes at 19.1%.

By 1992 CDs had ascended to that 60% position and by 2002, were at a whopping 95.5% of all revenue. Fast forward to 2012 though and all began to change. You can see that CDs had moved way down as downloaded singles and albums became more popular:

But this graph says it all:

New Incentives

With streaming becoming increasingly dominant, the incentives in the industry have changed. Musicians have always coveted a higher ranking from Billboard. But now that they count streaming, Billboard has made downloads ever more crucial.

This how The Washington Post explains their criteria:  

You can see that it’s the length that lets you “climb the charts” because longer albums maximize the chance for more downloads.

Examples? Here I again quote The Washington Post since I know little about the 22 tracks in Drake’s “More Life” and the 20 in Ty Dolla $ign’s “Beach House 3.″ The “record” right now though goes to Chris Brown’s “Heartbreak on a Full Moon” with its 45 tracks.

Our Bottom Line: Thinking at the Margin

Thinking about extras, we should thank British economist Alfred Marshall (1842-1924) for his insight. Marshall was the first scholar to suggest we keep an eye on the margin if we truly want to understand supply and demand. Because the margin is where we decide if we want something extra, the cost of that extra item shapes our behavior. At the margin, sellers decide whether to produce something extra and consumers calculate the quantities they are willing and able to buy at different prices. Their decisions depend on the extra item’s marginal utility–its value at the margin.

So, those extra tracks are no longer an artistic decision. As revenue generators, they have considerable marginal utility.

My sources and more: Making yesterday’s walk a pleasure, Tim Harford’s More or Less podcast alerted me to the longer album phenomenon. From there, I discovered more facts in The Guardian and Forbes. But The Washington Post had the best article.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - When Organ Donors Need More Than a Nudge by Elaine Schwartz

Economic research tells us that default options are powerful. Because they ask us to do nothing, we tend to select them. So, if the default retirement plan encourages the most saving, many of us wind up putting more aside. Or, if we are defaulted into a high co-pay health insurance plan, we take it.

But really, it is more complicated.

Where are we going? To a closer look at deceased organ donations.

Organ Donation Defaults

In France, deceased organ donation recently became the default.

People will automatically donate their organs when they die unless they actively “opt-out.” Reading Richard Thaler, most of us would say the nudge should work. And yes, when the law went into effect on January 1, 2017, only 150,000 out of a possible 66 million had signed the “refusal register.”

Similarly, with opt-in as the default, Spain has led the world with a 35.7 out of 1 million donation rate. But here is where it gets tricky. Looking further, you would discover that Portugal and Belgium’s donation rates are similar to the U.S. And yet, the former two countries have the “opt-in” default. Furthermore, when Australia (+41%) and the U.K. (+36%) successfully upped their 2009 deceased organ donation rates by 2014, they did not change their consent systems:

Our Bottom Line: Spillover

From a study on how to boost New Zealand’s deceased donor organ rate, I saw some of the behind-the-scenes issues. My takeaway was that increasing deceased organ donations has to involve institutional spillover.

Looking at Spain, Portugal, and Croatia, the New Zealand study said you need the following. (Some I directly quoted while others I summarized):

• an appropriate legal, ethical, and governance framework
• a national coordinating body
• hospital-based donation specialists
• specialist training
• financial and media support
• international best practices sharing

Where does this leave us? Sometimes a nudge is not enough.

My sources and more: For nudges generally, Richard Thaler (2017 economics Nobel laureate) talks about them in a Yale Insights article. More specifically, for organ donation, you might enjoy this NY Magazine article. But for the story behind the nudge, this New Zealand report from its Health Ministry has the best information.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

econlife - The Messages That Satellite Images Send by Elaine Schwartz

The weather at lēf farms has been described as summery… always. Whether it’s July or January, the temperature is close to 75 degrees, the breeze gently blows, and the air feels moist.

As an indoor state-of-the-art glass greenhouse in New Hampshire, the farm minimally pollutes while year round, the neighbors enjoy local produce. They have just one complaint.

You can see below that the lēf farms greenhouses are rather bright. Area residents say they give off an eerie orange color that obscures the beauty of a dark sky:

The firm’s CEO explains that 80% of the farm’s light requirements come from the sun. 

However, the other 20% comes from artificial lighting.

Those artificial lights are our focus today.

 

Light Stories

Lights can tell a story. In a project called Lights On/Lights Out, using satellite images, scientists have compared levels of illumination between 2012 and 2016.

Below, they hypothesize why some regions became more or less lit during those four years. Please think blue for more light and pink for less:

So, when you look at the following images, think blue for lights going on during those four years and pink for less of them:

Northern India’s massive electrification initiative is clearly shown:

We can guess that Venezuela's economic crises have darkened the country:

Europe appears to have darkened at night:

 

 

 

 

 

 

 

Our Bottom Line: Economic Growth

Nighttime satellite images can be barometers of economic activity. They can reflect a more vibrant GDP that is fueled by the ability to create artificial light.

So yes, we can say these pictures are…illuminating. But returning to lēf farms, night lights don’t necessarily tell the whole story.

My sources and more: Thanks to New Hampshire Public Radio for its Outside/In podcast where I learned about lēf farms. And always, I appreciate marginal revolution where I found the link to “Lights On/Lights Out.” Finally, as did I, you might want to peek at the lēf farms website.

Ideal for the classroom, econlife.com reflects Elaine Schwartz's work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.