Totally don’t get Amazon’s pricing schemes

About a week ago, I visited a friend and colleague in DC and got to meet her beautiful baby boy. While I and another friend played and cooed and giggled, my friend raved about a baby mobile (Wimmer-Ferguson Infant Stim-Mobile). The baby loved it, she loved it, her husband loved it and apparently it made everyone in her household happier. Since my college roommate welcomed the arrival of her fourth little one a few weeks ago, I decided to send her a “hey you made it through three weeks with four kids” present and what better gift than one that will totally enrapture an infant for multiples of minutes, like even tens of minutes. Peace and quiet? Yes, please.

Another good friend is due this month, (yes, it’s the year of babies, and I’m behind, sorry y’all!) and I thought, well, the mobile’s two for two, why not send it to V as well? Last Friday, I went to buy it and imagine my surprise when the price on Amazon went up by $2.64 between this week and last week. A more than 10% increase in the price of the good when I’m buying the second one? While I can’t say that I’m seeing different prices based on my purchases (if so, I just guaranteed higher prices by declaring it’s the year of babies on my blog), it does seem odd that the price would go up on something I had just purchased. I was in such a principles of micro frenzy at the moment: Marginal benefit is decreasing! Willingness to pay falls as the number of goods increases. Why aren’t they charging me less, not more? That’s what the law of demand says, #goshdarnit.

That’s flawed thinking, of course. If they are actually offering me a different price based on my buying history, and I’m going back for another one, the first one probably already proved its worth (a chorus of “I love it” from my college roommate is what prompted me to look again for V), and so perhaps now I’m willing to pay more for it.

If that didn’t confuse me enough, I got over my mini-fit enough from the other day to go back and buy it regardless of the price increase, and it was back down again, within a few cents of what I had paid the first time.

One savvy small-business owner friend suggested that Amazon might be trying dynamic pricing to determine the best price for the product. That is perhaps even more fascinating than them trying to charge individuals different prices based on their purchase history or demographics. They did some of this before, denied it, and got in trouble for it, back in 2000, if you didn’t remember. Then, they were accused of charging different prices based on demographics, but claimed it was an experiment and totally random, and promised not to do it again.

At my last look, the price is back up on the baby mobile, the highest I’ve seen it. I don’t know what’s going on, certainly something.

Update: I’m not the first to notice this. Apparently, Amazon and other retailers are experimenting with airline-like pricing. h/t @ericmbudd

Update  #2: The New York Times is ON it. h/t @thomaspace

The advent of conversations I thought I’d never have

Even teaching at a place like the University of Colorado, marijuana use was never something I discussed with my students or professors. It didn’t really come up among my fellow graduate students (except the ones who played Ultimate, let’s be honest). Outside of one friend who owned a medical marijuana dispensary and a few pothead friends (mostly my guitar teacher, who taught me some Bob Marley before anything else), it just wasn’t something I talked about that much.

The passage of Amendment 64, however, has suddenly turned the conversation on its head in ways I never thought possible. More than once this semester, I have had my principles of micro students ask about marijuana legalization and how we tax it. (The answer was I didn’t know, turns out that in Colorado it’s taxed at a higher rate (regular sales tax) than other pharmaceuticals (exempt from sales and use taxes), which, from an elasticity and deadweight loss perspective in a simple supply and demand model, is certainly the way to go).

Another student asked me this afternoon about moving to Denver after graduation, where he might have a job opportunity. I, of course, lauded Denver’s many highlights and, to my surprise, added, “well, and you can smoke pot legally if you want.” He responded it was not his thing, but we then delved into a conversation on the relative economic merits and costs of legalization. I know that people have been having conversations like this forever, it just seems like they’ve suddenly become much more mainstream.

Finally, on Saturday, I got together with some friends and one friend’s very conservative, elderly, immigrant parents, perhaps the last people on Earth I thought I would have a conversation with about marijuana. But, they grow orchids, and according to the new law, her dad told the group, he can grow six plants and so can his wife, so why not get started? He didn’t want to smoke it, he said. I’m still not sure what he planned to do with it, sell it, keep it just because he could, give it away? But both of my friend’s parents were extremely excited about the possibility. We went back and forth on the specifics of the law all while laughing uproariously at the insistence of two elderly Chinese that they wanted to grow pot and were looking for a consultant to help them, while their daughter tried to convince them not to because she didn’t want to take care of the plants while they’re not in town.

Not your run-of-the-mill cocktail chatter, for sure, but suddenly, it is. Brave New World.

Still learning–experimental economics edition

Until this year, I didn’t really know what experimental economists did. Despite having two experimentalists in my department, one of whom I spend a lot of time with, the whole concept of observing people’s decisions in a controlled environment but not controlling for anything about the individuals seemed totally silly to me. Aren’t you people worried about unobserved heterogeneity? I think my initial outburst was probably a bit oversimplified and I’m getting a better idea of what it means to do economics experiments now, but I’m still a bit skeptical.

After I excitedly read and recounted a paper on experiments and corruption the other day, a colleague of mine at Gettysburg allowed me to sit in on his energy economics class and experiment. Rim runs an experiment in every class after students present papers they’ve read and he presents the relevant theory on some aspect of energy economics. The day I visited, we talked about gasoline markets, differential pricing for differently located gas stations, and profit margins for owners of capital at various stages of the crude-to-consumer pipeline.

Then we got to play video games for the rest of class. I mean, we did an experiment. Half of us were set up in the experiment as gasoline suppliers and half as gas station owners. Each owner had two stations and a dedicated supplier who would set the price for each station. Importantly, the suppliers could dictate different prices for each station. When the game started, cars would enter the matrix and choose where to buy gasoline, usually closer to where they entered, but some were willing to drive if the price difference was great enough. Both suppliers and station owners could change the price as often as they wanted and consumer behavior was dictated by a random draw.

It took me a minute to get the hang of things. For instance, I didn’t realize for the first few rounds that the cost of crude (I was a supplier) was changing because I was so busy trying to figure out what the equilibrium price was for the two different gas stations. It was fun, though, to see how prices evened out and occasionally got out of control. It turned out that the inside-town gas stations had about 30-cent lower prices than the outside-town gas stations. This seems to me like a function of the parameters of the experiment, not really predictable behavior, but perhaps I’m wrong and it’s a function of the interaction of the parameters with behavior.

I think it’s asking a lot to assume that random college kids who know they’re getting paid a few bucks are going to act like gasoline station owners or suppliers. I know that experiments in other fields work like this too, in some way. The idea is to try to control everything you can in order to isolate the behavior or reaction or change. It’s what I try to do with econometrics; it’s what others try to do when they create models as well.

Perhaps it’s just indicative of my general skepticism of my own field, but I’m excited to learn more about it, too.

The long-term effects of food stamps

I was so confused yesterday when the NBER email arrived because I didn’t remember it being Monday. Last week just kind of crept into this week and though I’m ready for my mountains and family, I didn’t expect it to come so fast!

A paper on that sells itself as a ray of sunshine in the midst of a bleak and dreary literature on children’s lifelong outcomes from exposure to poverty, maternal stress, fires, and more. And it’s kind of true. The maternal stress/in-utero distress papers seem to be getting a lot of play lately (here’s one). Hillary Hoynes, Diane Whitmore Schanzenbach and Douglas Almond think perhaps we should look at long-run positive outcomes from the things (read: policies and social safety net programs) we can control. The abstract for “Long Run Impacts of Childhood Access to the Safety Net” reads:

A growing economics literature establishes a causal link between in utero shocks and health and human capital in adulthood. Most studies rely on extreme negative shocks such as famine and pandemics. We are the first to examine the impact of a positive and policy-driven change in economic resources available in utero and during childhood. In particular, we focus on the introduction of a key element of the U.S. safety net, the Food Stamp Program, which was rolled out across counties in the U.S. between 1961 and 1975. We use the Panel Study of Income Dynamics to assemble unique data linking family background and county of residence in early childhood to adult health and economic outcomes. The identification comes from variation across counties and over birth cohorts in exposure to the food stamp program. Our findings indicate that the food stamp program has effects decades after initial exposure. Specifically, access to food stamps in childhood leads to a significant reduction in the incidence of “metabolic syndrome” (obesity, high blood pressure, and diabetes) and, for women, an increase in economic self-sufficiency. Overall, our results suggest substantial internal and external benefits of the safety net that have not previously been quantified.

I tried to read it on the plane, but was distracted by an early, incorrectly used semi-colon. Yes, that’s enough to make me stop reading a paper (especially after wading through 19 student papers with many incorrectly used semi-colons). I’ll get back it to it later, promise.

Job lising of the month

I’m wrapping up my job-applying, at least for the big pre-December 1 deadline push, and am now mostly in the process of looking back at jobs I didn’t apply for in places I’d really like to live. Unsurprisingly, Denver is one of the places, and despite an apparent hiring spree by Colorado schools this year, I’m not a particularly good fit for the faculty positions that are open.

I’m curious, though, if there’s actually anyone who fits this University of Denver opening for an assistant professor of Economics: “Must show promise of distinction in research and publications in the fields of the Chinese economy, environmental economics, and feminist economics.” (emphasis mine.)

Not just heterodox, but feminist, examining questions of environment, and concentrated in an area where those that run the economy are largely indifferent to both feminist and environmental concerns. It kind of boggles the mind. I’m really curious to see who they end up hiring. In fact, I’d like to meet her; she sounds like a rockstar.

National Book Award Finalists

I was pleased to see this week that Katherine Boo’s Behind the Beautiful Forevers: Life, Death, and Hope in a Mumbai Undercity was named the National Book Award Winner for Non-fiction. I finally finished in a flurry of plane rides in October, fighting exhaustion and will-I-make-it-back-to-the-East-Coast stress in the shadow of Hurricane Sandy. Yes, I was one of those lunatics people trying to fly into the storm. I just made it, thankfully–I think my students would have revolted had I not–and haven’t picked up a book since then. If you haven’t read it, I highly recommend it. It doesn’t paint a particularly pretty picture of development, aid, poverty, or India, but that’s kind of the point.

Congratulations to all the winners! Thanks for keeping words beautiful.

Happy Election Day!

Don’t forget to vote today! For those in PA, remember that they can ask you for your photo ID, but you don’t have to provide it (unless you’re voting at a particular location for the first time–but even then, it doesn’t have to be photo ID, just the voter registration card they sent you in the mail.)

I didn’t get a sticker. So I’m just making sure to say it loud and clear here: I voted!

Thanks to those who came before me who worked so I (and others) have this right.