free lunch

the blog about nothing and everything

Friday, December 24, 2004

On the Road Again

I'm on the move so updates are sporadic. But here we go. I've been gathering data and reading journal articles even on vacation. Heck, I even sent out a research update to my committee lest they think I've been spending all this time monkeying around. I can feel the noose tightening but I also think of summer a lot these days. Summer would mean a lot of things this time around if I play my cards right. If I can weather winter and speed through spring....summer is looking promising.

Wednesday, December 15, 2004

Ladies Night

Six months ago the state of New Jersey ruled that ladies night ( the practice of letting women enter bars/clubs without cover charge and get discount for drinks) was illegal and violated civil rights law. Now that's public policy went nuts. First, I don't think it is the state's business to tell how restaurants should roll out their promotional activities. Second, I don't see the harm at all.

The economic theory of the firm tells us that the firm's main objective is to maximize profits. We have to remember every thing that the firm does is geared towards this objective. Ladies night is no exception. It is a way actually for the bars/clubs and the women to internalize the positive externality that the ladies create with their presence. A single man (heterosexual for now in this case) goes to the bar in the hopes of picking up a girl (or say have intelligent conversation by the bar). He's got more incentive to come when his chances are high (ratio of women to men is good). Ladies by being present at the club induces men to show up. Bar/Club manager is happy. Manager wants windfall to continue, spreads it out some over weak nights. Manager is willing to split the profits with the ladies by giving them discounts so they'll have the incentive to come. Everybody happy. Guys in New Jersey, good luck.

Tuesday, December 14, 2004

Super Model

I took the model out today. Inspected her for defects, and blemishes, looks like she's good to go. We did a few rounds she seems to perform well although I would have wanted her to do more. But then again you get what you paid for. Sometimes you have to be satisfied with what she gives you. She's only as good as what you build her up to be. It's a constant battle for improvement, sometimes you got to massage her a little bit to get things going otherwise she'll just stay there and do nothing or do something you wont be satisfied with. I think we did enough for today and it's time to put her to rest. I got to think about a lot of stuff I want to do with her tomorrow anyway. For now I will have to save her for another day. So I clicked on the small button and it gave me a reply that she already exists, I took a deep breath and choose to overwrite her.

Friday, December 10, 2004

The Hunt Begins

Graduate life as I know it has changed. Its turning into a mad dash to the finish. Conference paper abstracts to finish, teaching assignments, twice a month progress meetings on the dissertation, and of course job hunting. I actually have not spent time in front of the TV the past 3 days.

Preparing for the job market, I printed out the resume that's although updated after every semester (to change teaching experience dates), has been sitting in my documents folder titled "Job Applications." I took it to the career center and asked somebody to critique it. Apparently, I have written the best resume ever written :) all they can come up with was: "put page numbers," change "Looked into" to "Investigated." That's it? The job market matching system for my professional association's website matched me with 19 prospective job interviews if I say I'm interested. Most of these were academic and research type positions but curiously, one of it was for a Graphic Artist. Really? I don't know about Artist, but we can draw graphs :)

Thursday, December 09, 2004

Gift Problem

In the Philippines it's traditional and a responsibility for godparents to give gifts to their godchildren at Christmas. My increasing brood of godchildren is putting the problem of gift giving at the forefront. Everybody loves the uncle or the aunt that seems to know what you want for Christmas. But more often than not, these guys have low information costs (i.e. most probably they see their godchildren often). What's an absentee gift giver to do?

Assume there are only 2 toys (X, Y) in the world, assume further they are priced the same (a price of $1). Child Z values one toy more than the other (say by double, $2). He has no clue what he's going to get from absentee godparent. But child Z's level of happiness is expressed by building expectation of the form 1/2*X + 1/2*Y he's assuming absentee gift giver flips a fair coin before buying a toy. Child Z's expected happiness then is 1 and 1/2. So if an absentee gift giver sends money and let the child Z buy the toy, happiness of the child is 2 that's more than the expected happiness. If the cost for the child of having to buy his toy (i.e. walking to the store) is less than 1/2, then child Z is better off getting $1 cash. Hey, we can't all be Santa :)

Tuesday, December 07, 2004

Role Reversal

Data mining is a favorite hobby for most economists and economics students. Look what I found from the Commission on Higher Education of the Philippines. This page gives a listing of international students in the Philippines. American international students have been declining in numbers while our Nepalese, Taiwanese, Korean, Iranian, and Indonesian friends are holding steady. I can imagine how fun it is to be an international student in the Philippines, everything is so affordable and micro retailing is awesome (you can buy one shower's worth of shampoo for 10 cents). Catch a movie every day and still have enough money left for other things.

Monday, December 06, 2004

King of Wishful Thinking

After getting out of meetings with two of my advisory committee members I decided to get something to eat at the student center. Then it started to rain so I decided to stick around and browse in the bookstore. I wandered off to the section where they pick up graduation gowns. The lady in the counter asked me if I was graduating and I told her...

"not in a while, hey is that the PhD gown?"
"Yes, that's the new one that the Board of Trustees approved."
"I hope they didn't put a tiger paw at the back."
"They ordered this one so the university will have a distinct gown."
"Oh, is that right? Just like Harvard you can tell them apart with their gowns."
"Yeh, that's the idea."
"How much are those?"
"They're expensive, about $600, but you can rent them for the ceremony for $150."
"Is this the place where you order personalized invitations too?"
"Yup."
"What's being personalized?"
"Oh here let me show you, see they'll print your name and degree on it."
"How much are those?"
"About $25 for 15 invitations."
"Not bad."
"Are these the rings? They're the same design every year right? So one can order them later even years after graduating and still get the same one?"
"Yup. See they changed the design in 1959 and decided to stick with that one."
"Oh well, maybe I'll graduate next year and see you then."
"Oh, you'll graduate."
"I'm working on it."

Saturday, December 04, 2004

Starbucks Economics

I just got back from cashing in my Starbucks card for the free 10th cup. I'm still high from the caffeine fix and promised myself I will never try the grande size again. It's obvious why Starbucks chooses to give you a card that tells you the 10th is free rather than give you a 10% discount for each cup, that's because they want to lure you to buy more cups than you'd buy without the incentive. Easy enough, but just the kind of thing that economists want to use to demonstrate the usefulness of their analytical tools. So let me join my colleagues. Who knows I might be able to use this for a future lecture.



We always start by assuming there are only two goods in the world (we can't draw more than 3-dimensional diagrams). Assume the x-axis maps Starbucks consumption, y-axis represents all other goods. The downward sloping black line (slope=ratio of starbucks price/AOG price), it's our budget constraint (b.c.) and bounds all consumption possibilities in x-y space. The red lines represents the adjustment to the b.c. with the free 10th cup. The blue line is the b.c. if Starbucks chooses instead to cut the price.

The consumer at the original b.c. can be consuming either of bundles A, B, C. Assume there is a consumer whose utility (the green curve) is maximized subject to the b.c. at point E, with the free 10th cup he has an incentive to buy 9 cups (S*) and attain higher utility at point D with the free 10th. If the coffee was discounted instead, he might substitute AOG for the cheaper Starbucks because he's got the extra money to spend between the two goods. The free 10th cup has no additional incentive effect for people who consume greater than or equal to 9 cups but they do benefit. Did I tell the barista this? No. I told her I wanted whip cream with my mocha :)

Taking The High Road

Japanese scientists claim they have produced rubber from mushroom. Would one get high at the receiving end of somebody burning the mushroom tires of his car? :) If they succeed in lowering production costs, I would like to see a hybrid Honda Civic with mushroom tires. Throw in hemp upholstery :)

Wednesday, December 01, 2004

Drinking Your Way To The Top

Perhaps the result of conversations over beer during many happy hours for economics graduate students, there's been a good bit of research done on the impact of drinking on wages. The main results seem to point to a wage premium for drinkers when compared to workers who abstain. The latest issue of Applied Economics (Vol. 36, No. 26, p. 2299-2315) reports the results of the latest addition to the literature on the wage premium for drinkers. Bethany Peters finds additional evidence that supports the wage premium (as much as 20-25% more than non-drinkers) received by drinkers over non-drinkers.

The graph shows that for the model when no controls are included, the drinking premium is even higher for females. The models with fixed effects included however dampen the drinking premium (this might be because for this model permanent abstainers as well as permanent drinkers were dropped from the sample). More important, the comparison of permanent drinkers with permanent abstainers points to an unambiguous positive wage premium for the former. This is not to say that drinking is the reason why their wages are higher but perhaps some productive characteristics are associated with people who drink moderately (i.e. they might be more sociable and thus, work well with colleagues). I remember my heavy drinking days as a government employee heck, my and my drinking buddies' wages were not higher than those who didn't drink but it sure made for fun times after office hours.