Does $2.22 sound very different from $2.33? The answer is yes. In a soon-to-be-released study by Keith Coulter of Clark University and Robin Coulter of the University of Connecticut in The Journal of Consumer Research, research indicates that shoppers expect a much better deal when the price is $2.33.
In one experiment, people were told an original price and a sale price and later asked which sale price represented the bigger discount. Ignoring the math, people instead appeared to go by the sound of the sale price. Because $2.22 sounded
Does $2.22 sound very different from $2.33? The answer is yes. In a soon-to-be-released study by Keith Coulter of Clark University and Robin Coulter of the University of Connecticut in The Journal of Consumer Research, research indicates that shoppers expect a much better deal when the price is $2.33.Read More
How does a Mozart String Quartet resemble health care?
Both have Dr. Baumol’s Cost Disease
Eighty-eight year old economist William J. Baumol expressed concern in today’s NY Times about health care cost control. Comparing health-care to a Mozart String Quartet from 1787, Dr. Baumol pointed out that both were labor intensive. In 1787 and now, the same musicians and the same time are needed to play the piece. Similarly, in many ways, health care cost reduction is constrained by labor intensity.
David M. Herszenhorn, “Economic Diagnosis For Health System”, p. A12, NY Times, January 18, 2010.
Dr. Baumol discusses labor intensive “cost disease” in his 1966 book Performing Arts: The Economic Dilemma (with W.G. Bowen).
The Economic Life:Read More
Production requires “factor recipes” composed of the factors of production: land, labor, and capital. When a factor recipe is labor intensive, it requires labor as the dominant factor input. Capital intensive activities typically can create more savings than those that are labor intensive. Historically, the building of railroads was an example of increased capital, capital intensity, and a propellant of economic growth.
Just an interesting fact:Read More
Hearing that President Obama was concerned about preempting the sixth season premiere of “Lost”, I remembered that Richard Nixon had a similar situation.
In 1971, when the inflation rate had reached 5.7%, he decided to impose wage and price controls and scheduled the speech explaining the program for a Sunday evening. Although Nixon and his advisors were worried that they would push “Bonanza” (does anyone remember Hoss and Little Joe?) off the air that evening, they proceeded because he had to announce the decision before the financial markets opened on Monday morning.
The economy had a “pressure cooker” reaction to Nixon’s economic policy. Inflation dropped during the controls and then skyrocketed to 11 percent when the lid was lifted during 1974.