• Everyday economics and how music affects our shopping.

    How Music Affects Our Shopping Behavior

    Dec 21 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Thinkers, Entertainment, Households, Lifestyle, Tech • 639 Views

    At 88 decibels, the music in the 5th Avenue Abercrombie & Fitch is just below the level requiring employees to wear protection if they hear it for eight hours. Knowing that people like me can barely endure that kind of club sound, I suspect Abercrombie wants me to leave.

    Where are we going? To how firms use music to compete.

    Music and Our Buying Behavior

    The supermarket experiment:

    In a nine week experiment at a supermarket, researchers rotated among music with a fast tempo, a slow tempo and no music. Pace was a tricky variable since what is slow to certain people–based maybe on age and geography–is fast to others. After a slew of interviews, they decided that slow could be quantified as 72 or fewer beats per minute while 94 was the dividing line for fast. (For the Beatles, The Long and Winding Road has 67 BPM and Lady Madonna has 110 BPM.)

    Testing for how quickly shoppers moved through the store, how much they purchased and how many noticed the music, researchers concluded that when the music was faster, participants’ pace accelerated and they spent less. As for awareness, the tempo seemed not to matter. Most shoppers were not sure if they heard music.

    The restaurant experiment:

    Trying to target similar variables, another study focused on diners. Data was collected on two seater tables for 32 diners with fast tempo music and for 30 diners with slow music. This time, the metrics were:

    • How much actual time for the meal.
    • How much perceived time.
    • How much money was spent.

    Like supermarket shopping, the slow music correlated with more time spent eating (below):

    Amount of time spent in restaurant

    From: “Play That One Again: the Effect of Music Tempo on Consumer Behaviour in a Restaurant”


    And people’s time estimates were inaccurate (below):

    Monopolistic competition and restaurants

    From: “Play That One Again: the Effect of Music Tempo on Consumer Behaviour in a Restaurant”


    Again, the spending was higher when the music was slower (below):

    Monopolistic Compatition amount spent

    From: “Play That One Again: the Effect of Music Tempo on Consumer Behaviour in a Restaurant”


    More About Abercrombie

    Walking into an Abercrombie & Fitch store, according to a Shopify blog, you could be greeted by a strong whiff of Fierce. On its website, Abercrombie describes the fragrance as a “lifestyle…Packed with confidence and a bold, masculine attitude.”

    Music and smell are called atmospherics by academics. Also including temperature, color and design, atmospherics in stores influence our spending, our time and whether we return.


    Our Bottom Line: Monopolistic Competition

    In markets with monopolistic competition, firms have some pricing power but not much. It all depends on how much they are unique–hence the “monopolistic” part of monopolistic competition. You can see where atmospherics can come in handy. For Abercrombie & Fitch, that means spraying Fierce and playing the loud music that younger shoppers enjoy and my baby boomer friends avoid.

    In the following continuum, as a clothing retailer, Abercrombie & Fitch would be in the range of monopolistic competition. Then, further along near the oligopoly slot, are businesses with more pricing power like Apple and Kellogg’s.

    Exerting less power, firms engaging in monopolistic competition are to the left of oligopoly on the continuum.


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  • The econlife.com Weekly Roundup

    Weekly Roundup: From Old Age to Old Signatures

    Dec 20 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Economic Humor, Economic Thinkers, Entertainment, Financial Markets, Government, Health Care, Innovation, International Trade and Finance, Money and Monetary Policy, Regulation • 636 Views

    Our Posts Roundup


    Everyday economics and The tragedy of the commons explains magazine disappear in doctors' waiting rooms.Sunday 12.14.14  The mystery of the missing magazines…more


    Everyday economics and the internet in ItalyMonday 12.15.14  Where Italian needs a connection…more


    everyday economics and movie star statusTuesday 12.16.14  Which movie stars live longer…more


    everyday economics and Christmas musicWednesday 12.17.14  The Christmas music list that keeps repeating…more


    Supply and demand explain why a Button Gwinnett signature sells for close to three quarters of a million dollars while John Hancock's is much less.Thursday 12.18.14  How a signature became very expensive…more


    everyday economics and Russian inflationFriday 12.19.14  When a Porsche becomes a necessity…more



    Ideas Roundup

    • economic humor
    • tragedy of the commons
    • information infrastructure
    • innovation
    • developing economies
    • healthcare
    • regulation
    • financial markets
    • Dow Industrial Average
    • supply and demand
    • inflation
    • foreign exchange
    • behavioral economics


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  • everyday economics and Russian inflation

    Why Russians Are Rushin’ to Buy Porsches

    Dec 19 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic Growth, Economic History, Economic Humor, Financial Markets, Government, International Trade and Finance, Money and Monetary Policy, Thinking Economically • 675 Views

    Some Russian humor:

    Q. “If you could change anything about your past, what would it be?”

    A. “Rubles”

    In Russia, Porsches are selling like hotcakes. During the past month Porsche sales climbed 55 percent. Topping that, Lexus buying is up 66 percent and Mercedes, just seven percent. Interestingly, consumers were avoiding Audis and BMWs, probably because they thought they would retain less value.

    Meanwhile, less affluent Russians have been heading to Ikea where kitchen appliance and furniture sales were temporarily suspended because of the spike in demand.

    Apple’s Response

    Apple was one place where rubles could not be spent. Although there is no Apple Store in Russia, they do have an online site where they at first raised the price of the iPhone 6 by 25 percent. Even then, its dollar equivalent still fell $262 from $847 to $585. Now, their Russian business is summarized by this note, scrolled in different languages, at their online store:

    Foreign exchange rubles cannot buy Apple iPhone



    Okay, so prices are climbing, the ruble is losing value, and Russians, as Bloomberg said, are doing “weird shopping.”

    What is going on?

    A Reason to Shop

    On Nov. 1, one million rubles were equal to $23,250. Just one month later, their equivalent in dollars had dropped to $18,500 and now they are worth less. The rational response was to shop and buy something that would retain more value than the ruble.

    Below you can see how suddenly you needed so many more rubles for each dollar-related transaction:

    Russian  money losing value as ruble slides

    One result has been a soaring inflation rate, way beyond the U.S. two percent target:

    Declined value of Russian money

    Our Bottom Line: The Characteristics of Money

    Whether thinking about a rectangular piece of paper, a cow or a demand deposit, for people to believe something is money, it needs three basic characteristics:

    • Its supply should be scarce.
    • It should be acceptable as a medium of exchange.
    • It should retain most of its value when saved.

    Less scarce now as more is needed to buy consumer goods, the ruble is less acceptable as a medium of exchange and is losing value rather than storing it. Consequently, Russians would rather have a Porsche than a savings account.


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  • Supply and demand explain why a Button Gwinnett signature sells for close to three quarters of a million dollars while John Hancock's is much less.

    The Story of a Very Expensive Signature

    Dec 18 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Developing Economies, Economic History, Government • 683 Views

    A letter from John Hancock, famous for his signature on the Declaration of Independence, was sold for $3750 at Christie’s. A document from another signer, Button Gwinnett, (not even a letter) went for $722,500 in a 2010 Sotheby’s auction.


    Button Gwinnett

    The year was 1757 when 22 year old Button Gwinnett married Ann Bourne in Wolverhampton, England. While the register that he signed remained in the county records office (and now is valued at many hundred of thousands of dollars), he and his wife soon emigrated to the American colonies. First engaged in a dry goods venture that failed, he then purchased a Georgia plantation that creditors also forced him to give up several years later. A business failure, he achieved some political fame as one of the 56 signers of the Declaration of Independence.

    Signers Sets

    Considered a treasure by collectors, the Signers set is composed of documents with the signatures of the 56 signers of the Declaration of Independence. The problem though is that relatively few documents exist with a Button Gwinnett signature. So, anything he signed, whether for his wedding or his financial defaults, has a high price tag.

    Supply and demand Gwinnett signature

    From: RR Auction

    The first man to create a Signers set was William Buell Sprague. Employed as a tutor by George Washington’s family from 1815-1816, he was told he could have any of the first president’s letters as long as he replaced them with copies. If the story is true, then we can see how he developed an auspicious autograph collection that enabled him to assemble, in 1834, the first Declaration of Independence Signers collection. J.P. Morgan gave a Signers set to the Library of Congress in 1912.

    Today, anyone gathering a Signers set knows the toughest signature to get is the Gwinnett. One 55 signature set was even sold at auction. It had everyone except the Gwinnett. The most current inventory of Gwinnett signatures numbers 51. Institutions including Yale, Penn, Princeton, Cornell, The NY Public Library, the Library of Congress, and the English church diocese with the wedding signature (I could only discover that the diocese refused to sell it) have Gwinnetts while there are just 11 in private hands.

    The supply curve for documents with Gwinnett’s signature might look like this…high price, small quantity:

    Supply curve for Gwinnett signature

    Our Bottom Line: Supply and Demand

    With the position of the supply curve determined by the cost of production, in December 2012, a Signers set on the auction block had an estimated value of $1.5 to $2 million. Even though the set included 48 handwritten letters from the signers, the Gwinnett elevated the price. But, maybe even more interesting, the set did not sell because no one met the seller’s minimum price. So here we have a seller, looking for a price above equilibrium, and not getting it.

     Supply and demand seller's price

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  • everyday economics and Christmas music

    The Dow of Christmas Music

    Dec 17 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic History, Economic Thinkers, Entertainment, Financial Markets, Media, Tech • 712 Views

    The year was 1991 or 1992. Noticing that ratings rose when it played an all-holiday sound track, soft rock station 99.9 KEZ, Phoenix stuck with Christmas. The trend caught on and now, stations try to judge the right time to start wall-to-wall holiday music. According to a songs programmer, no one knows exactly what the date will be. Stations just have to be ready because a snow storm, some global event or a competitor could trigger the beginning. This year, on October 24th, the first station flipped the Christmas switch.

    Where are we going? To the Dow of Christmas Music.

    But first…

    Some Dow History

    In 1884, the first Dow Jones Average was composed of just 11 stocks, all railroads, and gradually grew until 1928 when the list expanded from 20 to 30, its current total. A list of large, leading firms, the Dow Industrial Average provides a statistical overview of market activity.

    The First Dow: July 3, 1884

    The first dow average

    From: Dow Jones

    The first 30 stock Dow:

    The First 30 stock Dow Industrial Average

    From: Dow Jones

    The current Dow:

    The current Dow Industrial Average

    From: Dow Jones

    The Christmas Dow

    Fivethirtyeight’s lead life style writer called the following graph a Christmas Dow because, like the Dow, it provides a statistical overview of market activity. Here though, instead of top businesses, we are looking at top Christmas songs.

    A Dow Industrial Average of Christmas song activity

    Sure enough, when I went to my local soft rock station from iHeart Media, this (below) was their “Dow” top ten of the week. Continuing, I saw that “All I want for Christmas is You” was #31 and “White Christmas,” #37:

    A Dow Industrials list of Christmas songs

    From: iHeartMedia


    Our Bottom Line

    Just like the Dow, whether looking at Billboard, iHeartMedia or Spotify, we can see that the top Christmas holiday songs have a market of millions of radio and streaming listeners, they remain on our list for multiple years, and occasionally, they are replaced by newcomers. And, as a major source of ad and streaming revenue, they are big business.


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