Economics

Sen in conversation with Angus Deaton and Tim Besley — pdf and video. Excepts: On Joan Robinson “She took a position—which has actually become very popular in India now, not coming from the left these days, but from the right—that what you have to concentrate on is simply maximizing

In Thinking Fast and Slow, Kahneman recounts a time when Thaler, Amos, and he met a senior investment manager in 1984. Kahneman asked, “When you sell a stock, who buys it?” “[The investor] answered with a wave in the vague direction of the window, indicating that he expected the buyer

Price dispersion is an excellent indicator of transactional frictions. It isn't that absent price dispersion; we can confidently say that frictions are negligible. Frictions can be substantial even when price dispersion is zero. For instance, if the search costs are high enough that it makes it irrational to

In Reinventing the Bazaar, John McMillan discusses how search costs affect the price the buyer pays. John writes: “Imagine that all the merchants are quoting $1[5]. Could one of them do better by undercutting this price? There is a downside to price-cutting: a reduction in revenue from any customers

What is the benefit of targeting? Why (and when) do we need experiments to estimate the benefits of targeting? And what is the right baseline to compare against? I start with a business casual explanation, using examples to illustrate some of the issues at hand. Later in the note, I

Foreknowledge of bad things is useful because it gives us an opportunity to a. prevent it, and b. plan for it. Let’s refine our intuitions with a couple of concrete examples. Many companies work super hard to predict customer ‘churn’—which customers are not going to use a product