Innovative marketing

Recently at my parents house an advertisement for Genaurdi's came in the mail with two coupon codes for online grocery shopping. The first coupon is for $10 off and expires 12/31. The second coupon is for $5 off and expires 10 days later.

I have frequently seen ads for some discount on your first grocery delivery order and I have never taken advantage of them. I think a lot of the reason I have not is that there is a large effort cost in making an online grocery purchase when you are used to real life grocery shopping. Choosing items from a list online is a lot harder than choosing them in a store, at least when you are used to choosing them in a store. The effort cost difference between online grocery shopping and real life grocery shopping presumably stabilizes over time, but the initial additional cost for online grocery shopping does act as a barrier of entry for the consumer.

The Genaurdi's coupons go further in trying to transfer the consumer entry cost to the producer than the coupons which offer only a discount on the first order. The first online order is probably the most costly absent of coupons, but the second probably also has greater effort cost than the steady state online grocery order. Genaurdi's compensates consumers for the greater effort cost of the second online purchase as well, but compensates them less than for the first purchase.

From a marketing perspective, these coupons also make sense. Someone that makes just one online purchase of groceries and finds it difficult because of the large effort cost of that first online order is likely not to return to make another without additional incentives. However, someone that returns to make a second purchase and finds it much easier than the first purchase seems much more likely to continue purchasing online groceries without coupons than someone who only receives a coupon for the first order. Thus, marketers should not only be focused on getting consumers to make a first purchase of online groceries, but also a second.

Religion, Science, Fear, Reason, and Turbulence

I was reading The Extended Phenotype, a book about evolution, by Richard Dawkins, a near militant atheist, on the plane ride to Philly. The guy next to me was reading the bible. At one point there was some turbulence, and it felt like near free fall for a second or two. I had my head down at the time, and noticed him jolt and grab the arm rests. I looked up and sort of grinned and he asked if I knew that was going to happen. I said no, it’s just turbulence.

I did not have a natural fear reaction like he did. My natural reaction was there must be some reason and everything will be ok. I think it may be because my conscious mind when it goes on a plane somehow turns off fear signals from the unconscious, but I’m not sure. But given our choices of reading material for the flight, I thought about a more interesting question: Are religious people more fearful than scientifically minded people? Is there causation in either direction? One purpose of religion seems to be to relieve people of fears about uncertainty in life (“God has a plan for me”, etc.). Are fearful people then drawn more to religion? My reaction of “there must be a reason for this” could certainly come from scientifically minded indoctrination, but also maybe I’m drawn to scientific thinking because I’m drawn to reason.

Running

I just went running in this. I'm quite proud of myself.

Precipitation map of Chicago

This is the precipitation map from weather.com around Chicago for 6:25pm today. It's quite beautiful provided you aren't walking through the "it looks like snow but its coming really fast and is water when it hits me" part of the map here in Evanston.

If you were to graph my weather utility across these realized weather outcomes it would look pretty crazy.

Expected Utility by Temperature

Below is a graph of my expected utility from weather based on the temperature. It includes things like chances of precipitation, wind, humidity, etc. It does not include the fact that Christmas is correlated with low temperatures. As with any utility function this is ordinal, not cardinal.

The jump discontinuity occurs where precipitation switches from being characterized by snow to rain. Rainy and 40 is way worse than snowing and 30. Luckily I believe I still did well on my exam tonight even though I spent some "study" time in the library drawing this on the board and thinking about it.

Links

The Onion's crash course in consumer theory - also available in blue

Talk to me when its Bo Jackson

My budget

I have been tracking my expenses since moving to Evanston in the end of August. I don’t have much income in school, and I wanted to evaluate my spending to help me decide whether I need to get a summer job or maybe take out some loans. I’m going to use this blog as a further commitment mechanism to make me track my expenses and keep them reasonable.

I picked my monthly budget amounts before I started tracking my expenses, and changed them slightly after September. My original budgets for groceries, eating out, drinking and clothing were $300, $100, $50, and $20. After a month tracking them I realized they could be adjusted. In addition to my monthly budget items, I also have yearly budget items of school supplies, local travel (mandatory cta-pass purchase), travel home, and fun travel which have yearly budgets of $480, $240, $600, and $960. My September, October, and November aggregated expenses by monthly budget category are below.

I am not concerned that I was way over budget in September. It was my first month in Evanston and I had a lot of atypical expenses because of that. I did keep a separate moving category, but that did not include everything I had to pay for because it was my first month.

I am slightly concerned about the eating out and drinking categories. In both October and November I was over budget in the categories. The reason I hesitate raising the budgets is that both of those categories in both October and November were characterized by under budget spending for 90% of the month, and then way over budget spending for 1 weekend each month when I had friends visiting. In October I spent just over $100 on eating out and drinking in the last 2 days of the month when I had visitors, compromising about half of my spending that month on those categories. In November I spent $85 on eating out and drinking over 3 days when I had visitors.

I don’t think I will have visitors this frequently in the future, so I am not raising the budget yet. I’d also like to try to spend less even when I do have visitors. December is not going to be an informative month because I will not be in Chicago for half of it, but January and February should be more like typical months. I will probably wait until the end of February when I will have 6 months of expenses recorded to adjust my budget further. I suspect I will be able to decrease the groceries budget by $20 or $30.

My first act as president

Let me make it official that if I ever become president, my first act will be to ban the sale of opaque umbrellas in the United States. I see no reason why this would not cause a large increase in social welfare, and maybe even a Pareto improving shift.

I'm sure there are those of you who believe that markets are perfect and hence we need only make clear umbrellas an option. However, empirical evidence, as well as theory suggests this is incorrect in the umbrella market. First of all, clear umbrellas are already available and we do not see everyone carrying around clear umbrellas. Secondly, there is a stigma attached to clear umbrellas that imposes a social cost to males who use a clear umbrella. This stigma should be removed.

Theoretically, a situation in which everyone carries a clear umbrella can not be a Nash equilibrium, because an individual would be better off carrying an opaque umbrella which would act as a credible threat. The rest of the people with clear umbrellas would avoid the opaque umbrella, and the opaque umbrella would bare none of the costs of avoiding sidewalk crashes. Empirical evidence shows that nearly everyone carrying an opaque umbrella is a stable equilibrium, and my intuition tells me that almost everyone carrying a clear umbrella would not be a stable equilibrium, if an equilibrium at all.

Since the social optimum can not exist in equilibrium, it is the government's responsibility to impose laws which send us to the social optimum, and as president, I would pledge to do so.

Why can’t there be markets in everything?

Airlines have recently added charges for bag fees and extra leg room in bulkhead or the exit rows. I have one more request for a market relating to air flight, although it does not need to increase airline revenue.

I think people should have to pay for leaning their seat back, and those behind them should be compensated. I have a strong preference for the person in front of me not leaning their seat back, and am more than willing to trade my upright seat for theirs. I’m sure there are people who prefer having their reclined seat and the seat in front of them reclined. If the airlines sort people correctly, there would really only need to be transfer payments between a few people who have their seat reclined and the seat in front of them upright to those people who have their seat upright and the seat in front of them reclined. There can be some sort of market when you buy your ticket where you give your price for having the seat in front of you upright and your price for having your seat upright. Then the airline picks the price to clear the market, and transfer payments ensue.

I recognize airlines probably are not going to do this, I’m not sure their customers will get it. I’m not sure how other people feel about the choice between (upright,upright) and (reclined,reclined) but if it is close to 50/50, they could easily just make one side of the plane upright and the other reclined. As it stands now, there is a transfer of utility from selfish people to good honest altruists like me who keeps his seat up.