Football cadence in a noisy stadium

Oklahoma State is playing Iowa State at Iowa State. The crowd is very noisy when OKST is on the field, so the players can not hear the snap count from the quarterback. Usually this leads to a silent count where the offensive players can not anticipate the snap count as they usually do. However, OKST is having the center do a visual snap count. Before he snaps the ball, he sticks his arm straight forward then brings it back and when it gets past his head he snaps the ball. Sometimes he snaps it the first time he does this, sometimes the second, just like a snap count. He his allowed to do this just like he is allowed to point to defenders and make calls. I have never seen this done in the NFL, I wonder if it will catch on.

Optimal PhD core exam implementation

Suppose you are administering a core exam in a PhD program. Your material is such that you want a certain amount of material available to the students while they take this exam. Suppose you decided two years ago that you would let every student take into the exam 3 sheets of paper with students' notes on both sides. Now assume that a student's score is a function of how good and plentiful the information on his sheet is. You find that too many students are passing your minimum threshold because they are bringing in more notes than you thought they could on 3 pages. You realize they are doing this not by handwriting any smaller and smaller, but they are coming up with other ways to get more information on the page, typing it, coming up with shortcuts or abbreviations, etc. You do not want to change your threshold of passing score, but you want fewer students to pass. So you must reduce the distribution of scores by decreasing the amount of notes students are allowed to bring in.

Now you have three options I can see. The first way is to give everyone the same set of notes that the professors would prepare, but then everyone would get the same score, so they can't do that. The second is telling students they can no longer type, and they must write it by hand. The third way is by telling students they may now only bring in 1 sheet of paper front and back. This reduces the information by 2/3.

Which of option 2 or 3 should they choose. I propose they choose the third option. Not only is it easier to enforce, it also selects for more innovative and technologically savvy people compared to option 2. Option 2 on the other hand, is hard to enforce, and instead selects for people that can write small. I would argue in today's society, being technologically savvy and innovative has a stronger correlation with success in almost every field than being able to write small.

Indeed they have chosen option 3.

Eagles draft a Northwesterner

They didn't draft me, but the Eagles drafted the quarterback from Northwestern. Check out the stock photo the Eagles use on their website when they were phone interviewing him. Oh and his name is Kafka.

The role of agents in the NFL draft game

I was explaining how the NFL draft works basically from scratch to an econ PhD student, let's call him Sam. At first Sam thought that teams bid for the players much like free agency. I explained that teams select players and then have the exclusive rights to sign them to a contract for the next year. Sam had big misgivings about this structure. His complaint was that this gives so much power to the teams and that they would be able to get a very good deal since the player has no outside options besides waiting a year and re-entering the draft (where the player would be drafted in a later round and would have a lower expected payoff).

It took me a little while to reconcile why this doesn't happen. Top picks in the draft are generally believed to be overpaid in comparison to what they would be paid in a free agency model. This must mean that the players have much more power than the teams, especially for early draft picks. I resolved this by realizing that the role of agents is more than just understanding the legal intricacies of the contracts. Agents, and the agency problem that ensues, are used by college players entering the draft as a commitment device to reject low offers.

Suppose that Sam Bradford, the consensus number one pick this year had no agent. He would be picked first by the St. Louis Rams, but both the Rams and Bradford would know that if Bradford did not sign, he would have to enter the draft again next year, and after a year of not playing, he would be drafted much lower, maybe at the 10th pick. Suppose the 10th pick usually gets paid half as much as the first pick. Bradford can not credibly threaten not to sign for a low amount if it is higher than what he would get had he been drafted at number 10. The teams can credibly threaten not to raise their offer since they are in a repeated game with draft picks every year, while Bradford is in a single shot game.

But the agents change the game. The agents have an agency problem, which actually serves to benefit the player. While the player can not credibly threaten to not accept an offer higher than his reservation wage, the agent can credibly threaten not to accept an offer higher than the player's reservation wage. This is because the agent is also in a repeated game. If Sam Bradford's agent accepts a deal which is 20% lower than the deal the first pick got last year, he will never work again. So teams know that the agent needs to get a decent deal (relative to past deals).

If the teams try to lowball the offer and the agent refuses and the player enters the draft the next year, this is very bad for the player, but it is not very bad for the agent. The agent gains a reputation for refusing lowball offers, which makes him even more likely to be hired by future college players.

In an ultimatum game setting, suppose the person receiving the offer was allowed to hire an agent to make his decisions and that this agent was a public figure with a reputation. Which agents would be most desirable from the receiver's perspective? They would be the agents who have a reputation for rejecting any offer less than 95% of the total pool. This threat is credible to the person making the offer in the ultimatum game since the agent has a reputation that is valuable to him and would be destroyed by accepting a low offer. So the ability of players in the ultimatum game to hire publicly known agents completely reverses the power each player has in the game, and shifts the rational equilibrium from the offering player extracting most of the surplus to the receiving player extracting most of the surplus. The agents, and the agency problem, act as a commitment device which benefits the players hiring the agents.

Did H1N1 save lives?

Long time, no blog.

Did H1N1 save lives?

This article from philly.com suggests that the H1N1 virus might have actually saved lives. It uses the observation that this winter there was less flu than in recent flu seasons. My initial reaction to this, and in my mind the natural reaction, was that of course there was less flu, people were washing their hands all the time. The article makes reference to hand washing parenthetically, but dismisses it as the cause for no apparent reason. This past winter I washed my hands more than twice as much as usual, and we all know the plural of anecdote is data.

I see no reason why people's fear of swine flu and their subsequent good hygiene could not have caused a drastic drop in the flu this past season. Often the simplest explanation is the correct one, although maybe not the one that makes for a 3 page newspaper article.

Strip iterated prisoner's dilemma

(Image courtesy of xkcd, click for larger image)

Consider the following two player game. Players 1 and 2 have strictly increasing and strictly convex preferences which admit a utility function representation over the number of songs they see a stripper dance to. The game they play is a finitely iterated game in which each player chooses cooperate or defect in the beginning of the period. The payoffs of the game are as follows. If both players choose cooperate, the stripper dances to two songs in the period. If both players choose defect the stripper dances to one song in the period. If one player chooses cooperate and the other chooses defect, the player choosing defect will receive a 3 song private dance.

How does the sub game perfect Nash equilibrium depend on the parameters of the number of periods and the curvature of the utility functions? With the assumptions in the statement of the problem, is it possible for cooperate cooperate to be played repeatedly in the infinitely repeated game?

Quote of the week

Another one from my macro professor. I think the material is really boring, but he says some funny things every now and then.

On why Ricardian Equivalence (the concept that the timing of taxes does not impact consumer choices i.e. it doesn't matter if you finance government spending with taxes today or taxes tomorrow) might fail in the real world:

"People could be retards...sorry I'm not supposed to say that."

My own selfish altruism

I went out for dinner with some out of town friends. There was leftover pizza, so I took it home since they couldn't keep it. Outside of CVS I saw the guy that usually begs there and gave him the pizza. A casual reader would call this altruistic. However, there are some other important facts. First of all, I did not have gloves so whatever hand I was carrying the pizza with would freeze after 5 seconds out of my jacket pocket. Secondly, I was about to go into CVS and it would have been awkward to carry the pizza in. Third, I had not paid for the pizza (as evidenced by the fact that it wasn't consumed at the restaurant) so my attachment to it was less than if I had a sunk cost in it. Lastly, the guy was pretty obese, so deep dish pizza probably wasn't what a benevolent social planner would have given him.

Quote of the week

"The obvious thing about macro models is that they're wrong."
-my Macroeconomics professor during the first class this quarter

My budget, aerial acrobatics

As I mentioned in my last budget post, December was not a very informative month in terms of whether my budget is reasonable. Below are my aggregates.

I saved a lot of money because I was home at my parents house for over half of the month, unfortunately I still had to pay rent for a full month. The one good sign I see is from the clothing budget. I don't think being at my parents house prevented me from spending money on clothing, so the fact that it was under budget was a good sign given that I have been over budget in the previous months.

The only overspent category was entertainment. That was all from one item, a groupon for an aerial acrobatic flight. I have not cashed it in yet, but I am really excited about it, particularly the prospect of piloting my own tricks. There was a groupon later for skydiving, but I couldn't find anyone that wanted to go with me. The guy I know that is doing the aerial acrobatics already went skydiving.

Shout out

I'd like to give a shout out to my friend "a player to his left" who is featured in the 7:40pm post in this blog.

Quote of the week

I heard this conversation on my bus ride from O'hare back to my house:

Amateur conspiracy theorist 1: You know who owns Phillip Morris?

Amateur conspiracy theorist 2: The cigarette company?

ACT1: Phillip Morris the cigarette company.

ACT2: Nah

ACT1: Kraft

ACT2: Kraft cheese?

ACT1: Kraft macaroni and cheese! That's why it's so addictive, they put the same stuff in it.

This was all said in complete seriousness. I don't know where to start in analyzing this so I won't.

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.