The Hidden Side of Everything and The Paradox of Choice

New York City’s crime rate began a steady and steep decline in 1991 that continued through the end of the decade.

Experts’ “Informational Advantages” criminologists travel agents car salespeople & Saturn cars physicians & tonsillectomies/cesarean-section rates lawyers & do-it-yourself divorces, wills, etc. real-estate agents & the standard 6% commission: $300,000 home = $4,500 (or 1.5%) after splitting with the other buyer or seller and their agency; holding out for an additional $10,000 = ?

Fundamental Ideas 1.) incentives are the cornerstone of life 2.) conventional wisdom is often wrong 3.) dramatic effects often have distant, even subtle causes 4.) “experts” use their information advantages to serve their own agenda 5.) knowing what to measure, and how to measure it, makes the world a lot less complicated (think empirically)

Variable Pricing & Choice 7 p.m. = $8.50 Why not price these films differently based on demand? What are the potential risks and rewards?

Alternative Strategies & Choices H.O.V. lanes E-Z Pass reduced parking spots in business districts

Variable Pricing & Choice Hot chocolate $2.20 Cappuccino $2.55 Caffé Mocha $2.75 White Chocolate Mocha $ oz Cappuccino $3.40 Translation Hot chocolate—no frills $2.20 Cappuccino—no frills $2.55 Mix them together—I feel special $2.75 Use different powder—I feel very special $3.20 Make it huge—I feel greedy $3.40 Source: Tim Harford, The Undercover Economist, p. 35.

Variable Pricing & Choice

Incentives, Variable Pricing & Context $3.25 half gallon $ liter $2.53 box $3.23 half gallon $ liter $2.61 box