11/27/2013

Bye Bye, Birdie

With the holidays upon us, it is that time of year again when we give thanks for what we have, and indulge beyond our needs and our belts.  But according to a recent article in the Huffington Post, there might not be as much to indulge in.  Butterball, the largest Thanksgiving turkey provider, is struggling to produce enough big size fresh birds to accommodate our gluttonous day of gratitude.  Orders for fresh average size birds (around 16 pounds) were cut by 50%.  The company confirmed that there might be a nationwide shortage for the 88% of US households that celebrate Thanksgiving by carving into their favorite fresh poultry.  This shortage is apparently due to a decline in turkey weight gain, and it is possible it will create a shift in the supply curve and an increase in the price of Turkey.  However, while there may be a shortage of fresh turkeys, there are other substitutes goods available.  Butterball and other manufacturers have stated that the availability frozen turkeys has not been affected, just fresh large size birds.  So if you have a big family to feed this holiday season, be sure to prepare accordingly: either get your big bird while supplies last, buy frozen, or plan on getting a couple smaller birds instead.

11/17/2013

Jobless and underemployed Americans

The United States unemployment rate is the same as it was four years ago. Sure it has decreased in the past couple years, but the issue is still problematic. It is startling to see that unemployment is still unchanged since 2009; in fact there are 2 million less people working at the start of 2013 as there were at the start of 2009. Due to the difficulty of finding a job, many Americans have simply given up looking.  According to Trading Economics, the United States unemployment rate is 7.3%, which does not include those who are settling for part-time work or who are underemployed.


We are told that the economy is getting better, but just last month (October 2013) the United States economy lost over 600,000 full-time jobs. Also, according to the Federal Poverty Line Guidelines, 1 out of 4 part-time workers are living below the poverty line. For instance, the poverty line for a house of 4 is $23,330. This is a growing issue and should be addressed by the leaders of this country.

11/13/2013

Shopping, Before the Turkey Gets Cold.



The article “Shopping, Before the Turkey gets cold” by the New York Times is a good example of a game theory in practice.  First off, let’s note that we are discussing a the demand curve of Black Friday products.  Could the decision of retailers to open the Black Friday deals on Thanksgiving be due to a new market that’s available only on Thanksgiving?  Not likely because customers today would buy a flat screen TV on Thanksgiving or Black Friday.  My argument for retailers opening Black Friday deals early on Thanksgiving is a gaming strategy.  Retailers can take some of their competition’s demand briefly by offering similar goods at an earlier date and time.  This will increase that company’s demand briefly for those goods and benefit the company as more revenue is brought in.  Of course this negatively affects the competition.  Therefore the competitors will also open their Black Friday deals on Thanksgiving.  Thus, opening early on Thanksgiving becomes the new equilibrium for the Black Friday deals market.  Is it possible for both retailers to go back and open on Friday?  Yes, but because the companies have already crossed the Thanksgiving threshold once, they will be tempted to open early again, and hence repeat the cycle.  We will probably see more businesses follow this trend, it’s just sad that it has to be on Thanksgiving.     

Companies Dominating the Internet Market


Recently we studied economic markets that are oligopolies.  The firms in these markets offer similar products, have few firms competing in the market and are difficult to enter. An oligopoly market that came to mind while studying this subject was the cable internet market in the US. My husband worked at a company that marketed services for television, internet, phone, and security companies.  He said across the nation he dealt without about 13 total companies that supplied television and internet services.  While he didn’t deal with every single one, 13 is a very small number of companies across the US to provide these types of services.   

Michael Hiltzik wrote about this very issue in an article entitled, “Cable monopolies hurt consumers and the nation.”  The article discusses that between Comcast and Time Warner Cable, they effectively control roughly 40% of the internet market of the US.  The article went on to explain that Verizon had made an attempt to enter the media market with these two giants, but after less than a decade Verizon decided it did not have the cash to remain competitive and stopped expanding service.  If a company as large as Verizon can’t compete who can?  This clearly points to an oligopoly as two big firms control a large amount of the market share while the barrier to entry as with Verizon is difficult and costly.

The second thing I noticed in the article was how Time Warner and Comcast seemed to share similar price points.  For example it gave a quote on 10 megabit from either one of the companies hovering around $35 per month.  This again points to an oligopoly with companies in the market sharing similar price points. 

Over the last few years, one of the few large companies that are trying to enter the market is internet behemoth Google.  They have begun to roll out their fiber services in two cities in the US.  It will be interesting to see what if any effect Google can have on bringing competition back to the internet marketplace. 

11/12/2013

SeaTac and Other Minimum Wage Talk

A highly contested initiative was placed onto SeaTac's ballot this year. The initiative started as a petition and finally distilled into Proposition One on the ballot. The aim of Proposition One was to raise the minimum wage to a "living wage" of $15 an hour. This is just one of many such initiative taking root in America, but is it for the best? The economic theory of supply and demand shows what ought to happen when price floors like this occur. The theory states that buyers of human resources will consume less if the price per hour rises. If this is the case we should see unemployment rise when initiatives like this are put in place. We should also see low-skilled workers being replaced by more productive, more skilled labor than the original labor force. In essence it is theorized that by raising the minimum wage to help low-skilled workers the ending effect is to actual economically hurt those in question. Will this be the case at SeaTac? Due to the very nature of SeaTac it may be that there will be no decrease in workers employed. As an airport they may be able to pass the new costs associated with the law onto consumers.

To help me answer this question I tried consulting multiple studies on the effects of raising the minimum wage. All the studies I found were like this one presented in The American Economic Review. The studies either concluded that there was no negative employment effects or that they could not determine the effect. I hope that the data for SeaTac is recorded and studied if this initiative passes. Perhaps it could lend more insight into this subject. For now we will have to wait for the votes to be finalized. According to The Seattle Times we have a few more days and possibly await a  recount before the vote is finalized.

Ticket Scalping

In one of our recent classes we discussed price discrimination and the topic of ticket scalping came up.  This was interesting because Professor Tufte said economist do not have a good answer on whether venues should or shouldn't allow this practice.
This past summer I was in San Diego with my wife. The main purpose was of our trip was to attend the San Diego Zoo on day 1 and Sea World on day 2. We were done at the zoo around 5:30 pm and decided to drive to Petco Park to watch the Padres play the Pirates where there was an abundance of tickets available. Our plan was to purchase $15 tickets for seats in right field but as we were walking from our car to the box office we found a ticket scalper and bought tickets from him. The tickets we purchased had a face value of $90 each and we bought 2 of them for $60 total. 
So what did Petco Park lose by my purchase of tickets from a third party? I purchased the $10 bottomless soda cup, $4 popcorn bucket, four $4 hotdogs, $25 dollar t-shirt for my wife, and a $30 hat for myself. Petco Park lost $30 on ticket sales and $30-$50 in additional purchases I would have made at the ball park had I not purchased $60 tickets from a third party.

Another example of third party ticket sales is from when I went to the Jimmy Buffet concert at MGM Grand in Las Vegas last month.  The concert was sold out and we had 2 extra tickets which we were able to resale.

What did MGM Grand and Jimmy Buffet lose? I would argue that MGM and Jimmy Buffet did not lose or gain on my resale of the tickets.  The venue had received their asking price for the 2 seats and therefore could not receive any additional income.


After these two experiences of third party ticket sales, the best answer I have is: it depends.  

11/10/2013

JOBS - Not Steve, The $7.25 Kind

Nearly 48 million (15%) of American citizens are struggling to survive below the poverty line.  In 1938, the Fair Labor Standards Act was passed to stimulate the economy and lift Americans out of poverty.  Had the act taken inflation into consideration, minimum wage would now sit near $10.76 per hour.

There are many, but one reason the change has not occurred is a fear that those receiving the increase are teenagers or secondary providers.  Current 2013 statistics show that an estimated 84% of beneficiaries are over 20 years old - far from perfect, but not bad.

Worse yet, is the fear of an overall job loss.  Nobel Prize winning economist Paul Krugman stated that these negative effects would be minimal, referring to an increase in minimum wage.  If it is true that poorer individuals spend more of their income than do the wealthy out of necessity, an increase in wage should lead to increased consumer spending and growth.

With no added costs to tax payers, maybe it is time to help millions of full-time American workers out of poverty level incomes.


11/01/2013

Cash for Clunkers was a Lemon

According to this recent article on Foxnews.com, the Cars Allowance Rebate System (CARS), also know as the "Cash for Clunkers" program, that was introduced by the government a few years ago has fallen quite short of its anticipated impact on the environment and to the economy.  The program offered an amount from $3,500 - 4,500 off the price of a new car if it had a higher fuel economy than the owner's current car to be traded in.

The government spent nearly $3 billion on this initiative only to find that the results were far less significant than expected.  Not only was the total emissions reduction not substantial, but the overall impact on the automotive industry and the economy as a whole was somewhat of a bust.  Further analysis of the CARS initiative shows that many of the sales of new cars were simply pulled forward from a future date in which the sale would have been made anyway.  So the demand curve for new cars would have shifted to the right in the short run, but then would have reverted back to the left in the long run which would have basically equaled the same net result without the program.

The article also discusses the impact of employment and job creation in the short-term, which according to the author, could have been realized through tax cuts to employers' and employees' payroll taxes.  If anything, we can see that billion dollar initiatives don't always have the long-term impact that they're touted to have at the time of implementation.