Mergers Can be Beneficial

The chairman of “AdvancePierre” and advisor to the same, Dean Hollis links the aggressive acquisition of company by “LandShire” with the growth in product and innovation and emphasizes on the importance of this acquisition plan as being growth driven both for the customers and strategic partners of AdvancePierre. Even though this is the second time they are being acquired by some other company during last three weeks.

AdvancePierre Foods Merger

The mergers no doubt are found very effective in many ways, that they help two producers to merge and pool their capabilities in order to enjoy the synergy effect and economies of scope or scale whatever the case may be, because there will be sharing of diversified skills and activities from both companies and will result in closing the gap that was there before the merger.

Such mergers no doubt are also important for key stakeholders of the company which is being acquired as they will be under a larger and safer roof now, and resultantly they will be on a more profitable end.

Further, mergers are also helpful for the economy, this can be said if such acquisitions turn successful they will be making a larger sum of profits now than both the companies were making separately before. Therefore a profitable merger always adds to the economy by displaying positive results which will be a building block in calculating National Income. The other aspect of such mergers is obviously an increased total output of the economy i.e. a higher GDP level.

Besides the merits of merger, there are many disadvantages of such mergers as well, like it may lead to large amount redundancies therefore promoting an increased unemployment level which obviously cuts down the National Income level.

Such mergers may result in cartels and monopolies, if the mergers are at a larger level. The cartels and monopolies are considered unfavorable for society as they charge discretionary prices from the consumers.

If we see the mergers, they are by far beneficial for society and economy as it can; support the weak business, ensure continuity of employment level or an increase therein may be, greater quantity of products and services etc., therefore, if such mergers are regulated for their negative impacts on economy, they can be very helpful for the society and economy.

But there arises a series of questions, when mergers occurred so frequently as was used by ‘AdvancePierre’ would it help growing? Would it not send a message that there may be some risk attached to “Advance Pierre”? And the list of such questions is not exhaustive.

The Tale of Two Clubs

Major League Soccer (MLS) is the premier soccer league of the United States and Canada. Since 1993 this organization has grown from obscurity and is now a household name in America. The league is currently composed of 20 teams divided into two conferences with four more teams scheduled to be added by 2020. With only a few more slots in the league, dozens of cities are putting bids on the table to gain entrance. However, despite the flood of interest, MLS has accepted the propositions of two clubs that will move into cities that are already occupied by other teams. Will this provide too much supply that will exceed demand and dilute profitability for both parties? The following story suggests that the league is not yet ready for two teams in one locale.

Chivas USA competed for market share with LA Galaxy in the Southern California area. Attendance at the Chivas games became so poor that the club gave tickets away in order to fill the stadium. It didn't work. Despite cheap ticket prices, average attendance remained at a dismal 7,000, about 35% of capacity. Average attendance at LA games was 21,258, 80% of capacity with full-price admission. The Galaxy had won the turf battle for fans. Tickets to watch Chivas play were essentially inferior goods that weren't valuable despite being free to the consumer. Is the soccer market in North America too saturated for current levels of demand? If this is the case, allowing two teams to share a city may be a step backward for the league in the current market.

Cities which house only one soccer team see game turnout hover around 95 percent. With these traits in mind, it seems the decision to grant LA FC and NYC FC entry into the MLS system is a mistake. These teams will fight for their respective markets. Once the better performing team emerges, fans will follow, leaving the other team to die. Given past experience, it seems that the wise solution is to separate teams geographically from one another, allowing them to have a monopoly on their individual markets. Demand for the sport is still in its youth in this country. Despite the promise of continued growth, by providing too much supply at this stage, MLS risks the failure of clubs residing in the same area as another.
Can a city sustain two MLS clubs?

Control over Oil Prices

I have been greatly enjoying the consumer benefits of a global oversupply of oil, as gas prices have nearly been cut in half here in Cedar City. I admit that I have been somewhat ignorant to the root cause of falling oil prices. I hear commentaries from co-workers and classmates about the oversupply, but I have not taken much time to dig into it myself. I have come to the simple understanding that global oil supply is significantly higher than global demand.

This article helped be to gain a more complete understanding of an issue that affects each one of us. The main misconception that I had was that if oil supply was too high, the major suppliers would simply cut back in order to keep prices at a healthy level. There is certainly some scaling back going on, but the world’s largest oil cartel, OPEC, decided toward the end of 2014 that they were unwilling to risk their market share to raise prices.  Saudi Arabia, the world’s second largest supplier, took a similar stance. So, supply continued to exceed demand and prices fell to the lowest we have seen in years.

The most interesting lesson that I learned from this article is that even the largest oil suppliers in the world cannot control the market perfectly. With everything that we know about growth trends and demand and demand around the world, there is still much uncertainty involving this industry. The textbook describes the influences that market forces have on the supply/demand curves. In theory, it seems quite simple to forecast changes in these curves and make adjustments to reach market equilibrium. However, we are witnessing a real life example of how difficult it can be to reach such equilibrium.

Ammunition Shortage - No End in Sight?

For the past few years ammunition has been in high demand. Whether this is due to gun control scares, presidential elections or conspiracy theories, people are buying more at higher prices than ever before. Ammunition supplies have been making a slow comeback. However, .22 and other high demand shells are still nowhere to be found. Relating to economics principles, we can obviously see there is higher demand than supply, driving the prices up.

There are some external motives for the increase in demand, but rationally you would expect demand to decrease as the prices soared. This is what confuses me, paying double or even triple the sticker price for a box seems undeniably ridiculous but people do it everyday. Wouldn't people have a price point where they would no longer buy the product? This may be a stretch but it reminds me of a Giffen good. A Giffen good can be described as a good that increases in demand as price increases, basically backwards of the traditional theory of demand. My thought is that people see prices increase for ammunition, they then go and buy up as much as possible before it is sold out. This occurs because there really isn't a whole lot of substitutes for ammunition. Nevertheless, a chain reaction occurs and has been for years now where some continue to buy ammo no matter the price, just to have it.

Inline with the characteristics of a Giffen good, I wonder if prices decreased substantially, people would buy less because it is seemingly more available. I recognize that this would most likely not occur but couldn't help but ponder the characteristics of an inferior good.

Do you think ammunition has characteristics of a Giffen good? What do you think is causing ammo to be in such high demand? How long will this last if it maintains Giffen good qualities?

Link that sparked my thoughts.

Tax season

It is officially tax season, and while gathering all my financial documents to get ready to prepare them, I started to wonder how things would officially pan out for me this year.  I was reminded of a study I read in an accounting course regarding the Laffer Curve and wanted to hit on a few points regarding it.  

The Laffer Curve illustrates the two most important things we need to know about taxes: how much money the government can raise from taxes and at what level of tazation the government might start getting less, not more, revenue.

The Laffer Curve is illustrated by a normal graph.  The horizontal line is the tax rate that the government chooses, and the vertical line is the revenue that the government receives from that tax rate.  

If the tax rate is zero, the government receives zero revenue.  Accordingly, point (0,0) is the first point on the curve.  And if the government keeps raising the rate, then revenue will continue to go up, at least when we're in the low tax rate part of the graph.

If the government charges a 100% tax rate, no one would work, and the national income would be zero.  This means that government revenue would be 100% of zero.  So another point on the curve must be all the way to the right on the tax rate line at 100% where revenue equals zero.

A study by Christina Romer and her husband David Romer, both economics professors at University of California Berkeley, was written and published in the American Economic Review.  This study examined how the national income responds to tax rates.  It was calculated that the hump on the Laffer Curve occurs where the tax rate is around 33 percent.

No matter what your politics, you should not want tax rates to be above around 33 percent.  Obviously, conservatives and many moderates think the rate should be lower than that.  But even if you are an extreme left-winger and your only goal is to make government as big as possible, you should oppose a tax rate more than 33 percent because when taxes go higher than that, the government actually gets less money.

The Smartphone Population

The Smartphone Population

The article I studied is a podcast by the investment firm Andreessen Horowitz that describes the smartphone industry. This article was particularly interesting to me because of my interest in working for a mobile development company.

The smart phone industry only has a few big players making it an oligopoly. When key players make changes the industry is dramatically affected. An example is Apple’s recent addition of the Apple Pay feature. This feature makes it simpler to make purchases in apps on an iPhone. Ease of use is a large driver for mobile users and the addition of Apple Pay may push the demand curve for in app purchases to the right.

The population of smartphone users also has an interesting dynamic. Google currently has approximately 75% of the market share for smartphones. Apple has approximately 15%, and the rest is split among a few other players. The interesting thing is that Apple has the majority of high end users, and therefore a majority of the revenue for apps. For an app developer, this creates an interesting situation. You can focus on the larger population of Android users, or pursue the smaller but more profitable population of iPhone users.

Another interesting point that the investment analysts made is that the smartphone market is sometimes treated like the personal computer market. The personal computer market has been similar to a commodity market. Like the computer industry the smartphone industry only has a few major inputs. Those major inputs, ram, storage, processors, screens, developer hours, are all the same for the computer and smartphone industries.

The difference one of the analysts pointed out is that phones go everywhere with you. This makes style and ease of use more important features. The phone industry is much less of a commodity industry than the computer industry.  The size, replacement cycle, and higher end aspects of the phone industry make it much more appealing as an industry because there is room for long-term sustainable competitive advantages.

The article Mobile is Eating the World – and Apple is Gobbling the Fastest can be found online here: http://a16z.com/2015/01/30/a16z-podcast-mobile-is-eating-the-world-and-apple-is-gobbling-fastest/

Drone Market

One industry you can see soaring during Independence Day fireworks is the drone industry. Drones can be used for work and for play, and can be bought almost anywhere.  Many drones have a camera that can be used in various ways, such as a real estate professional showing a home or a sports fanatic trying to record a touchdown pass.  Others would like to use drones to more conveniently deliver goods to customers.  The government uses unmanned flying units to spy on and deliver ordinance to the enemy.  A mischief maker can use his spy drone for secret purposes.  What can hinder this industry that delivers a product everyone can have a use for?

Recently, an unmanned, flying drone landed on the White House lawn.  Anyone could have done this, regardless of regulations.  President Obama has asked the FAA for more regulations on drones.  He realizes their limitless uses for enjoyment and productivity, but also sees a potential threat to possibly anyone.  How will this change the market for unmanned vehicles? http://time.com/3683923/obama-drone-gulation/

One example of how expected government regulations have influenced the market is firearm and ammunition sales after President Obama was elected to office.  Firearm sales spiked before the inauguration and certain ammunition still can’t be found on Wal-Mart’s shelves most days.  What are the effects on supply and demand if regulations state that the current drone technology is too high for average consumers?

The effects of government intervention aren’t always clear.  What will happen to the drone market when more regulations are enforced?  Will companies be able to use them for profit which would expand the economy?  Will drone makers hold back spending for development until laws are set? If strict regulations are set, how does the industry continue to thrive when its product cannot be reinvented? http://money.cnn.com/2014/11/24/technology/faa-drone-regulation/

Minimum Wage

An important topic that affects both employees and employers is the topic of minimum wage. It has recently become a big topic of discussion as governments consider raising minimum wage to as high as $15 per hour. There are many arguments for minimum wage law, but most arguments support one goal - to assist those individuals who make below poverty level wages and are socio-economically considered “poor”. Another argument states that with the productivity increase of our current work force and the increase in average wage rates should result in an increase in minimum wage. While compelling arguments can be made in favor of minimum wage, the question is whether or not minimum wage is producing the desired results. Ultimately, the answer is “no”.

In 2004, Paul Kersey (an economics major from the University of Michigan-Dearborn, lawyer, labor policy analyst, and former Bradley Visiting Fellow at the Heritage Foundation) gave a testimony to the House of Representatives regarding economic effects of minimum wage on society. While the data referenced is outdated, the underlying principles are basic laws of economics and remain in force today. Minimum wage creates a price floor that results in a shortage of jobs. In his testimony he indicates that the elasticity of demand for labor is -0.5, which means a 10 percent increase in minimum wage results in a 5 percent decrease in jobs. Other compelling arguments against minimum wage include: limiting employment options for teenagers and individuals lacking in employable skills; enticing illegal immigrant workers to our labor force which take jobs away from US citizens; and, variations in cost of living makes minimum wage irrelevant in some areas.

The topic of minimum wage affects all other markets because minimum wage directly impacts income levels, which is a demand shifter, and input price, which is a supply shifter. By driving up minimum wage with a price floor and forcing higher income levels, businesses must compensate for the higher input cost by decreasing supply of goods. This causes the supply curve to shift to the left decreasing quantity and increasing price. The increase in income simultaneously shifts the demand curve to the right for normal goods and causes a further increase price. In summary, an increase in minimum wage causes a price increase in most other markets.

The market has a natural ability to find an equilibrium point that satisfies both consumers and producers. The same principle holds true in the labor market. While the minimum wage law was enacted with good intentions, the law cannot stop or alter the natural forces of a free market economy.

Thoughts for this post taken from the following websites -

http://www.forbes.com/sites/timworstall/2015/01/21/there-is-no-reason-the-minimum-wage-should-rise-with-productivity-or-average-wages/

http://www.csmonitor.com/USA/2015/0101/With-21-states-raising-minimum-wage-2015-is-a-tipping-point-video

http://www.balancedpolitics.org/minimum_wage.htm

http://www.heritage.org/research/testimony/the-economic-effects-of-the-minimum-wage

President Obama targets "second-earners" with new proposed tax credit

With his state of the union address completed, President Obama has proposed another set of taxes that will surely rile up a lot of people (http://www.npr.org/2015/01/20/378680818/transcript-president-obamas-state-of-the-union-address). Besides the ever-popular attacks on investments and rich people, the president also mentioned a new tax credit aimed at “second-earners” in a family. I think this may constitute an attack on families where one partner decides to drop out of the workforce or work part time for some reason, say to care for children or an aging parent. Take two families making $60,000 a year: in one family a mother works full-time for an employer and in the other she does not. Under Obama’s plan, the first couple receives a large child-care credit and a new second-earner credit. The second couple does not — and so pays higher taxes than the first one. This in fact encourages families to abandon their hope of staying home with their children and penalizes them if they do decide to stay home.

On the other side of the equation are employers. Hiring managers may be excited about the prospect of this “second-earner” credit because it gives these people an incentive to actively join the job recruiting pool. Much like the Work Opportunity Tax Credit (http://www.doleta.gov/business/incentives/opptax/) encourages employers to hire individuals from certain target groups; hiring managers could use the “second-earner” credit to their advantage to recruit more qualified individuals into their companies.

What do you think? Does the second-earner credit punish those who wish not to actively seek work for whatever reason? Could employers use this to their advantage to lure hesitant workers into the recruiting pool? What other perverse incentives could arise from using this tax credit to influence a person’s decision to stay home? 

Healthcare Economics: What will happen if Healthcare becomes “Free”?

Healthcare Economics: What will happen if Healthcare becomes “Free”?

As a healthcare professional I am very concerned with Healthcare economics, but as a consumer I find that there are huge problems regarding the affordability of healthcare.  We all have likely suffered the anxiety of opening a bill from a healthcare provider. This anxiety comes from not knowing how all of the factors will play out.   Some of the common unknowns people might have could be phrased as follows:

1.      Will insurance cover the procedure in question, and if so at what percentage?

2.      What if any of my deductible have I met?

3.      How much can a five minute procedure really cost?

Too often it seems we are surprised by the answers to these questions.  It seems now days that you need a law degree and an English degree to understand the terms of our insurance, and if you are uninsured you need to be independently wealthy to afford healthcare. (Some may also argue that you need to be independently wealthy to afford insurance).  The simple truth is that most people do not fully understand what the end price of their health care will be and when they get the price it is much greater than they expected.  This is where much of anxiety surrounding healthcare comes from, and this anxiety has caused a great number of the population to cry out for healthcare reform, and many of them even ask “What would happen if Healthcare were free?”

I believe that simple economics can answer that question.  The quantity of healthcare services demanded at a price of zero would certainly overwhelm the quantity supplied by suppliers at the price of zero.  Although consumers would be thrilled to have someone else pick up the tab this would increase their economic cost because they would have lines larger than anything ever seen at Disneyland.  Many people would find that they pay the price of free healthcare with their life because it is simply not in supply at that price.

Another problem would be the fact that for-profit healthcare providers would not supply services for nothing (which is what the Government currently pays), and this would leave us with federally funded healthcare providers.  We have seen how well this form of healthcare works through Veteran Healthcare services. 

It is plain to me that free healthcare is a myth and clearly not an option.  But the question for discussion I have is what can be done if anything to fix healthcare in the United States?  For your reference I have included a link to an article that describes many of the options available to lawmakers.  Please look them over and let me know your thoughts.  

As for current healthcare reform, following the last presidential election I was very surprised to see people posting on Facebook and other social media sites that they were “moving to Canada”.  I was surprised because Canada already has much of what our current leadership is moving towards which includes somewhat free healthcare with low supply and great demand. People wait months just for a simple CT scan. Please post what your thoughts are current healthcare reform.  Do you think it will help or not?

  It seems to me that current healthcare reform is looking to make Employers and Healthcare providers foot the bill for healthcare, which I believe will ultimately lead to higher unemployment and less for profit healthcare.  Again because of the law of supply and demand employers will hire less people due to increased costs, and for profit hospitals will close doors because they cannot compete while being paid what the government offers. 

http://content.healthaffairs.org/content/24/6/1399.full

Gasoline Prices and Localized Monopolies

The price of gasoline and diesel fuel amaze me,  regardless of when prices are high or low.   I often harass my friend who is the general manager at a major gas station about his prices, and he often jokingly responds that his bonus is based upon how high he can keep his gas prices for specific periods of time.  Needless to say, that upsets me even more and I usually trade a few insults with him about his business methodology.  My friend's business tends to be the price leader in town, signalling the price of gasoline and diesel simply by the price he displays on his billboard.  Other gas stations in town follow his price increase or decrease within a few hours,  except for those who claim to have specialty gasolines with proprietary additives.

Outside of two major national gas stations,  all of the gasoline in town and most of southern Utah comes from the same pipeline about 10 miles west of Cedar City. This brings up another interesting point in that prices for gasoline at the same gas stations (example: Maverick) are about $0.25 higher in Cedar City over that of St. George,  yet all of the gasoline comes from that same pipeline west of Cedar City!  When I ask those gas stations in Cedar City why they are about $0.25 higher than St. George, they claim extra "transportation" charges (but as mentioned, all of the gasoline comes from west of Cedar City), so I feel like I'm getting ripped off....and I hate getting ripped off by a bunch of profiteering clowns.

So what causes price changes in gasoline and other petroleum products?  The Economist does a pretty good high-level review:  http://www.economist.com/blogs/economist-explains/2014/12/economist-explains-4.

My reasons for caring about gasoline and diesel prices are very legitimate.   I work in the transportation industry,  where my yearly local  and regional diesel fuel consumption exceeds 4.5 million gallons a year, so  every penny counts. The Economist web link above, summarized, proposes that supply and demand are not the only determinants of price.   Weather and geographic location also play an important role. Some topics worth reading comments on:  1.)  Does everyone feel gasoline price differences between cities in Southern Utah are reasonable or unfair?  2.)  Does product differentiation (bulk gasoline vs. name brand gasoline) warrant local price differences?  3.) Why the sudden rapid gasoline price drop?  Is there a hidden agenda?

The Economics of Amazon

I recently read an article entitled, "Campers help Amazon keep up with holiday rush" on KSL.com.  This article presents the fascinating life of transient workers.  As the holidays approach Amazon requires the additional help of temporary and seasonal labor.  On Black Friday 2012 customers ordered 26.5 million items from Amazon.   Essentially, during the holidays consumers place increased demand on retailers such as Amazon, and Amazon does all they can to supply that demand.  To meet the external demand amazon has a greater demand for labor.

In all, Amazon will hire 70,000 seasonal workers this holiday season.  Temporary laborers are incentivized to fill this demand through decreased costs of living and increased flexibility to move. Furthermore, Amazon even pays for the cost of campsites for employees.

Amazon has warehouses in Kentucky, Kansas and Nevada.  These warehouses are located in smaller towns with lower costs of doing business.  However, these small towns do not have the population to support increased seasonal demand.  These small towns benefit as additional temporary laborers increase the population and demand additional quantities of services such as groceries and entertainment.

Increased holiday commerce has significant effects upon our economy.  As additional goods are purchased and funds spent it seems that nearly all aspects of our interrelated economy are stimulated.

http://www.ksl.com/?sid=28022965&nid=157&title=campers-help-amazon-keep-up-with-holiday-rush&fm=home_page&s_cid=queue-15

Game Theory and Terrorism

On September 11th, 2001, terrorists attacked the World Trade Center towers, killing thousands of innocent people. Since then, there have been many initiatives taken by countries around the world to counter terrorism. According to CFO Magazine, these initiatives are effective at eliminating organized terror networks but have encourage the growth of smaller terror plots/organizations.

Game theory is all about information, decisions and payoffs. A rational person will choose a choice that provides him/her with the greatest payoff. Each individual's payoff is affected by the decisions of other players in the game. When there are low transactions (communication) costs, the game will likely provide the most efficient outcome.

This theory applies to terrorist cells. Large terrorist cells and terror plots involve many people and require significant coordination. Because of this, the larger terrorist cells have an increased chance of getting caught by western intelligence groups. This means that the payoff is now riskier for large terror networks/plots. This causes terrorist to shrink the size of their terror networks and the size of terror plots. A smaller terror plot will have less of a chance of getting caught because it will not require as much communication, planning or coordination. This decreased risk probably makes the terror plot more valuable to terrorists. In summary, we see that game theory can describe the decisions of terror networks.

PCs Aren't Going Anywhere

In a recent article on the decline of the PC industry, analysts suggest that for the time being, the PC market is not doing as badly as it was predicted to do in 2013. I argue that while there is a significant decline in PC sales, it is only in the consumer market. Sales will remain strong in the business market.

It's really interesting to think that in 2013, phones and PCs can be thought of as substitute goods. Ten years ago, PCs were considered the future and there was no way that a phone could be a viable substitute. Advances in technology have allowed phones and tablets to become 'smart' enough to do most everything that a PC can do.

While its true that the PC market is shrinking, PCs will continue to remain relevant into the future for enterprise purposes. Right now, phones and tablets are selling a lot quicker than PCs are selling. This is happening because the market for private consumers is larger than the business market. Phones and tablets are relatively new, first-time purchases for many consumers and most would rather spend money on a tablet or phone because it meets their needs for internet browsing, gaming, social media, etc. For consumers, phones/tablets are substitutes for PCs. For businesses, phones/tablets are not substitutes for PCs. PCs are simply better suited for things like typing, working with spreadsheets, large amounts of data, and other tasks that are normally done during a workday. Because of this, overall sales of PCs will continue to drop but PC sales in the enterprise market will remain strong.

American Airlines and US Airways Merger Monopoly?

Today, the merger between American Airlines and US Airways became official.   Once the merger is completed, the newly formed airline will control approximately 20% of the market according to an article on August 7, 2012 in the Los Angeles Times. There has been a lot of controversy about the merger, with some opponents calling the union between the two airlines a monopoly that would reduce competition and raise fares.  We know that a monopoly, according to our textbook, is defined as the “only seller in the market.”  One thing we know for certain, is that even after the merger, the newly-formed American Airlines Group Inc., is not the only seller in the market.  However, if we take a closer look we may see that American Airlines Group, fits the characteristics of a monopoly if we look at market power. Market power exists when a seller can control the market, specifically when it comes to price and quantity demanded.  In more specific markets, where American Airlines dominates, like Reagan National Airport, we can see how American Airline has market power and could potentially have market power.  In anticipation of this, one article describes the details of a settlement where American Airlines will have to give up some of their market power and share some of its flight slots with Southwest and JetBlue. All in all, American Airlines with give up 52 flight slots at Reagan National effectively lowering its market share from 70% to 56%.  56% is still a pretty big chunk of the market in the Washington, D.C. airport but if we examine airports nationally, we can see that each airport has its own market power. We find Delta in Salt Lake City or Continental in Houston, TX as huge market powers of their respective airports.  I think this variance across the nation helps to alleviate the possible repercussions of any monopoly and its effect on price within the industry.

Proposed Federal Minimum Wage Increase

Congress’s proposed changes to the federal minimum wage will effectively raise it $2.82, from its current $7.28 to $10.10, over the period of 2 years.  This article discusses the economical implications of such a proposition.  There is much discussion as to whether or not such an increase will positively impact the economy.  Despite any negative offerings outlined by this article or anyone else, I am in favor for the minimum wage increase.  My reasons are as follows; I do not ever see myself competing for a low-wage job, thus this area is not an area of concern for me, I feel it will only increase opportunity for workers in states whose minimum wages rates are currently low, and it will keep employee turnover relatively low.

Overall, I believe that increasing the federal minimum wage will spur growth in the economy and in overall business activity.

Winners Curse: Craigslist

I am not ashamed to be one of those "low-ball bidders" who is always scanning Ebay, Craigslist, and KSL classifieds in search of that GOLDEN nugget.  Recently, I read an article about the "winner's curse," which states that many auction items are sold well above their intrinsic value.  This is often due to the fact that information is not equally known by both the buyer and seller.  If I offer a high price, I will win both high and low quality items but pay more -- on average -- than what my items are really worth.  This is known as "information asymmetry."  As a result of this knowledge, we can all constantly low-ball bid items and walk away with the deal of a lifetime on a weekly basis.

As a seller of a collectible item, we now have a problem on our hands.  How do we maximize our final selling price?  It is simple.  There is a reason you get the best deals on ads where no picture is offered, and no detailed description is available.  To get every dime out of your item, make sure to offer ample pictures, descriptions, ownership titles, letters of authenticity, etc.  An article recently published by the American Economic Association about asymmetric information revealed that eBay Motors auctions fetch an extra $80 per photo provided by the seller.  Happy Bidding/Selling!