One Reason We Think a High Price Looks Low

Through a behavioral economics lens, our reaction to a price relates to a frame or reference point that creates an association with a gain or a loss.

What a Blind Taste Test Showed About Beer

Behavioral economic ideas show that product differentiation and consumer preference are more from branding than the taste of colas or beers.

Some Warren Buffett Investing Wisdom

Guilty of probability neglect, we should listen to Warren Buffett’s advice on investing and use cost/benefit analysis whenever emotions overwhelm logic.

How Chinese Economic Growth Relates to Restaurants and Pilots

China might not fuel world economic growth if instead of a 7 percent real GDP growth rate forecast, we use a regression to the mean of 3.9 percent.

How Less Might Be More At the World Cup

In a study of the Barcelona Olympics, researchers concluded that winners of the bronze medal tended to be happier than the athletes who got the silver. Please look at the expressions (below) of the Olympic medal winners for the 200-meter individual medley at Beijing…

Have We Halved the Deficit?

In the State-of-the-Union, President Obama said, “Our deficits–cut by more than half.” Looking at the federal deficit as a percent of GDP, we can say that the deficit is much lower than 4 years ago. BUT… The deficit was an unusually…

What You Can Learn From the Marshmallow Test

Forty years ago, psychologist Walter Mischel began studying delayed gratification by giving young children a choice. A child and a single marshmallow were left in a room. The child could have one marshmallow now or two when the adult returned…

Restaurant Economics: How to Make 1500 Meals a Day

At 2 am, converging at the delivery entrance of Balthazar in NY’s SoHo are mussels from New Zealand, russet potatoes from Idaho, steak from the Midwest and chicken breast and bacon from Prince Edward Island while some Little Skookum oysters originated in Washington State.…

Environmental Issues: Making It Easier To Be Green

“Paul owns shares in company A. During the past year he considered switching to stock in company B, but he decided against it. He now learns that he would have been better off by $1,200 if he had switched to…

Fiscal Policy: Looking at the Lottery

The 14 million (or so) people who buy Powerball lottery tickets may be suffering from probability neglect. They know that their chance of winning $40 million could be 1 in 175 million. But still, they buy the tickets. Nobel prize winning…