Matt Nolan

Wine and competition in New Zealand

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In the following story on Stuff, we are told that a New Zealand wine maker has sold a whole bunch of wine for $3.50 a litre – an incredibly low price for the premium brand.

The reason for these “firesales” of wine we are told is:

these big sales come on the back of a bumper harvest this season, resulting in surplus stock

So winemakers have had a bumper season – and as a result they are having to sell some of their wine excessively cheaply. Doesn’t this seem weird.

Well it makes complete sense when we think either:

  1. There is competition in the wine industry or,
  2. The wine company is able to price discriminate between markets

Discuss 🙂

goonix

$onny Bill Williams and the salary cap

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The recent Sonny Bill Williams saga has brought into light the issue of salary caps in competitive sport. After fleeing the Australian NRL for French Rugby Union, SBW made the claim, among many other bizarre excuses, that the NRL’s salary cap was anti-competitive, in that it prevented players from earning their full-potential.

Does SBW have a valid point?

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Matt Nolan

Do economists ignore workers?

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Over at Econospeak Michael Perelman is discussing how he feels economists ignore the concept of a worker when they discuss economic theory.

There appears to be a fair amount of disdain in his post about the mathematical nature of economics. However, I will forgive him for this – he is a heterodox economist after all, so his very discipline is focused on critiquing areas where mainstream economic thought makes a wrong turn. Although I do not share the mis-trust of mathematical theory (infact I believe it is a very useful way to organise ideas (sort of like writing them down), I do agree with the concept that an over reliance on technical models, without an understanding of the underlying assumptions, can lead to spurious conclusions in economics (however, as we have said before, this is a problem with the subjective application of a model – it is not invalidate the model in of itself).

Anyway, the authour appears to believe that economists ignore the idea of a worker. Fundamentally, I get the impression that he is believes economics discusses the rights of capital owners in far more detail than we talk about the rights of workers. However, I’m not certain that I agree – let me try to explain:

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Matt Nolan

Trade-ins: What’s the point

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Yesterday I was talking to my partner about the lack of videos available for her iPod. I was prattling on about how there probably isn’t many videos because the penetration of the video iPod is probably quite low. The reason I believed that the penetration was quite low, was because I couldn’t see lots of people forking out for a new iPod with video – when the old iPod would still do the main bit of playing music.

My partner then said they should do trade-ins for the old iPod, so you can get the new one more cheaply. At first I was dismissive of this idea, stating that, unless you could get money back for the parts what was the point. However, I soon realised that I was completely wrong – there are a large number of circumstances where my partner was right and a trade-in deal made sense.

Now, I haven’t actually seen any trade-in deals for iPods, but I certainly have for the xbox and playstation. As a result, I’m going to discuss why firms that sell durable goods may want to have trade-in deals.

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Matt Nolan

Gift or investment: Lil Wayne edition

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Over at the excellent intersection between anthropology and economics blog, there is a discussion about the Lil Wayne, his latest album, and how this fits into the idea of a gift economy.

[Disclaimer: I haven’t listened to Lil Wayne, so my knowledge on the marginal benefit of his music is severely limited.]

Here the question is asked:

Specifically: who’s going to buy this album when they have been so generously gifted with Carter’s work for free?

But it has been popular – very popular. This raises the next query:

It may be that Lil Wayne has succeeded here because he is, in the opinion of Rolling Stone, the “best rapper alive.” If you are this good, ubiquity and generosity have no penalty. Free for all or fee for all, it doesn’t matter. We have to listen. But intuitively this seems wrong. Surely the incentive for “giveaways” should be more pressing for lesser talents.

This is what I would like to discuss more, in context of a “gift economy”.

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Matt Nolan

Could Wal-mart help small business?

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Over at Anti-dismal, Paul Walker notices an article by Andrea M. Dean and Russell S. Sobel which show that the regions with a Wal-Mart tend to have a higher number of small enterprises (with 5-9 employees) than regions without a Wal-Mart. The same trend holds (albeit more weakly) for businesses with 1-4 employees, and the trend is flat for self-employment.

This is an interesting result, given that the majority of the public tends to believe that the existence of stores such as Wal-Mart and the Warehouse have driven mum and dad retailers out of business. Now we could argue about whether having large stores drive out small stores is a good thing or not (I think it generally is), however this article suggests that there may not even be a trade-off, in which case society should stop hating on these large firms for “destroying mum and dad stores”.

As a result, lets ask ourselves what the article’s cross-sectional data means.

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