Market Power

The Old Market Power

Until I get the hang of Typepad, I'll continue to post over at my Blogspot blog.  When this site becomes fully active, I'll let everyone know over there.

Testing, 1 2 3

This is only a test.  Do not adjust anything.

Are Kids More Violent These Days?

Mark Thoma posts here that the answer looks to be "no."

The New Market Power

This is Phil from Market Power on blogspot.  I've decided to move my blog permanently.  In the future, the blog will be accessible at www.marketpowerblog.com.  I haven't gotten everything set up yet, but I'll be working on it over the next couple of weeks.  Hope to see you over here soon.

Minimum Prices Combat Predatory Pricing?

I posted this piece and this piece on Minnesota’s minimum gas price law. Walter Williams has some comments on predatory pricing as it pertains to this sort of price regulation. In theory, a price predator is a business with a cost advantage that can price other firms out of business. Once the competition is gone, the predator takes advantage of its new-found market power and jacks its price back up. The key here is that the firm drives out competition and that there is no incentive for anyone to enter the market in the future. This will not happen in the gas price market.

Gasoline sold at Sam’s Club is virtually the same as gas sold at Casey’s, Texaco, Holiday, or Hy-Vee. There is very little (if any) product differentiation. Economists talk about a Bertrand duopoly. In this market structure, two firms producing perfect substitutes compete in price and they will price their product at marginal cost. They have no incentive to lower the price any further and incur marginal losses and they have no incentive to raise the price and thereby lose all their customers to the competitor. In a Bertrand market, all that is needed to have marginal cost-pricing is two firms. Do we really think Wal Mart is going to corner the market in gas and become the only seller?

Alex Tabarrok had this post last May about minimum gas price law law (which is where I found the link to the Walter Williams piece). Apparently, this isn't the only time that a gas station attached to a Wal Mart has been attacked under this law.

The Pie-ing of William Kristol

On March 29th, conservative commentator William Kristol was giving a speech at Earlham College. About thirty minutes in, somebody served him dessert (from the Chronicle of Higher Education - subscription required):

That's because a student climbed onto the stage in Goddard Auditorium at the college, in Richmond, Ind., and threw an ice-cream pie, topped with a cherry, into the pundit's face.

Nice (he says sarcastically). Chris Hardie, a graduate of Earlham, reflects nicely on this event.

Nice Shot, Man

You play golf like a blind man!

Blogspot's Problems

John Chilton has the answer for why Blogspot has been so temperamental lately.

From the Ground Up

One of the first things I did when I got to Minnesota State was develop my Sports Economics course. My younger colleagues and I are also going to be instrumental in building the future of our department. These sorts of things are common at most institutions, but most of us will not be involved in building a university from scratch. From the Chronicle of Higher Education (subscription req'd):

The faculty members who have already arrived on the new Merced campus of the University of California have not only had to balance research with teaching, but also had to concentrate on curriculum development, community outreach, job searches, and heavy administrative duties. "Everyone is doing multiple tasks and working very long hours," says Maria Pallavicini, dean of the School of Natural Sciences.
...
Someday Merced will boast a faculty of more than 1,200. For now, the university employs fewer than 50 professors; 60 should be in place by the time the campus officially opens, in September.

Recruiting for those positions has proceeded smoothly, by and large, despite the many challenges the new faculty members face, the remoteness of the campus in central California, and Merced's lack of name recognition.
...

But Merced has seen an outpouring of interest in faculty jobs. Carol Tomlinson-Keasey, the chancellor, says the university received 7,000 applications for the first 30 faculty openings. "Many were drawn to the UC name," she says. "Thank God for that."

Indeed, many faculty members mention the university system as a prime reason for their interest in their new jobs. "Being within the UC system guarantees a certain level of support from the state and a certain level of quality," says Kevin A. Mitchell, a physicist who is an assistant professor in the natural-sciences school.

It also means a certain salary level. Merced pays faculty members salaries in the same range as that of professors on the system's other campuses. The lowest-paid assistant professor makes nearly $49,000, and the highest-paid full professor brings home more than $151,000. According to the Greater Merced Chamber of Commerce, the median price of a house in the city in 2004 was $279,000, a far cry from the sky-high prices elsewhere in the state. (The median price in San Francisco was $647,000.)

Minnesota State has about 1300 faculty jobs. If Merced gets up to a similar student-teacher ratio, I suppose it will end up with about 14,000-15,000 students. I wonder how successful the following sort of collaborative stuff will be in the long run, once the bureaucracy gets in place and starts festering:

That freedom has allowed faculty members to be creative. For instance, Mr. Mitchell and a mathematician will team teach a double-credit course in calculus and physics. "These are two very closely related subjects," says the physicist, "so it makes sense to teach them together."

The introductory-biology course will also make more use of mathematics and computer science than traditional biology courses do, says Mr. Colvin, who will teach it. That shift in priorities will lead to less emphasis on memorization, he says. It will also have a practical side benefit: Since teaching-laboratory facilities will not be completed by the time the fall term starts, computer-lab sessions will help make up for lost time.

Faculty members from all three schools constituting the university are working on shaping a yearlong core course that will be required of all freshmen. The class will pay particular attention to noteworthy concerns of California's Central Valley, such as the use of natural resources, particularly water, from the perspective of scientists, engineers, politicians, historians, and anthropologists.

"Departments often create silos and barriers for faculty with different expertise," says Ms. Pallavicini, the natural-sciences dean. "It's often difficult to get a computer scientist and a biologist together if there's different space and different rules in their departments."

Such problems do not exist at Merced, where the faculty members know each other well because of their constant administrative work in the race toward opening day. But other issues have cropped up because of that very lack of departments.

I reiterate... I wonder how long it will be before the bureaucracy festers and the various departments start calling their credit hours home in a game of "that's mine, this is yours?"

Gambling on College Basketball

I posted thoughts on this subject over at The Sports Economist, but I wanted to go into more detail. From the Washington Post:

Betting on college sports threatens the integrity of the games, in the view of Bill Saum, the NCAA's director of agent, gambling and amateurism activities. At worst, it exposes college athletes to pressure from criminal elements conspiring to fix the outcome of games. At its most benign, it sends mixed signals about the propriety of gambling, whether on sports, slots, poker or pool.

What drives this fear is the lack of salaries paid to players commensurate with the revenues generated by their games. To see how football programs recruit players when they can't compensate them with income, see this post below. Nice digs.

Every player is a candidate to be a point shaver and there are some penalties that hit all players in the same manner (jail time, expulsion from school). The star players on the big-name programs are the least-likely to fix games. These players have relatively good opportunities to play professionally and to earn lucrative salaries. If they get caught fixing games, their professional careers will likely be ruined. So they have to get at least as much to shave points as they expect to lose in their basketball career.

The good players on the not-so-big-name programs and the guys off the bench on both types of programs are more likely to fix games. They don't have professional opportunities and therefore have less to lose. They are also the ones that point shavers are going to go after because they will be the ones who have lowest reservation price of price shaving.