OFWAT wants cuts in the real cost of water bills
The water regulator OFWAT has published their latest five-year price capping proposals for the UK water industry. They want household bills to fall in real terms for water customers in England and Wales - positive news for people struggling to pay their utility bills but not so for shareholders in the water companies who have become renowned for their generous dividends on the back of price increases over and above inflation in past years.
read more...»Too much choice is bad for you
At last I have found someone else who only wants to use his mobile phone to call other mobile phones. Adam Shaw, who presents Business news on Radio 4’s Today programme, is writing about choice on his business round-up and suggesting that too much of it is a bad thing.
The one option he seeks in a phone – that it should simply allow him to communicate with other people’s phones – is the only choice that is unavailable to him.
He also bemoans the fact that, amongst a range of hundreds of different shirt styles available, he can’t find one that is just what he is looking for, and he suggests that the problem is that too much choice makes it hard to feel confident that the selection we make is the best option available, so that the opportunity cost of getting that choice wrong is higher.
Look at the example from behavioural economics of the supermarket which finds that it sells ten times as much jam when it only gives consumers six varieties to choose from, compared with very low sales when twenty four different pots are on offer, making a great display that attracts lots of attention but few sales, as buyers are confused by the risk of getting the choice wrong. He ponders whether we would be happier if we returned to a simpler economic model, with fewer choices and lower expectations of the utility we would gain from each decision that we make.
Perhaps Stelios has a point when he told Adam Shaw that his objective was to lower customer expectations so that they would be content with lower customer service levels!
Price anchoring
There is a really good article on price anchoring and the iPhone in the Washington Post today.
read more...»Ethical Economics
First and foremost, the title is not an oxymoron. We dismal scientists get a pretty bad rep for being dispassionate. In fact, I was recently asked to give the most soulless example of an economic judgement that I can think of. I put forward the following:
read more...»The Fairer Sex
It’s been a great week for economics with plenty of macro issues in the news. Half term has also given me lots of time to think about the microeconomics of everyday life, inspired in part by reading Tim Harford’s The Logic of Life.
On Friday I rushed, fashionably late, into Rhyme Time at my local library. My daughter and I quickly joined in a rousing chorus of ‘The wheels on the bus’ and after a few lines I realised that my voice stood out, and not just because I am appalingly tone deaf; its defining characteristic was that it was probably at least two octaves lower than anyone else’s in the room. Of the thirty plus parents there, I was the only dad!
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