Not marked for resale and why it may not be a bad thing

If you have ever bought goods in bulk such as a box of ice cream sandwiches, you may notice on that on the label it says, “not marked for resale.” Obviously, the manufacturer does not want people to buy and distribute their goods, and equally as obvious, it’s making them more profits when they sell by bulk. I should note that the reason for why they’re earning more money is not because it’s cheaper for them to sell by bulk (although in certain cases that may be true), but because they are second degree price discriminating. This particular form is called menu pricing, and it works by separating high demand and low demand consumers by offering different packages at different prices. Someone like a mother of four who wants a lot of the good will buy the bigger package at a lower average price per unit while people such as a single bachelor who want less buys the smaller packages. To stop people from buying the larger package and reselling it to turn a profit (this is called arbitrage), they print the no resale labeling. Now whether or not this is enforceable by law, I am uncertain, but uncertainty alone can discourage people from attempting to resell.

At first glance, this may seem like the companies are inefficient since they are not selling close to their marginal cost when selling the small packages, and it may well be true because there might be fewer low demand consumers buying. Conversely, under regular monopoly pricing, the firm may set a price that excludes much of the high demand. It is unclear unless we compare what would happen when there is no price discrimination. The deciding factor is simply a matter of quantity. Do they sell more or less under menu pricing? What we do know is that menu pricing is not always bad.

The different ways an economist can look at a burger joint menu

Economists have developed a wide array of models to explain market phenomena. For better or worse, sometimes the views overlap and even conflict. It’s this diversity in interpretations that makes economics both an intriguing subject to study and something of a pseudoscience.

So an economist walks into a burger joint and looks at the menu. To keep with the tradition of economists using creative names, we’ll call this first economist, A. A notices that there are a variety of items with different size options at various prices. In particular, the average price per unit of food has a negative correlation with combo size. That is, a small combo has a higher price per unit than a medium combo which has a higher price per unit than a large combo. He concludes that the firm is using a type of price discrimination called menu pricing.

After A sits down, economist B walks up to take her order. B looks to the menu and orders the number 4 which a sandwich consisting of a patty, lettuce, and tomato slices. She always orders a number 4. In her mind, the burger joint had offered the different types of meals to appeal to different consumers. By reducing the distance between a consumer’s desired preference and the actual meal offered, the firm can charge a higher price to each consumer. This is the Hotelling spatial model applied to horizontal product differentiation.

Economist C has fallen on hard times so he has in his pocket a coupon that lets him get two sandwiches for the price of one. Recognizing that the firm is willing to sell the sandwiches at half its price, he concludes that the burger joint has a fair degree of market power because the marginal cost of making another sandwich has to be at least half of the price value. His buddy, economist D, notes on how effective the advertisements were at bringing them to the restaurant. He notices how the firm is so effective at reminding him of why their burgers are good, but it does not bother him because afterall, if the food was really bad, he could always go to the hot dog stand across the street.

Finally, economist E enters the restaurant. He is hungry and so he orders a number 1 and proceeds to have his lunch without another thought.

The platformer parody game

I Wanna Be the Guy (IWBTG) is a devilish platformer parody that plays on the absurd difficulty of older games like Ghosts and Ghouls. Whereas gamers may have slammed their foreheads into the ground during their youth after dying for the tenth time, IWBTG will make them want to blow their brains out after dying for the hundredth time. This is a game that would be considered cruel and unusual if used as a punishment.

You are blasted with a wave of nostalgia upon running the game. Starting with the Megaman theme sound in the introduction, you will encounter a great deal of references from older games including Dracula (with authentic voice acting) from Castlevania to Bowser from Super Mario. There are no lives and on the hardest difficulty, there are no saves. The game can be incredibly unforgiving. The level design is purposefully unfair. Anything from apples ignoring gravity to the old Megaman style ice blocks will make you suffer. Most of the game will rely on memory and a long series of trial and error. In fact, the greatest obstacle to the game is the gamer himself who has to deal with repeated failure and the nerve-racking feeling after making past a particularly difficult segment but have not yet found safety in the form of a save game. The game is a reminder of why we have deviated from games that required a Spartan’s mentality to win.

For the diehard platformers, IWBTG will be a worthy challenge and should you ever become the guy, wear that distinction proudly. Most of us would have tossed in the towel and either congratulate you or laugh at your misery. That said, a good let’s play of IWBTG is a great source of entertainment.

Link to the official website:

Merry Christmas, Mr. Lawrence

While I love games and economics, it’s a good idea to venture out. So Friday is going to be a bit of everything else I enjoy conveniently labeled as media.

Taking place in WW2, Merry Christmas, Mr. Lawrence is a tale about the complex relationship between British PoWs and their Japanese guards. Written, directed, and produced by both British and Japanese film makers, the movie is at times, an odd mixture of two very different cultures and acting philosophies. But this peculiarity is fitting as Merry Christmas, Mr. Lawrence is very much about men coping with their cultural differences and building friendships.

The film is available on Netflix through online streaming. After watching the film, be sure to revisit the movie’s hauntingly beautiful score composed by Ryuichi Sakamoto who also plays a major role in the film. You can find the movie score on Youtube by searching “Merry Christmas Mr. Lawrence.”

Anatomy of a game

A game is a system of constraints. Whether it’s Solitaire or Call of Duty, the player is restricted in what he can do. When we play any game, what we’re really doing is trying to beat the constraints. Sometimes beating the constraints can mean optimizing statistical probabilities in your favor. It could be reading your opponent and trying to figure out what sets of constraints you can impose on her, and conversely, how to deal with the constraints that she can impose on you. Whatever it is, constraints are central to any game.

Now let’s compare two similar games, Chess and Checkers. With tournaments across the globe and the prestigious title of Grandmaster, Chess is taken seriously. Checkers, on the other hand, is something you would play with your ten year old brother. The rules of Checkers is simple; your pieces can move forward in a diagonal pattern, and you remove opposing pieces from play by “leaping” over their pieces. If you get a piece to the opposite end of the board, it gets promoted and can now move backwards. Chess has a myriad of rules which are far too many to discuss.

An important distinction to note is that it’s not the number of rules that necessarily creates constraint. For instance, Go is very simple but is on parity with Chess in complexity. What ultimately matters is the ability to maneuver around constraints. In Starcraft, one of the major constraint is resources. Initially, the player has little choice in what he can do, but as the game progresses, he can choose to expand to acquire more resources, build less resource intensive units, or even cripple his opponent’s economy to give himself a relative advantage.

The key goal of a successful game is have enough maneuverability around constraints so that it grants the player enough freedom to experiment. When there’s too few constraints, the game becomes too easy, but with too many constraints, the game becomes static with little room for novel strategies.

Why Steam is so successful

Online digital distributor giant, Steam, has become a household name for gamers across the world. Shrewd business practices on the part of Valve, the makers of Steam, has kept the users of Steam generally happy and its competitors out. The very nature of Steam prohibits most users from using other digital distribution services. Who wants to run a handful of memory demanding programs in the background? In this respect, Steam already has a major advantage because it was the first to embed itself on our desktops.

To better understand why so many people use Steam, we need to first address the concept of network externality. Certain goods and services increase in value as more people use them. Take for instance, the classic example of the telephone. When one person has a telephone, he has no one to call. When there are two people, they can call each other. Each additional person raises the value of the telephone. Economists call this effect, network externality.

Valve understands very well how network externalities impact markets. Thanks to Steamworks, Valve has taken a step further to cementing our feet. Steamworks is the community building function of Steam; it encompasses everything from your friends list to your profile. Most of all, it’s a free service with the caveat that you have to purchase at least one game on Steam. Consider the telephone example. If you were the only person using Steamworks, how valuable would the service be? Since so many people already use Steam, the network externality must be immense, strong enough to prevent a competitor such as Impulse, another digital distributor, from entering. Impulse can technically match everything Steam does, but it cannot replicate the network externality effect without a substantial user base.

It is interesting to note that Steam is not flawless in its design. Origins, Electronic Arts’ digital distribution software, has begun hitting Steam in the one area where it is not invulnerable, titles. Origins has taken the approach of pulling away its loyal and diehard consumers in the hopes that it can build its own user base. While it is notably more successful than Impulse, it is unlikely that Origins will be able to sport enough exclusive titles to pull people off of Steam. Electronic Arts and Valve can realistically only make titles published under them exclusive. For the vast majority of titles, Electronic Arts and Valve will have to compete for sales licenses.

Front yard farm: nonprofit organization for the unemployed

Until recently, my front yard lawn resembled a piece of misplaced wilderness. A month’s worth of rain and the curse of procrastination had spawned a rather disturbed creation. As the sight of it became increasingly less pleasant, I had no doubts that that residents of my neighborhood block would soon file a complaint. Subsequently, I culled it.

Lawn maintenance is not a particularly joyous activity. I do not derive pleasure from my lawn in whatever shape or form. I had once toyed with the idea of cultivating a home garden, but I found the labor and time associated too costly for a few leafy greens. So the solution is rather simple: find someone else who has the time to spare. The homeless in my city spend many hours sitting by stop lights asking for handouts and small transfers of wealth. If I could convince one or even a handful to manage my garden, I could easily substitute a portion of my food budget for seed money to see my plans go into fruition. (Yes, not one, but two puns.) I would take a small portion of the harvest to compensate for my expenses, the hobos would get to keep the rest of the food, and Frankenstein lawn would not rise back from the dead. Now I only have to convince my landlord that uprooting her front lawn for charity would be a good idea.