FDA screens out studies with selection bias

The Free Press:

• ..one of the studies looked at a group of people for six weeks—three weeks after they were vaccinated, and then another three weeks after that. If they were healthy after the second three-week period, the researchers concluded that it meant the vaccine was safe. In addition to the absurdly short length of time—six weeks to conclude the vaccine is safe?—it has an obvious and inherent bias toward healthy people, who are the most likely to get vaccinated. 

•  Another study used an approach called “test negative”: It looked at people who came to the hospital with flu-like symptoms, some of whom had Covid and some of whom didn’t. If the group who were vaccinated had fewer people with Covid, it was supposed to mean that the vaccine worked. But in reality, it could simply mean that people who are vaccinated are more likely to show up at the hospital.

Waning Credit Card Market Power?

 

Historically, Visa and Mastercard earned substantial interchange fees because merchants had few practical alternatives. But FedNow, RTP, “pay-by-bank” systems, and blockchain-based settlement reduce switching costs and create new competitive options for merchants and fintech firms. Recent reporting from American Banker noted that RTP and FedNow transaction volumes are growing rapidly while firms simultaneously experiment with stablecoin-based international transfers that bypass traditional correspondent banking systems. Meanwhile, regulators are increasingly scrutinizing the market power of incumbent payment firms, including a new UK competition probe involving Visa, Mastercard, and PayPal. Network effects can create durable market power, but interoperability, regulatory pressure, and technological innovation can gradually transform even seemingly entrenched monopolies into far more competitive markets.

For decades, Visa and Mastercard benefited from one of the strongest forms of market power: network effects. Consumers tend to apply for cards that are accepted by more retailers and retailers accept cards that are held by more consumers. The resulting feedback loop favored first-mover credit cards and made subsequent entry difficult. But now new payment “rails” are beginning to erode that dominance. Real-time payment systems like FedNow and RTP now allow money to move directly between bank accounts in seconds, bypassing traditional credit card networks entirely. At the same time, stablecoins and open-banking systems are creating alternative methods for transferring funds with lower fees and faster settlement. Reuters recently reported that Visa’s annualized stablecoin settlement volume has already reached roughly $7 billion, while Mastercard is spending up to $1.8 billion to acquire stablecoin infrastructure firm BVNK. These investments reveal that incumbents increasingly view new payment rails as potential substitutes for traditional card networks.

A Hiccup in a Price War

Many antitrust economists are wary of the efficacy of predatory pricing, the strategy of pricing below costs to drive a competitor out of a market. The usual counter-argument is that, for it to work, the inevitable losses this will entail must be recouped after the rival has exited. Recoupment requires higher prices ... that can attract rivals again. Additionally, there are many tactics the prey can implement during the predation phase to try to thwart the predator.

A new one to me is giving away booze. As described in an article for Southwest Airlines 50th anniversary, Southwest pioneered frequent, cheap flights within Texas in the 1970s. In 1973, Braniff and Texas International started a price war offering $13 tickets. This was below Southwest's costs and were intended to drive Southwest out. Southwest countered with two-tiered prices. They would match the $13 price but also offer a $26 price that included a fifth of liquor. Most of its customers were business travelers who would expense the $26 ticket and keep the liquor. Since the liquor cost Southwest less the the the difference in the prices, it made more on the $26 tickets. Few of its customers opted for the money losing $13 tier. And, of course, the publicity of "free booze" was priceless.

Demand for Metro Rides to FIFA Matches is Inelastic

A recent Forbes article helps explain why getting to FIFA World Cup matches by will cost spectators $150 just for the metro train to get to the stadium. One contributing factor is that demand becomes more inelastic when it is a complement. Fans who have already committed to travel, lodging, and match tickets may have already budgeted $5,000 for the event. What’s another $150? The World Cup in NYC is a once-in-a-generation event for many attendees, and transportation costs are a small share of total trip expenditures. Combine that with few viable substitutes ways to reach the stadium and you have a market where consumers are effectively “captive.” Under these conditions, even large price increases result in only modest reductions in quantity demanded, allowing providers to charge prices far above normal levels.

From a pricing perspective, mega-events shift firms toward the region where optimal markups are high because elasticity is low. The inverse elasticity rule implies that when consumers are less price responsive, firms (or cost-recovering public agencies like NJ Transit) can pass through more of their costs without losing much demand. The $150 fare is therefore less an aberration than a predictable outcome of event-driven economics. The broader lesson is that mega-events elevate willingness to pay for complements, making demand more inelastic.

Nationalistic Self-Sorting

 

Un Français hisserait-il jamais le drapeau d'un autre pays?

Vertical Integration and Screening

 

Cutler et al have published a new paper that adds to the catalog of reasons why firms might vertically integrate. They examine Skilled Nursing Facilities (SNFs) owned by hospitals. SNFs make referrals to hospitals for their residents who develop medical issues. But some referrals are more lucrative than others. The SNF has private information about which referrals will earn the hospital more profit. An unaffiliated SNF will capture none of this, but a vertically integrated SNF/hospital can profit by screening in the more lucrative patients and screening out the less lucrative patients.

Algorithmic Pricing Paper by some middling economist

Froeb, Luke M. and Tschantz, Steven T. and Sokol, D. Daniel, Algorithmic Pricing When Capacity Turns Over: Competition, Collusion, and Information Sharing (April 29, 2026). Available at SSRN: https://ssrn.com/abstract=6675958 

BOTTOM LINE: 

First, sharing occupancy information intensifies competition, as firms compete in each realized state rather than on average. Second, as occupancy rises, it becomes more difficult to absorb diverted rival demand, so firms become worse substitutes for each other, shrinking the gains to collusion. Third, scale pools demand risk, raising occupancy and lowering prices. 

 Together, these findings identify a structural channel through which algorithmic pricing in capacity-constrained markets generates efficiency gains rather than collusive overcharges. ... The results yield practical guidance on which pricing algorithm to adopt and what information to feed it.

GLP-1 and Wedding Dress Uncertainty

Many a bride has chosen a dress a bit too small in anticipation of losing a few pounds before the big day. Sometimes they miss their goals. Bridal studios have long anticipated and planned for this. But with GLP-1 weigh loss medications, the dieting goals have become more ambitious. Even when the weight goals are met, the changes in body shape may not be what was anticipated. An ill-fitting dress, and unhappy bride, is even more likely. There is more uncertainty in the bridal dress business.

As the WSJ reports,bridal studios are trying to accommodate. They are handling more rush orders due to selections made later after gauging weight loss progress, holding more inventories of near-miss sizes and late dress change options, and trying to fit in more last minute alteration requests. All of these adjustments to accommodate the additional uncertainty imply additional costs. As if wedding planning wasn't anxiety inducing enough.

 

Europe's super power is regulation

Economist: How Europe regulated itself into American vassalage:

Decades of over-regulating the old continent’s economy left businesses there unable to compete with American firms, which went on to trounce European ones even in their own backyards. ...

The annoying thing is that, taken individually, each piece of euro-regulation is laudable. Yes, Europe should aim for “net zero” carbon emissions by 2050. Of course regulating AI is sensible, lest the robots turn on us one day. Firm antitrust rules enforced by the EU have served consumers well, and so on. But taken together the effect has been a tangle of red tape that has left Europe awkwardly exposed. Efforts are afoot to get to grips with some of the more unappealing dependencies; next month the commission will unveil a “tech sovereignty package”. But it remains to be seen whether Europe can escape its role as a superpower in rule-making, yet a supplicant in everything else that matters.

Addessing Double Markups with the Zollverein

A new paper by Huning and Wolf explore how the Zollverein was formed. A point it makes is that this episode serves as one of history's most dramatic examples of solving the "double markup" trap. Before this 1834 customs union, the German lands were fragmented into hundreds of tiny states, each acting as a local monopoly over its stretch of road or river. As goods moved across borders, every state added its own high transit toll, essentially a successive markup on the wholesale cost. Just as a manufacturer and retailer both adding high margins can kill consumer demand, these "stacked" tolls inflated prices so severely depressed the volume of trade, leaving both the merchants and the states’ treasuries worse off than if they had coordinated.

 

The formation of the Zollverein effectively acted as a massive vertical integration project for the German speaking peoples. Internal customs barriers were abolished and replaced with a single, uniform external tariff with each state getting a share of the revenue based on its population. This eliminated the destructive cycle of successive markups, reduced final prices, and spurred a surge in cross-border trade. When independent entities in a supply chain (or a geography) stop competing for individual margins and start optimizing for the whole, the resulting efficiency gains can build an empire.