Sephora's strategy (make-up/beauty)

 WSJ has a good summary of the moves that Sephora has made to make it into such a success.  

How did Larry Summers correctly predict inflation?

... I thought if you were filling a $30 billion hole [the insufficient aggregate demand necessary to get the US economy to full employment] with $200 billion of spending, there was likely to be some overflow and that overflow would translate into inflation. I did the same calculation essentially, looking at GDP, and I saw a 2% or 3% GDP gap, met with about 15% of stimulus. (LINK)

A lot of macroeconomics uses microeconomics tools like demand and supply.

Why is Europe lagging the US and China?

Since 2000, the EU's share of world income has fallen has fallen from 33% to 25%; and the its companies share of world value has fallen from 31% to 16%.

The Economist mistakenly attributes the difference to several factors:

• Europe's firms seem to have been out-managed 
• Its biggest firms are in the wrong industries
• Entrepreneurial deficiency

All of these seem like symptoms of the EU's decline, not causes. My best guesses about what caused EU's decline are:

• EU regulations stifle innovation and growth 
• The EU cannot tolerate the inequality that comes from incentive pay required for profitable innovation.

This shows up in the graph below, showing that "...in the past decade venture capitalists have backed 661 companies that went on to be worth over $1bn. Only 78 of these “unicorns” are in Europe, worth 8% of the 661 firms’ over-$2.5trn total."

Does Kroger think that moral hazard explains vaccine reluctance?

How else do you explain their cut in Covid-19 benefits to unvaccinated employees? Here is what Kroger says: 

 ...the company is modifying policies to encourage safe behaviors [emphasis mine] as it prepares to navigate the next phase of the pandemic, and that the changes are designed to create a healthier workplace and workforce. 

As treatments for COVID-19 get better, the benefit of getting vaccinated declines.  

Earlier blog post: Does moral hazard explain some vaccine reluctance?

Committment Matters when Bargaining

And I bet he got $300.

Nobel lecture on inferring causality from non-experimental data

Why poker players are thinking like economists

The rise of online poker created a divide between old-school players who had made their careers playing live poker in casinos and a new school of online players who learnt the game on the internet. ... It was the new-school players who took game theory seriously, particularly the idea of Nash equilibrium strategies (which players referred to as “Game Theory Optimal” strategies).

Three changes stand out. 

•  More frequent bluffing: Perhaps most noticeable was how often new-school players bluffed (i.e. bet with weak hands). ... The logic is twofold. First, bluffing means your opponents will need to call your bets often to stop you winning with weak hands; hence you’ll frequently win a lot when you have a strong hand. Second, many hands you bluff with can improve and become a strong hand when more community cards are dealt. ...
• Short-stack play. When players have relatively few chips, decisions can often be boiled down to a choice between going all in (i.e. betting all your chips in one go) or folding. When poker can be simplified in this way, game theory provides recommendations on exactly when to go all in and which hands to fold.
• Mixed strategies. Game theory often recommends mixed strategies – randomly choosing what to do with a given hand in some situations – to avoid becoming too predictable. This was particularly important for players on the internet, where opponents could use tracking software to analyse their play and look for weaknesses.

Does moral hazard explain some vaccine reluctance?

If patients know they can get monoclonal antibody treatment, there may be less incentive to get vaccinated:

WEBMD:

Tennessee health officials say that nearly all vaccinated patients should receive lower priority to preserve supplies for those who remain most vulnerable, while those in Alabama say treatments should go to those who are most likely to be hospitalized.

NIH:

When there are supply constraints, unvaccinated patients with COVID-19 are among the populations who should be prioritized to receive monoclonal antibodies, according to an updated statement on NIH COVID-19 treatment guidelines released on Thursday.

Look ahead and reason back: buying a franchise

Individual franchisees (like an individual hotel owner) pay to use the brand and business formula of the franchisor (like Best Western, Comform Inn, Days Inn, Econolodge, Hampton Inn, Holiday Inn, Ramada, or Super 8). The value of the brand to the franchisee depends, among other things, on how much "within brand" competition there is.

Unless the contract grants the franchisee an "exclusive territory," the franchisor may have an incentive to set up more franchisees in the same area. Using a ten year data set of Texas Hotels, Arturs Kalnins find that when new franchisees open up nearby, incumbent franchisees lose 2-3% of their revenue. Interestingly, there is no cannibalization when a new company-owned hotel enters near an existing company-owned hotel (e.g., La Quinta and Motel 6 own most of their own hotels).

If franchisees anticipate that future franchisees will cannibalize sales, this will reduce the amount that they are willing to pay for the franchise. If franchisees do not anticipate cannibalization, they are in for a rude awakening.

Franchisees are powerful politically (easy to organize, common purpose) and often lobby state legislatures to enact franchisee "bill of rights" giving them, among other things, right of first refusal for new franchises. In states with strong franchisee bills of rights, companies with strong brands opt for company-owned stores, which are easier to control instead of the franchisee organizational form..