Browse

Why a healthy bank can still collapse: Diamond and Dybvig's bank run A bank keeps only a slice of your deposit as cash and lends the rest for years, so it quietly bets that almost nobody asks for their money at once. Diamond and… Economics4 min read29 Oct Why two ice-cream vendors end up side by side: Hotelling's beach Two ice-cream vendors share a long beach, and every swimmer walks to the nearer cart. Where should each one park? Drag the carts and watch the dividing line… Economics4 min read22 Oct Why a free shortcut can make everyone's commute longer: Braess's paradox Build a brand-new road and every commute gets longer. In a town of 4,000 drivers, two routes each take 65 minutes. Add a free shortcut and each driver… Economics5 min read19 Oct Why mild preferences can build a segregated town: Schelling's chequerboard Nobody in this town wants it split into blue and orange districts. Each household only asks that a few of its neighbours look like it. Yet run the rule and the… Economics4 min read15 Oct Why rival ice-cream carts end up side by side: Hotelling's beach Put two ice-cream carts on a long beach and each one is tempted to creep toward the other, because standing next to a rival steals customers without losing… Economics4 min read8 Oct Why people bid more than a dollar for a dollar: Shubik's escalation trap Auction a dollar bill with one twist: the second-highest bidder pays their bid too. It sounds harmless, yet in 1971 economist Martin Shubik reported that… Economics3 min read2 Oct Why shared fish, fields and water get used up, and how some places don't When something is shared and nobody controls it, taking a bit more is always worth it for you. You keep the whole gain; the damage is split among everyone… Economics6 min read26 Sep