Economics
6 breaks
Prices, incentives and why markets do what they do.
AllBiologyComputingEarth & SpaceEconomicsEngineeringFood ScienceHistoryLanguageMathsMindMusic & SoundPhysics
Why good used cars vanish from the market: Akerlof's lemons
Why can a market of willing buyers and sellers fall apart? In 1970 the economist George Akerlof showed that when only the seller knows a used car's quality…
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…
Why adding a road can slow every driver down: Braess's paradox
You would think a free shortcut can only help. In 1968 the mathematician Dietrich Braess showed it can make every driver slower. In our four-road example…
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…
The winner's curse: why whoever wins an auction has usually overpaid
In 1983, MBA students bid on jars of coins worth exactly $8. On average they underestimated the jars, guessing $5.13. Yet the winning bids averaged $10.01, so…
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…