The real reason why luxury hotels charge for internet [2015/12/26]

There has been many theories why luxury hotels charge for wi-fi.

Reasons include guest's price insensitivity, perk, avoid cannibalization, and to maintain
reasonable high internet speed.

Perk was a weak theory to begin with because if customers really needed wi-fi, they would just purchase it.

Cannibalization cannot be ruled out but is not a very convincing theory either. Who would just use internet and stay in their room in a luxury hotel? Customers would surely take advantage of the luxuries that the hotel provide instead of being sucked in to Netflix, which they can anywhere else.

Well, today, we are closer to the real reason why they charge for internet. Recently,
Marriott has been fined by FCC for blocking customer's hot spots.

This action rules out price insensitivity and to maintain reasonable high internet speed. If customers were price insensitive then they would just pay for hotel wi-fi. If the hotel cared about internet speed, then they would not care about customers using their own wi-fi.

Hence, what convincing evidence are we left with? Yup, money, money, money...charging for internet makes money and is probably a super high margin business because once you set up the internet, the maintenance is very low cost. That is why Marriott actively banned customer's wi-fi.  It could not lose its cash cow, especially as lodging became more competitive with rise of Airbnb and other innovative lodging.

So in sum, luxury hotels charge for internet because it makes profit!

School Bus Seat Belt

The debate is back about school bus seat belts.

I agree with the ABC's report that school bus should be safer and that seat belts should save lives. Also, I believe that school seat belts are not so costly so it seems pretty obvious (hopefully...).



But here are some thoughts that I had using my economist hat.

First,  is it the best usage of our constrained resources? American schools have so many problems to fix and not enough resources. Are school bus seat belts, one of those priorities?

Second, there is the law of unintended consequences. As the transportation security board mentioned raising school bus cost due to seat belts may lead to more parents/ caregivers driving their kids to school which may result in higher accidents, congestion, and loss of time by the parent/caregiver.

Remember that 911 attacks had an unintended consequence of people driving more instead of flying, which lead to more car accidents and deaths.

I just mentioned these points not to have people with pitchforks and torches in front of my house but to think about the effects of policy.

For more information about effects of policies, I suggest listening to the following podcasts which are not only educational but fun.

Freakanomics
Econtalk

If you want a book then I suggest reading Freakanomics.




Please drive safely ^^

Invasion of Giga-mansions

According to ABC News, there is an increase of uber sized mansions being built in  Beverly Hills and Bel Air. And the rich neighbors are not very happy with the constructions including Jennifer Aniston.

Here are my thoughts...

1. Why are you complaining so much if you also built mega mansions before...Yes, it is noisy with the construction and some invasion of privacy but to me, it seems like what capitalism does. Also, what you call truck noises and dangers are what ordinary people in LA face everyday. So I do not think it is an honest complaint.

I think if you want an legitimate complaint, you should complain about safety, environmental issues, and may be some noise issues. Please don't complain about capitalism.

2. Wow....human greed knows no limits...90,000 SQ FT! This is just really show off of greed. I do not blame anyone using their money the way they see fit but this seems ridiculous. I don't think two bars and two home theaters will make you twice as happier. The marginal utility is just not there. So economically it just seems odd.

3. Finally, it is your money but you can still make a better use of it by investing in things that create value from investing in people, businesses, and research.

Remember that capitalism is driven by economics and absurdities cannot persist long. Eventually negative net present value projects will cave.

Supplement Fraud

Apparently, GNC, Target, Walgreens, and Walmart have been selling supplements without the labeled or advertised ingredients.

See article here: http://well.blogs.nytimes.com/2015/02/03/new-york-attorney-general-targets-supplements-at-major-retailers/?smid=fb-share

Wow. That's a breach of trust right there. Ripping off people who want to be healthy and those that are probably older than the general population.

So is this a market failure? Both yes and no.

Yes, because, obviously, the reputation mechanism failed for now. Firms were supposed to be honest because failure to do so would decrease their profits through the market mechanism. Also, there may be a internal control issue, where the management did not monitor the lower managers well. In addition, it is a failure of oversight by the regulators. Hence, there seems to have been a market failure.

However, despite this incidence, we cannot say that the markets failed. I have not read the details but it does not appear to have been widely systematic or conducted over a long time. And regulators came to correct the issue. So I believe that it is a market hiccup rather than a market failure. A market failure may be rigged bids in a developing nations where nobody wants to participate due to absolute corruption.

So now what? I believe that the regulators will fine the perpetrators and the firms will probably settle for some amount and those supplements will be taken off the shelves.

What should we do? Several things.

1. Don't buy supplements. They don't really work anyway.

2. Buy fresh fruits and vegetable. Yes, good food actually works better.

3. Complain to GNC, Target, Walgreens, and Walmart. Tell them how upset you are and that you will not shop there until trust is restored. One complaint is unlikely to make a difference but it is a start and always voice your concerns for a better and just world.

4. Dispose any of the supplements that are suspected of being mislabeled or falsely advertised in a trash can instead of flushing down the toilet. Flushing down the toilet will cause water pollution (http://www.epa.gov/aging/docs/disposal-meds-flyer.pdf).