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Thursday, December 05, 2002 |
"United Learns Size Isn't Everything", WSJ December 5 2002.
[Categories: Airlines, Costs, Demand, Game Theory (Commitment)]
P.S. Commitment piece is at the end, about United having little cash perhaps as a bargaining tactic to induce unions to accept less pay.
1:44:20 PM 
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Friday, November 08, 2002 |
"Airbus is Set to Give Final Nod for Superjumbo Jet", WSJ December 19, 2000.
"Airbus Comes of Age with A-380 Super-Jumbo Jet Challenges Boeing's Last Monopoly", USA Today June 21, 2001.
"Boeing Weighing Speed and Efficiency in Deciding Newest Plane", Associated Press November 7, 2002.
Summary: Airbus' super-jumbo has received numerous orders. Boeing appears to have backed off from competing directly against Airbus' super-jumbo, instead favoring a smaller plane that will greater distances. According to Boeing, this plane may also be much faster (as in the Sonic Cruiser idea) or just super-fuel efficient. (See most recent AP article.)
[Categories: Airlines, Demand, Game Theory (first-mover, threats & commitments), Market Definition]
3:52:25 PM
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"Fast-Food Chain makes a Move Out of the 'Box'", WSJ October 29, 2002.
Jack in the Box plans to open 100 to 150 convenience stores that will be co-located with their restaurants.
[Categories: Costs (Economies of Scope), Demand, Other (Bundling)]
2:58:03 PM
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Sunday, October 27, 2002 |
"United They Fall", WSJ, October 21 2002. Apologies the salary table didn't come out well. Bottom line: United pilots make from $129K -- $306K, others such as Northwest pay from $100K -- $220K, Southwest pays from $87K to $152K, and at the bottom American Trans Air pays from $46K to $110K.
Why does the pilot's union at Northwest gain bargaining strength when United decides to pay its pilots more? After all, the Northwest pilots aren't likely to be able to switch over to United.
[Categories: Airlines, Costs, Game Theory]
12:12:36 PM
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"Web Effect is Greater on Airline Revenue Than Costs", WSJ, October 17, 2002. Do you agree with this article's analysis? If so, what should airlines do now vis-a-vis their internet strategy?
[Categories: Airlines, Costs, Market Definition, Price Discrimination]
12:03:52 PM
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"Industrial Gases: Pressure Builds in Recession" and 'The Middle East: Natural Advantages Fuel Increasing Investment", Financial Times Special Section: The Business of Chemicals, October 14 2002.
First article: As we learned in class, one potential advantage of servicing is that it provides a means to meter customer consumption and hence to price disriminate through a two-part tariff. Is this feature important, do you think, to industrial gas providers, say, supplying bars and clubs?
[Categories: Price Discrimination]
Second article: Apparently, the Middle East commitment to expand capacity has deterred others from expanding. Can we conclude, then, that expected future gas prices given the Middle Eastern expansion are lower than what would be necessary to justify present investment by other, higher cost producers? What if the Middle East had a smaller cost advantage? Could they still deter expansion by others in the face of expected high future prices?
[Categories: Costs, Game Theory]
11:58:25 AM
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Wednesday, October 02, 2002 |
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Thursday, September 26, 2002 |
"Microsoft Unveils Media Software", WSJ September 5, 2002.
"The [media] software is a `strategic entry point' for Microsoft into the more traditional markets":
--1-- "Technologies that are showing up in this product first could easily end up in other offerings."
--2-- "Microsoft has an advantage since it can bundle its digital-media offerings with its other, often-dominant software."
[Categories: Costs (Economies of scope), Demand (Network externalities), Microsoft, Price Discrimination (Bundling)]
2:30:50 PM
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Monday, September 16, 2002 |
"Insurance Issues Threaten Satellite Industry", WSJ September 10, 2002.
Among these three factors, which does the article suggest are the most and the least important in understanding the challenges facing the satellite insurance industry: (1) economies of scale, i.e. financial pooling; (2) adverse selection of insurees; (3) moral hazard / incentives of insurees.
[Categories: Adverse Selection, Costs, Insurance, Moral hazard]
3:04:11 PM
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"America's Cotton Subsidies Depress World Prices, Undermining Foriegn Policy Goals", WSJ June 26, 2002 and subsequent letters, "Farm Subsidies Equal Constant, Affordable Food" and "Free Market Avoidance".
According to the article, the U.S. cotton subsidy program guarantees U.S. farmers $.70 / pound of cotton whereas the world price is $.40 / pound and according to the letter in support of the subsidy, "profits are razor thin". As long as profits are less than $.30 / pound, it would seem that all parties concerned would be better off if the U.S. paid its cotton farmers to not produce cotton: Farmers could be paid more than their profit producing cotton, U.S. could pay less than $.70 for cotton, and the world price would not be as depressed, easing our foreign policy concerns. (Only cotton buyers would be slightly worse off.) What is wrong with this logic? Why do (very rational) cotton growers oppose such a policy? Hint: think about fixed vs. marginal costs and hence about average vs. marginal profits of cotton farmers.
[LINK: subsidy (3), fixed vs. marginal costs (4)]
I'd like to thank Med. Ocean student Tahsin Alam for bringing this article to my attention.
2:48:37 PM
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© Copyright 2002 David McAdams.
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