Archive for November, 2007

Nov 12 2007

SAS Economists Podcast #6: The oligopolistic nature of the video game console market

by Annie Sung and Kristie Chung

Which do you prefer, the Wii? the XBox 360? the PS3? How about other video game consoles? Can you even think of any other video games consoles? Hmm… let’s see… how about the Sega? Wait, no, haven’t seen any of those in a while… what about the Atari? Oh, shoot, nope! Oh yeah, don’t forget the Caleco Vision (for the record, Mr. Welker’s earliest video game memory was of playing Smurfs on a Caleco Vision).

The fact is, today, the market for video game consoles has shrunk to three dominant firms: Nintendo, Microsoft and Sony. This podcast will investigate the video game console market, examine its characteristics, including the elasticity of demand for the different consoles, and conclude whether it exhibits the features of an oligopoly.

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Nov 08 2007

IB – Theories of Exchange Rates

The links below will take you to an overview of several theories relating to exchange rates. These include:

Your assignment in today’s class is to work with your partner to read and prepare a short presentation of your assigned topic. You will come to the front and explain your topic halfway through class.

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Nov 06 2007

World’s top supermodel rejects the US dollar!

BBC NEWS | Business | Supermodel ‘rejects dollar pay’Gisele Bündchen

Currency speculators should take note… the world’s highest paid supermodel has sent a clear signal to those buying and selling currencies in the foreign exchange markets: The US dollar is NOT a good buy!

How does a woman who made $30 million in the first six months of this year send such a signal? By refusing to accept modeling contracts offered in US dollars, insisting she be paid in Euros.

The question is, why does she care what currency she’s paid in; can’t she just convert it to whatever currency she wants once she’s paid? According to Tim Harford, the “Undercover Economist”:

It seems she believes that the dollar is likely to fall in the short term, between the time a contract is agreed and the money is paid. (In the long term, who cares? She can convert her cash to any currency she likes.)

The weak dollar is clearly of concern to Americans consumers and foreign producers alike, but it’s more than likely that Gisele, while she may be the queen of the catwalk, probably knows more about striking the perfect pose than she does about behavior of foreign exchange markets.


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Nov 06 2007

Burgernomics and Purchasing Power Parity

The Big Mac index | Economist.com

In IB Economics we’re studying the theory of exchange rates. A floating exchange rate system should be in equilibrium when the rate enables people in different countries to buy the same basekt of goods with an equal amount of money. In other words, If I walk into McDonalds in the US and have to pay $3.00 for a Big Mac, then board a plane, land in Shanghai and walk into a McDonalds there, the price I pay in Shanghai should, given current exchange rates, be the same as what I paid in the US. In reality, a Big Mac in Shanghai costs about 56% less than one in the US. This tells economists something about the value of the Chinese RMB. Continue Reading »

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Nov 05 2007

Non-price competition in the market for… WIKIS!! Wetpaint makes a move to gain market share

Wetpaint, the free online wiki service, has stepped up its use of non-price competition in an attempt to increase its market share in the wiki market. In addition to releasing several Mac vs. PC parody videos meant to showcase the user-friendly, customizability of Wetpaint’s wikis vs. its rivals, the company also announced this morning that it would be offering ad-free wikis to educators!

As a user of Wetpaint since early this year, the distracting presence of advertisements bothered me; the decision to provide educators with ad-free wikis is huge, and makes Wetpaint even more attractive as a platform for hosting online learning communities for teachers of all grade levels.

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You may be thinking, “Huh? There’s a market for wikis?” Well sure there is. Just because something’s free for us consumers does not mean it’s not a profit oriented business. Wetpaint and its rivals compete for consumers in an oligopolistic market in which competition is not based on price (since its products are essentially free), rather on product differentiation based on features and communicated through advertising and public relations.

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