Recently in game theory Category

Jason and I were PhD students in the economics program at the University of Texas at Austin for five years, and Barry Kahn was a classmate of ours. However, during the last two years of the program while Jason and I were working on dissertations, Barry was spending most of his time on a business idea. Using the tools of game theory, microeconomics, and industrial organization, he was developing a company that would attempt to take back to the original ticket seller some of the profits that scalpers always get on the secondary ticket market. The result is Qcue (pronounced kyoo-kyoo) and the product is called dynamic pricing.

This story blows me away. Last Saturday, the undergraduate students in Val Lambson's upper division game theory course at BYU arrived early for their final. They somehow convinced everyone in the course to not take the exam. So they all received scores of zero. But because the course grading is curved, their grades now depend entirely on the work done up to that point in the course. Thus, by this coordinated action, the students lowered their workload while decreasing the set of assignments upon which to base their grades. What blows my mind is that no one deviated--especially the students who were in the middle of the grade distribution going into the final.

Analyzing this equilibrium is interesting. Let's look at a number of cases.

If you want to be mesmerized by a fascinating auction site, go to Swoopo.com and click on an item that has less than 15 seconds on its countdown clock. Swoopo is what some of my colleagues have recently termed a pay-to-bid auction. You pay $0.75 to bid, and each bid raises the price by $0.15. If the item has been up for auction for more than 24 hours, then a 15-second timer gets reset every time somebody makes a bid. If no one else bids within the 15-second period since your bid, you win the item.

Two of my colleagues, Brennan Platt and Joe Price, along with one of our undergraduate students (Henry Tappen), have written a paper entitled, "Pay-to-bid Auctions," that beautifully lays out the economics of these Swoopo-type auctions.

We have seemed to have figured out growth (well, at least the U.S. has, I can't say as much for Niger or Zimbabwe).  As Ed Leamer points out, the U.S. has pretty much been growing at a constant rate of 3% for the last 35 years- what we need to do is to figure out how to "iron out" the cycle.  Our theories of the business cycle are terrible.