Would you rather pay $10 and have free shipping or pay $5 and pay $6 for shipping?  Answer: you prefer the latter.  Well, at least if you are like most bidders on eBay. 

Morgan and co-author Tanjim Hossain, an assistant professor at Hong
Kong University of Science and Technology, held 80 auctions of new
music CDs and Xbox video games to test how consumers respond to
different price schemes. In the eBay study, they varied the opening bid
price and shipping charges on identical CDs, ranging from Britney
Spears to Nirvana, and video games, including Halo and NBA 2K2.

…A
perfectly informed and fully rational consumer will merely add together
the two parts of a price to obtain the total out-of-pocket price for an
item and then decide whether to buy and how much to bid based on this
total price.

But that’s not what happened
in their eBay auctions. Instead, they found that lowering the opening
bid price while raising shipping charges attracts earlier and more
bidders and ultimately leads to higher revenues compared with doing the
reverse. Those findings suggest consumers pay less attention or even
completely overlook shipping costs when making bids…

The quote is from a writeup, the full paper is
…Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay (subs required).

Also check out the interesting data on online pricing at Nash-equilibrium.com.

Thanks to Carl Close for the pointer.

According to this post the Japanese have a very strict system of auto inspection:   

The first ones to talk to the government about this were the car manufacturers,
and they convinced the government to enforce a rule that used cars have to go to
the technical inspection after 3 years, and this is a costly matter since a
check costs between 1500 and 3500 EUR. Once you’re in the system, you have to
get your car checked every 2 years, and once your car is 10 years old, you need
to go there every year. This is a reson why the Japanese change cars quite fast,
usually before the car is 3 years old. Important aspect is that you have no
control whatsoever on the cost of possible repairs, because after the technical
check, the car is driven to the garage and they do the repairs that the
technical check asked them to do, you just get the bill with your car. A very
nice rip-off… and this system is being envied by a lot of other domains, like
the electronics domain at this moment. So from April 1st 2006, ALL electronic
products sold in Japan before 2001 will be prohibited from the 2nd hand market!

Comments are open if you have more information on these interesting policies.  I guarantee there is a dissertation or two here.  Here is my previous post on state car "safety" programs.

Thanks to Boing Boing Blog for the link.

Addendum: An informed reader noted that the post is incorrect about electronic products being banned, major appliances will have to be inspected something like autos but the inspection doesn’t apply to computers. 

I am not an expert in international finance but I am going to agree with Brad DeLong on this one:

The late Rudi Dornbusch said that one of the infallible warning signs that we
are near the collapse of an overvalued currency associated with an unsustainable
trade deficit is when highly intelligent and respected economists begin evolving
plausible theories that–this time–the trade deficit is sustainable.

Although Ikea stores have yet to arrive in India, its catalogs are sold by
street hawkers and bookstores in many major cities….

When Arundhati Ray redecorates her home, she picks up an Ikea catalog to
search for that perfect piece of furniture….she clips a photo of the desired item, which typically includes measurements,
and then takes it to a local carpenter.

The welfare economics of Ikea knockoffs in India, like those of pharmaceutical knockoffs, are not clear-cut.  On the surface, Ikea appears to be losing out to design theft but India’s emerging middle class generates media attention far in excess of its numbers.  India is still a very poor country that probably could not currently support the low-price, high volume Ikea model.  Thus, knockoffs allow a few Indian consumers to take advantage of good design and Ikea loses little to nothing.

Thanks to Carl Close for the pointer.

"Capitalism is not much loved," writes Clive Crook in The Atlantic.

Seen a movie lately? Watched television or read a newspaper? The culture that speaks to Americans, and hence to the Western world, radiates suspicion of free enterprise….

The point is not that such movies, or the culture more generally, argue that capitalism is evil. Just the opposite: it is that they so often merely assume, innocently and expecting to arouse no skepticism, that capitalism is evil….

It is difficult to see where any heightened
appreciation of the market system is going to come from. Economists,
presumably, ought to be supplying it. Unfortunately, in most cases,
communicating a sense of wonder is not among their gifts. In some ways,
teachers of economics are probably making matters worse. As practiced
in universities, economics continues to turn inward, with ever more
emphasis on math, quantitative methods, and narrow specialization. You
can make a case for that, but it silences the discipline on the thing
that matters most.

Crook is right of course but his piece would have been a lot better had he mentioned the book Americans found most influential in their lives after the Bible.