XM and Sirius satellite radio are the only two competitors in their industry. However, in 2007 they filed for a merger that would create a monopoly for satellite radio. The justice department approved the merger claming that there would be enough competition from conventional radio, mp3 players, and ipods to stop the joint company from skyrocketing prices. On the other hand, the FCC has been more difficult to convince. When they originally wrote the contracts for the wave licenses, they were to be kept separate. The two companies are willing however to work with the government, and obey certain rules such as keeping prices static for three years.
Thursday, July 31, 2008
Today on the abc World News Tonight with Charles Gibson announced that Exxon Oil has announced the largest quarterly profits of any corporation ever - 11.7 billion dollars. Shell Oil followed with 11.5 billion for the quarter. Hearing that news none of us would wonder where that profit came from - we paid for every penny at the pumps. However, as the commentator explained, Exxon made its profit long before the oil was even refined into gasoline. They made it by raising the cost of the crude oil.
Exxon and other oil drilling companies are part of a small competitive monopoly that sets the prices and to a large degree controls the markets of many other goods and manufacturing. The commentary explained that oil production in the Middle East had slowed after the US invasion of Iraq (It is just getting back and increasing now.) The decrease in production by one supplier began the manipulation of the market by the other monopoly participants. By slowing oil production or as the commentary described by conducting repairs on oil drilling or broadcasting concerns that oil production may be curtailed because of the continued aftermath of major storms in the Gulf of Mexico, the consuming countries were willing to pay a premium price on oil to assure their supply.
The oil drilling market is not easily entered. Many oil rich lands are off limits to new and old companies because of governmental and political restrictions (e.g., in Russia and Venezuela), because of conservation concerns (in the coastal waters and in Alaska) and because of natural barriers (e.g., drilling by the North Pole although there is already interest by oil companies in the sea beneath the melting northern icecap). Therefore the monopolist oil companies have been able to set the price and get what they ask.
But there is another side to the story. The news commentary described what happened during the oil crisis in the 1970's when President Carter urged all Americans to conserve energy. For a while Americans bought smaller cars and turned down the heat. But the oil crisis did not last long and soon we all went back to consuming the cheap supply of energy. This time is different. There is no expectation that the oil crisis will end soon. The longer the prices stay high the more lasting the effects. Americans are already driving less, taking more public transportation, working at home for some days per week, buying “green” and seeking products and designs that conserve energy. These changes are not temporary because they are effecting a shift in production and industry. One example is the Toyota factory that had opened in Louisiana and was prepared to make trucks has now retooled to make hybrids. American auto manufacturers have done the same. So that were the energy crisis to end in the next few months, the shift that has taken place would not simply return to the old ways. Economists call this demand destruction, in which changes in the economy creates a shift in consumer behavior that destroys interest in old products. The process is a natural phenomenon in the technology industry in which new devices quickly make old ideas obsolete. With the oil crisis, the destruction of demand has made “going green” the new chic.
Posted by Steve at 7/31/2008 08:23:00 PM
The Coase Theorem states that a free economy will find private solutions to difficult economic conflicts. This article appeared a few years ago but what it describes is happening right now in New Haven, Connecticut where I live. The activity is an example of a creative solution to a complicated problem - without government interventions. The article describes a variation on car-rentals; charges by the hour especially in big cities or near airports and business centers.
What is happening in New Haven, the city where Yale University is, involves the growing problem of traffic congestion and scarce parking places. The university had banned student cars from university lots, especially after new construction took up several parking lots. Students and their parents of course complain. And city businesses miss out because the carless students do not buy big items because they cannot carry them to their dorms. However, the city was not interested in subsidizing student parking even though the university is a big part of the economy. The city also has a shortage of parking spaces and students would be leaving cars unused for long periods of time in parking spaces needed for consumers of city businesses.
A few enterprising students formed a business “Pick-Ride-Drop” nicknamed PaRDEE. The idea is that the business makes a few cars available to students to rent for an hour or more to shop or get to the train station. They are charged by the hour and an extra fee if they do not bring the car back to the same lot where they picked it up. There are drop off places at ten spots around the city, including the train station, the grocery stores and shopping district, the medical center, and several business centers. The students call ahead to reserve a car at a pickup place and then drop it off with the keys in a special pouch for the next driver. The business began with 10 cars and now there is a group of 39. The market has opened to employees of the university and several allied businesses.
The Coases theory is evident in the following. The business would not have worked if the owners had to pay the exorbitant parking and the students would not have purchased the cars if the parking costs had been passed down so Yale designated a number of spots just for the cars in exchange for happier students and parents. The city also agreed to waive the street parking meters for those cars in exchange for more reasonable numbers of student cars. The students have to plan ahead but for very reasonable rates get to have car transportation when needed. The fees go to car repair and gas. As gas prices increased the rates have also climbed but are still acceptable.
The most recent development is the addition of a bicycle fleet operating on the same principle for those who are thinking green. In a recent local paper article one of the owners commented that the shared rides and cars is a practice that is more common in Europe but workable in the American city. The organization is planned as an excludable and rivable product, making a private business.
Posted by Steve at 7/31/2008 08:22:00 PM
Very few times in our countries history have we seen so many companies file for bankruptcy. This article lists around 10 different well known companies that have filed or are going to file for bankruptcy. One that I found shocking was a retail store called Mervyns. Never heard of it? I do not blame you. However if you ever lived in California you would be quite shocked and upset. Mervyns is the same thing as a JC Pennies...but a little bit nicer. Every Californian is very familiar with this store. In fact when I lived in California my father used to manage a store where we lived.
Posted by Jordan Stryker at 7/31/2008 03:26:00 PM
Who wants a new car right now? That is what the General Motors Corporation (GM) would like to know. With gas prices at an all time high and a weak economy, many Americans are not headed to the car dealerships like they were a few years ago. The whole industry in the U.S. has fell 10% in the last year, and GM fell below the average at 16%. In addition, their shares hit a 54-year low in July and things are not looking better for the future months. This is leading GM to cut 15% of U.S. and Canadian salaried workers by November 1. Their plan is to reduce white-collar costs by more than 20% to reduce the amount of layoffs needed. GM is not the only company feeling the strain Ford and Chrysler have also announced salaried layoffs. The demand for the market is no longer present in our society now. The cost is greater than the demand therefore cut backs are being made now to save the company in the end. So who wants a new car right now? I think most of us would love to have a new car right now, but who is going to buy one? The person whose price meets demand will buy a car.
Posted by christa schott at 7/31/2008 03:03:00 PM
In the heat of summer who is really feeling the burn of high oil prices the oil companies or the consumer? Exxon Mobil Corporation, which is based in Irving, Texas, broke a new record Thursday with the biggest quarterly profit ever made by a U.S. company of $11.68 billion (with a 40% increase in revenue from the last quarter). However, this increase in profit fell short of expectations due in part to the balance of increased oil and natural gas prices, but a decrease in sales volume and higher operating costs. Although, we as consumers can sometimes think that the oil companies are setting ridiculous prices it is all in part to supply and demand. With the lowered supply over the past several months the demand is not being met, so higher prices are bring down the demand. By using a demand curve the oil companies are setting the price that will allow their supply to meet their demand. However, the oil companies aren’t being hurt as much by the 8% decrease in crude oil production as some consumers considering Exxon Mobil holds the record for at least the top six most profitable quarters and largest annual profit for American based companies. Exxon Mobil is not the only one making huge profits right now. A Europe based company Royal Dutch Shell fell just short of Exxon’s Thursday high this quarter. So who is feeling the burn more? It is hard to say, but the increased gas prices are becoming an economic crisis for most Americans.
Posted by christa schott at 7/31/2008 12:42:00 PM
As if losing your luggage through the airlines isn't bad enough, how about meeting it when you reach your destination, after you send it separately? Some people are opting out of checking their luggage are are sending it ahead of time. Delta Airlines has announced that they would start charging $50 instead of $25 for just one extra bag. This increase doesn't include the extra cost for bags exceeding the weight or size limit. Although Delta is the only company as of now that has raised their prices, the other companies are expected to follow suit.
FedEx and UPS are the two most promising ways to go in shipping luggage, but the trouble is, how soon do you send it. In choosing this option, it would be necessary to pack well in advance and have your luggage well on its way at least five days before your expected arrival. And all for comparable cost to what you are paying to check the luggage in the first place. The biggest advantage lies in the idea that shipping the luggage gives you the option to use delivery confirmation and insurance on lost luggage. Airlines however, don't guarantee anything lost in route.
So after contacting your hotel to assure they accept early arrival luggage, making sure you haven't packed any "dangerous goods", like aerosol spray, perfume, cologne and nail polish remover, and preparing well in advance, the question that lies is, "Is it worth it?" Would the benefits from shipping your luggage outweigh the extra $25 per extra bag? I say, pack lighter, shoot for one suitcase and a carry-on and you're set.
Posted by katiedickson at 7/31/2008 11:31:00 AM
The core inflation rate, excluding food and energy, accelerated in Indonesia to 8.7 percent in May from 6.3 percent in December. During the same period, the core rates rose in May in the Philippines and Singapore to 6.2 percent and 6.8 percent, respectively, from 2.6 percent and 3.5 percent.
While oil prices were rising, most others products prices were rising. Oil is most important public products in the world because most factory and transportations using oil. Therefore, the rising of oil prices strongly impact to rising of other products prices. Some countries reduce tax of oil to block inflation. However, that was not a solution. They couldn't block inflation. Now, the oil prices are dropping. Then we can suppose that other products prices will be dropped.
Posted by Inji Song at 7/31/2008 04:01:00 AM
Wednesday, July 30, 2008
The Chinese government has created a type of monopoly on the internet. They have control over the internet in china and control what people are allowed to see on it. This is becoming a major controversy with the Olympics edging closer because they are limiting what sites the media will be able to access. Normally, the Chinese government regulates what sites their citizens are able to access, however they promised that they would life the restrictions for the media during the Olympics. Overall the internet is not a monopoly because more than one company has access to the internet. In away I believe the Chinese government creates the internet an artificially scarce good as well by controlling who uses it and the websites. I will leave this up for discussion, so please tell me what do you believe china is doing and is it right or not?
Posted by Neil Boyer at 7/30/2008 09:43:00 PM
Is it any surprise that Chrysler or any car manufactuer is struggling in times like this? Chrysler has tried to take promotional avenues that would increase the cars being purchased but they have not been successful. They have decided, instead of calling it quits they are going to pair up with foriegn auto producers. Chrysler claims this will help their never ending drop in sales. There has been some descussion that not only selling cars over seas but making them too will be the primary focus especially for the jeep like vehicles. We all know now that anything the is a SUV or Truck is no longer wanted due to the increases in fuel prices, so instead of completley shutting off the making of these vehicles they are going to seel the ones they can in the U.S. over seas. Also, Chrysler is looking for ways to spend less money in the car making process. They are strongly leaning on having the building of the cars be done over seas for the cheaper labor costs. Chrysler is also trying to cut cost by offering early retirement packages and other early benefits. Chrysler is trying to stay in business because there top selling vehicles are Trucks and SUV's so they will do what is necessary to stay competitve in that Market.
The article on overfishing and the potential extinction of a valuable resource reminds me of the current difficulty with oil production and the destruction of the environment. There is little to no incentive to limit oil drilling and control of oil fields. However there is a monetary control placed on oil production when the oil cartels and OPEC understand that by limiting the availablilty of oil by drilling less the price of oil goes up. Countries and even individual consumers have been forced to pay the higher price because of the dependency on oil as a source of energy and a raw material for industry.
The same control is not true for the fishing industry. As the cost of fish and squid increase, consumers can find ready substitutes - steak or vegetarian meals. Fish is rarely an indispensable commodity for most consumers of the world. Oil on the other hand is not replaceable - at least not yet and not until there is a viable and reliable cheaper energy source and the technology to use it.
Solar power and wind power are two potentially viable sources that future technology may bring into reality. Both are public goods - that is nonexcludable and nonrival in their specific form although a levied cost may make them artificially scarce goods, limiting access to those willing to pay.
For now oil is the primary source of energy for transportation and much of industry. As the demand continues, the "overfishing " of the fossil fuels as well as the associated pollution will continue to threaten the environment and political stability of the world.
One of the hot issues in the upcoming election is the management of the high cost of oil (driven up by both the manipulation of supply by the oil producers and by the surge in demand by developing nations like China and India which have greatly increased their oil consumption). Two different solutions have been proposed. One by McCain is to relax the government regulation that prohibits drilling in protected lands and coastal areas of the United States. The Democratic proposal is to reduce the demand for oil through government regulation that forces auto manufactures to increase the engine efficiency of cars and and increase the development of hybrid and electric cars. Notably in the free market economy, consumers themselves have an impact on the crisis by buying smaller cars, using public transportation, conserving energy in the heating and cooling of their homes, and driving less. Although government regulation is necessary, the consumer behavior is also an important element in decreasing over use and unacceptable levels of environmental impact.
Posted by Steve at 7/30/2008 09:13:00 PM
A billed passed on capital hill today that places sharper restrictions on access tobacco and marketing and advertising of companies. It is in hope that the younger generations will not be persuaded to smoke making then live longer and have less of a risk for heart disease and lung cancer. The bill would allow the FDA, Food and Drug Administration, to watch labelling of cigarettes and recall some that are seen as unreasonably harmful. As you know in our youth the negative externalities of smoking becomes cancer which makes generations not last as long and the economy in turn suffers from a smaller market. Although White House administration recommends a presidential veto , we will just have to wait and see what happens in the weeks to come and if the bill will be good or bad for the economy.
Posted by Nathan Eschbaugh at 7/30/2008 09:03:00 PM
On Wed, 30 a rise in sweet crude reached a $4.58 increase. This was not expected rise in fact experts believe that prices would continue to fall because hurricane Dolly did not effect production as much as expected. The reason behind the rise was do to a decrease in supply. For approximately prices for crude had slowing been decreasing allowing the national average for regular to drop below $4.00 a gallon. A problem with dropping gas prices is that when people see $3.65 a gal they become happy and start driving more, which in turn increases the demand, which again increases the price of gas. Gas is an example of an excludable product. People have to pay for the product, no matter what the price. Also when people start to use more of the product there isn’t the same amount for others to use, which in this case makes the price rise.
Posted by Neil Boyer at 7/30/2008 05:21:00 PM
Tuesday, July 29, 2008
This article describes new legislation to control hazardous materials in children's toys. Lead and phthalates (the latter a chemical to make rubber and plastic more pliable) are chemicals related to negative health effects especially in young children. The recent problems with the contamination in imported toys alerted Congress about the need for higher standards and more oversight in the regulation of certain private goods.
The chemical contamination in manufacturing represents an externality. The question of whether it can be observed directly or not is still debated. Although the amount of lead and phthalates can be measured, the amount of harm they impose on the consumer is what is debated. Those in favor of regulation site studies that show exposure to these chemicals produces negative health effects in animal. The manufacturers and their lobby argue that the scientific evidence is inconclusive. (A National Public Radio program compared the current debate over these chemicals with the earlier one that focused on saccharine as a carcinogen.). Therefore regulation of this chemical will need to focus on the original action (page 456 in Chapter 19) rather than on the outcome. That is, what is being regulated is the presence of the chemical itself and not the health problems which remain uncertain and hard to measure.
There would be little incentive for manufacturers to change their use of this chemical and it would not be possible to depend on the market to regulate it since consumers have no way of telling from looking at the product whether it is contaminated or not. Therefore governmentregulation is required to control the negative externality of the rubber duck and all toys.
Posted by Steve at 7/29/2008 09:52:00 PM
attempt to clear the air for the athletes) faces in trying to undo in a few months what has This article discusses China's attempt to deal with air pollution in time for the Olympic games that will begin in early August. The article (and others that have been following Beijingidentifies the overwhelming difficulty that Beijingbuilt up over decades of poor regulation of emissions as well as recent surge in economic growth and industry.
Part of the Chinese difficulty comes from a command market economy in which the public serves the wishes of the government and has no power to force regulation of negative externalities on their own behalf. Private enterprise is similarly limited and so the regulation that comes from a market economy is also missing.
As the article points out, the same factors that got China into the pollution bind are those being used to try an emergency fix. The government ordered that factories be dissembled and moved in their entirety to the farmland far from the city. The cost was considerable both in lost production, manpower, and resources. However, the benefit to the country in terms of world perception and success in hosting the Olympics was viewed by the central government to outweigh the cost. As the article points out, the efforts may be too little too late to effectively control air quality.
The effect of the pollution in China, the level of which bypassed that considered optimal in the West, now will have global effects through the reactions of individual athletes. The negative externalities have increased dramatically because of the unique circumstances of the Olympic games. But they are not easily eliminated or controlled. The Chinese government has viewed pollution as an unavoidable consequence of economic growth and ignored pollution as a side effect. Now the interest has changed and decreasing pollution is an ultimate goal. In a command economy the optimal pollution is whatever the government decides at whatever cost it takes.
Posted by Steve at 7/29/2008 09:20:00 PM
This article discusses government regulatory policy to combat over-fishing. The author of the article focuses on the effectiveness of IQF's (Individual Transferable Quotas) in the fishing industry. The system is similar to tradable permits in the control of pollution. The government issues IQF's to fishermen in an attempt to counteract overuse of popular fishing areas in the ocean ( a common resource). The IQF's establish well-defined property rights for fishermen. The author comments on the higher effectiveness of the IQF system in contrast to other methods of government control on the fishing industry. Governments can limit the fishing season or net sizes, but both of these options lead to over-capitalization. Costs for the fishermen increase but the pressure on fish stocks in not relieved. The IQF's on the other hand lead the market to more efficiency because the quotas are tradable, they lead to increased safety through reduced incentives to go out in inclement weather, and they eliminate the incentive for the government to shorten the season, leading to an improvement in the quality supplied. New Zealand uses an IQF system to regulate nearly its entire fishing industry. In the United States, IQF's have improved the over-fishing of Alaskan halibut and Virginian striped-bass. This article provides a real-world example of how to efficiently use and maintain a common resource as discussed in Chapter 20.
Posted by amy.soul at 7/29/2008 05:19:00 PM
I found this while searching for some serious issues to post for this section of the course. I got a kick out of it. If you play the clip, it will display more clips to view with similar sentiments. I found it on an environmental economics blog, www.env-econ.net
Posted by amy.soul at 7/29/2008 05:02:00 PM
Sunday, July 27, 2008
In the 3rd quarter, Macintosh and iPod helped boost Apple Inc.’s scrawny earnings 31%, beating Wall Street’s expectations Monday. Apple earned $1.19 per share, or $1.07 billion , 11 cents ahead of analysts’ view for $7.31 billion. Apple sold more Macs than ever before, 2.5 million, up to 41% from a year ago. Apple also said iPod sales jumped 12%, Peter Oppenheimer, chief financial officer said, “The quarter was a home run” In an interview. Apple’s share’s sank $18.04, or 10.8%, to $148.25 in after-hour trading, after gaining $1.39 to close at $166.29.
Apple Inc’s conservative outlook tends to usually make them shoot low in their predictions for 4th quarter earnings. Apple only predicts a profit of $1 per share on $7.8 billion in sales, well short of Wall Street expectations. Through the plagues of expectations in the stock market Apple has been one of the strongest competitors, while still making profit when the economy is down. In the future, investors predict that Apple’s gross margin will drop. In response to this accusation, Apple Inc. noted that margin was actually better than expected, helped by better commodity prices and stronger sales of higher margin products. Oppeheimer forecasts even lower margins in the 4th quarter, tied in part to the launch of the undisclosed new products.
Posted by Devin Turley at 7/27/2008 07:18:00 PM
Saturday, July 26, 2008
Sirius Satellite Radio Inc. bought rival XM Satellite Radio Holdings Inc. for $3.3 billion. This means that subscribers will be able to have access to both stations, it was also said to create huge cost savings for the industry. FCC Chairman Kevin Marin told the Associated Press, “Consumers will enjoy a variety of programming at reduced prices and more diversified programming choices.” The two rivals kept each other on their toes, the one fear that Democratic Commissioner Jonathan Adelstein has is that they will turn into a monopoly. Republican commissioner Taylor Tate insisted that the companies settle charges that they violated FCC rules before she would approve of the deal. Both companies agreed this week to pay $19.7 million to the U.S. Treasury for violations related to radio receivers and ground-based signal repeaters. The merging companies said that their merging would create hundreds of millions of dollars in cost savings and lead to greater choice in programming for subscribers and flexible pricing options. The FCC approval faced a steeper climb because the companies were prohibited from combining under terms of their licenses. The agency struggled to come up with a way to show that allowing a satellite radio monopoly was in the public interest. Sirius and XM also have promised to include a limited “a la carte” offering that would be available within three months of the close of the deal and allow listeners to pay only for the channels they want to receive.
Posted by Devin Turley at 7/26/2008 06:46:00 PM
On Friday, July 25 2008 28 branches of the 1st National Bank of Nevada and First Heritage Bank, operating in Nevada, Arizona and California, were closed by federal regulators. The FDIC said the takeover of the failed banks was the least costly resolution and all depositors will switch to Mutual of Omaha with “the full amount of their deposits.” As of June 30th, the banks closed by the FDIC had total assets of $3.6 billion. Most of the assets are in 1st National while First Heritage accounts for $254 million. In Nevada, 1st National has 10 branches and employs about 350 people. Bill Uffelman of the Nevada Bankers Association said Friday the FDIC action “is a reflection of the times for the banks. It’s a poor economy.” Uffelman cautioned against the sort of consumer concern that prompted customers to wait in line for hours to withdraw funds after IndyMac Bank branches were seized by federal regulators. All FDIC-insured bank deposits are guaranteed by the FDIC up to $100,000, Uffelman noted. So all the customers of the bank that have up to $100,000 are safe, but those that have more than $100,000 may have some trouble taking hold of their cash.
Posted by Devin Turley at 7/26/2008 05:39:00 PM
Gas stations customers finally have a reason to be relieved, because the dropping price of crude oil has finally reached gas stations nation-wide. The national average for a gallon of regular gas has pulled back to just above $4 a gallon. It has been stated that prices at the pump are poised to dip even further, and could cost as much as 25 cents less by Labor Day. AAA spokesman Geoff Sundstorm said, “People say typically prices shoot up like a rocket, fall like a feather. But this time…..it looks like it’s different,” “The retail sector is interested in bringing these prices down as fast as they can to stimulate business in their convenience.” The price of crude oil fell $2.23 and settled at $123.26 a barrel, and earlier the contract dropped even further to as low as $122.50.
Posted by Devin Turley at 7/26/2008 03:52:00 PM
The high gas prices and withering economy don’t seem to be bothering Amazon.com Inc. The internet retailer reported Second quarter earnings that more than doubled and easily topped analysts’ expectations. The company’s shares jumped $6.07, or 8%, at $76.58 in after-hours trading, after finishing regular trading up $2.57, or 3.8%, at $70.54. Amazon.com Inc.’s chief executive, Jeff Bezos , suspects that increased fuel prices will actually give Amazon a “relative advantage” over other retailers. Bezos says that the increasing price of gasoline is making customers rethink the idea of going to the mall or outlet, so they decide to shop online. Amazon’s free shipping offers and “Amazon Prime” are even more valuable now to customers because of the current circumstances.
At the end of the quarter, June 30th, Amazon earned $150 million, and in the same quarter last year earned $78 million. The company’s revenue took a leap and climbed 41% to $4.08 billion, including a 35% leap in North America. The company’s net cost climbed to $128 million from $75 million last year.
The reasonably confident internet retailer has increased its sale forecast for the rest of the year to a range of $19.35 billion to $20.10 billion.
Posted by Devin Turley at 7/26/2008 01:36:00 PM
Facebook.com Inc. promises to intensify its efforts to wee out programs that violate its rules for protecting users’ privacy. More than 30,000 applications have been designed to run on Facebook since the company opened its site to outside developers 14 months ago. Millions of Facebook users have taken the most successful applications with open arms, helping the applications turn into hot commodities. Facebook.com Inc, estimates that the makers of its top applications have raised over $200 million form venturing capitalists.
As the number of applications has over flown Facebook, its users have increased form 24 million in May 2007 to around 90 million today. This rapid growth has narrowed Myspace.com’s lead in the internet’s social network niche and helped privately held Facebook secure since a $240 million investment form Microsoft Corp.
Having so many outside applications on the side has caused some stress for Facebook, too. Some applications have included security holes that gave web surfers unauthorized peeks at the personal profiles of Facebook users. “Facebook has already removed about 1,000 abusive applications since it opened its Web site and plans to move even more aggressive as it establishes clearer ground rules for operating on its site” said Benjamin Ling, Facebook’s director of platform program management.
Posted by Devin Turley at 7/26/2008 01:25:00 PM
Wednesday, July 23, 2008
Since 2006, the number of televisions atop gas pumps has skyrocketed. Now, 3 private held companies have placed more than 20,000 screens at thousands of gas stations from the Massachusetts Pike to southern California. Roy Reeves, Vice President of sales and marketing for PumpTop TV, says, “We try to bring some fun to the pump.”
Not only are the televisions relieving some stress, but they are bringing in some added revenue for gas station retailers, which have seen a shrink in retail due to an increase in fuel load costs and credit card fees.
It has been reported by Gas Station TV, which tracked its retailers’ sales, saying that stores with the TVs sell 75% more car washes and 69% more snacks if they are advertised. The companies that advertise on the televisions at each gas station, pay “rent” in exchange for placing the flat screens above the pump.
Once a customer starts the pump, the TV comes on. You can’t change the channel or volume, so the customer usually tunes in. It also appears that customers are more willing to buy the products that are advertised and also remember what was advertised. According to a Gas station TV and Nielson Media Research Study, 70% of the people who watched the ads remembered the product advertised, and 89% of customers were willing to buy the product after seeing the ad atop the gas pump.
“One of the pit falls for convenience store owners is that people pay at the pump,” says Richard Divine, head of the marketing department of Central Michigan University. “People don’t want to go inside anymore. But at the gas pump you have a captive audience.”
The main purpose of these TVs atop gas pumps doesn’t seem to be advertisements, but to distract the customer from the $4.22 per gallon of gasoline we are paying for.
Posted by Devin Turley at 7/23/2008 07:34:00 PM
Sunday, July 20, 2008
Starting Sunday, July 27, Microsoft’s mid-range Xbox 360 consol with a 20GB hard drive will cost $299. The updated Xbox 360 is set to arrive in stored in early August. The new 360 will cost $350 and will have a 60GB hard drive, which will give the consol significantly more space for storing games, TV shows and movies Microsoft sells on its Xbox live marketplace wed site. The 60GB Xbox 360 consol is also said to have some extra appeal with streaming movies and TV episodes through high speed internet offered by Netflix.
Although Microsoft adjusted its price of the 20GB 360, it did not change the price of the more basic Xbox 360: Arcade version (256MB, $280) or the Xbox 360 Elite ($450, 120GB). Microsoft released the Xbox 360 1 year ahead of competitors Nintendo corp. and Sony corp. As of the end of May 2008, Microsoft had sold 10.3 million Xboxs in the US. By comparison, Nintendo had sold 10.2 million Wii consoles, and Sony had only sold 4.5 million Playstation 3 machines. While Nintendo has consistently kept the price of the Wii at $250, Microsoft and Sony have been scrambling to cut their prices while still being able to obtain profit.
Posted by Devin Turley at 7/20/2008 11:07:00 AM
Cell phone trafficking causing increased loss of millions to cell phone companies
Cell phone companies have made it so easy for people to purchase cell phones that it only costs $15 to get one loaded with minutes. But a new problem has arisen for the cell phone companies, hackers and cell phone trafficking. In states like south Florida, New York, California, Georgia, Texas and elsewhere, traffickers have figured out that they can make huge profits by purchasing thousands of low cost “pay as you go” phones and hack into the software so that calls can be made on any cell phone network. After phones have been hacked into, they are sold all over the world and this costs the cell phone companies 10s of thousands of dollars. It is not illegal to unlock the software in your “personal” phone, but cell phone companies base their profits off of people buying their minutes. When numerous people hack into their phones for free minutes the phone companies lose even more money.
TracFone wireless is one of the leading producers of the cheap “pay as you go” phones. The company is suing traffickers across the nations and hoping to put a stop to this “siphoning of profits”. The unlocked phones are sold for between $40 and $60 above the TracFone discount price, and are frequently marketed in lots of 10,000 or more.
In recent months, TracFone has filled 39 lawsuits. Lawsuits similar to TracFone’s have been filled by AT&T, Nokia corp., Virgin Mobile USA Inc., and Motorola Inc.
TracFone and other companies have argued that, under federal law, the phones must be used with the minutes that were bought from the company that sold the phone. Companies like TracFone, lose profit when people buy minutes from other companies.Some cell phone companies disagree that cell phone hacking is wrong. A company called Incomtel, which is the self-proclaimed “Cellular supplier of the world” was among those companies that were recently sued by TracFone. In court, Incomtel lawyers argued, “that it is perfectly legal to buy phones from stored such as Wal-Mart, CVS and Target and modify them to work with any cell phone system.” Incomtel also said, “because the phones made by Motorola and Nokia are purchased on the open market and are repackaged for resale, Incomtel is under no obligation to incomtel.” So far, TracFone and similar companies have been winning more cases than losing
Posted by Devin Turley at 7/20/2008 10:25:00 AM
Thursday, July 17, 2008
In this article, the reader is shown that the price of gas is affecting college students and their education. Since the price of gas is so high, more students are enrolling in online courses opposed to traditional classroom ones. This is an example of cross-price elasticity of demand, as the demand of online courses increase the demand of gas decreases for these students. People everywhere are doing all they can to save money at the pump, whether buying more fuel efficient cars or finding ways to get the same education without leaving home.
Posted by Steve at 7/17/2008 08:39:00 PM
Monday, July 14, 2008
Remember the days when America was the more powerful country in the world? Where America companies were considered the premier company in whatever area of business they were in? When American's would outsource their jobs to other countries? These days are coming to a halt. Inbev, Belgiums largest beer producing company has agreed to purchase Anheuser-Busch, which happened to control almost 50% percent of total U.S. market shares of domestic beer sales. Just what does something like this say about our weakening country? To many people Budweiser stood as an American symbol. Many people feel that this would be the same thing as agreeing to sell the Statue of Liberty to Canada. Just the other day I found out that Indian conglomerate TaTa recently outsourced some of its jobs to Marietta's very own Reno. What did Tata set up? A calling center. The days of joking about calling Microsoft and talking to an Indian are fast approaching a close. Now Indians are joking about having to talk to Appalachian Americans for their problems. Let that sink in. It is now more expensive for India to hire their own native workers then it is for them to hire American workers. Scary huh?
Posted by Jordan Stryker at 7/14/2008 05:01:00 PM
Over the past few years, changes have been discussed in order to develop a solar, or electric automobile. A man by the name of Elon Musk, however, is putting just that idea into action with the Telsa. Yes forms of these cars have been developed, but currently Elon has production under way, with a plan for the future.
In the article, he discusses that although there aren't many being made currently (at just 1,800 a year) the trend seems to be following that by late 2010 there will be 20,000 cars on the market. As production continues to develop, Elon discusses, the price will continue to drop as well. Similarly as to our class lessons, he explains that "when you change the production quantity by a factor of 10, you can reduce the price by a factor of two." This follows the main idea of supply and demand.
Elon, goes on to further explain his products advantages which lead to consumers choosing his car over one that GM and Toyota may produce. The Telsa provides a completely gas free option for consumers. In the GM and Toyota cars, the gas is used complementary to the electricity. These cars do plug in, but unlike the Telsa, they use both forms of fuel. The idea that no gas is needed whatsoever is the most flattering advantage to Elon's product.
Deeper into the article, the idea of a carbon-cap or tax is discussed. Elon explains that he would rather see a tax due to the simplicity. Similar to our class lessons, this idea of a tax or cap provides a question. With the new electric cars-that do not burn fuel themselves, but use electric often produced by coal burning plants, and the development of hybrid's produced by GM and Toyota, there will be a rise in the production of carbon. Which idea is the best to limit this form of form of pollution?
Posted by katiedickson at 7/14/2008 03:57:00 PM
This article is contrasted with Yahoo.
Yahoo rejected Microsoft proposal. Economists who work in MenuPages and Yahoo have considered their profits.
Yahoo said it unsuccessfully reiterated its willingness to sell the entire company to Microsoft for $47.5 billion, or $33 per share — a bid that the software maker dangled in early May before withdrawing it in a pique over Yahoo Chief Executive Jerry Yang's demand for $37 per share.
The other side, New York Magazine buys Menupages site. Menupage's economist might think this way is much profitable than keep their company. Also, New York Magazine economist might think that this way is much profitable than they make their new own site.
Posted by Inji Song at 7/14/2008 09:50:00 AM
When you see things being given away through a lottery of even a buying incentive it is usually money or some sort of item. For instance I was at the golf course the other day and noticed a big advertisement for the new $ 400 Callaway driver and I didn't think anything of it until I read on the sign, that they give you a $100 gas card if you buy one. This deal at one point in time, would not have been a incentive for anyone to buy the driver but now its like wow, a gas card I could really use that. Well that is exactly what the Florida lottery is also hoping will happen is people will buy lottery tickets in hopes of winning free gas for life. Yes, for life I know crazy. The winner would be award 26 gas cards a year, each worth $ 100 for life. So like everything else there is no guarantee that money will actually cover the price of gas in the future. The question you have to ask is when will gas be too expensive to not cover the cost. The lottery ticket only costs five dollars but the article does not mention the odds of winning, but they probably are average because it is the second prize listed on the ticket not the first, which is a quarter of a million dollars, some think the gas is a better deal.
Posted by Nathan Eschbaugh at 7/14/2008 06:57:00 AM
Sunday, July 13, 2008
Not immune to the effects of soaring gas prices, Toyota Motor Corp., like its Detroit cousins, has announced plans to suspend production of its full-size pickup Tundra and its truck-based SUV Sequoia. Toyota plans to halt production starting August 8th. As gas prices continue to escalate, the demand for trucks and truck-based SUVs has decreased. Sales of the vehicles are down and inventory isn't moving. Toyota has the capacity to build 400,000 trucks but forecasts indicate only 150,000 in actual sales. Their trucks are sitting on lots for 64 days before they sell. These stats are almost unheard of for Toyota according to analysts at J.D. Power and Associates. The cutbacks in production will affect more than 10% of Toyota's 43,000 employees. Toyota is now faced with the challenge of focusing its manufacturing operations on its best sellers in the current market conditions. A new plant is under construction in Blue Springs, Missouri where Toyota will build hybrid Priuses, and production of hybrid Highlanders will move to Indiana. The decrease in demand for more gas intensive vehicles is causing productions shifts for American automakers and changing the face of the auto industry.
Posted by amy.soul at 7/13/2008 07:48:00 PM
Wednesday, July 09, 2008
The growing trend of salvage yards has begun to sweep the nation. This very cheap way of finding parts of old smashed cars for your car that could possibly need parts replaced, it affordable and effective. People that go to these also res-sell the parts they pry off the junked vehicles.
Today, if you recycle scraps you can receive up to $300/ton. Automotive Recyclers Association president, Sandy Blalock, said “At one time, a crushed car would go for $20 to $30 a ton. The market for scrap metal has skyrocketed so high that a family said they were able to put 3 kids through college by selling scrap metal on e-bay. Pull-A-Part, a self-service yard, only charges $1 for admission, $1 for wheelbarrows, also there is a flat fee price for each part. At times, customers are charged a $3 core deposit as an incentive to bring the old parts back so Part Galore can recycle it.
Posted by Devin Turley at 7/09/2008 05:57:00 PM
Wal-mart has been named the nation’s largest buyer of locally grown fruits & vegetables. Wal-mart plans to buy $400 million in produce grown in its states this year. By only buying local produce the company estimates it will save $1.4 million in annual savings, 100,000 gallons of diesel, and 672,000 food miles.
An obvious notice in the change in Wal-mart’s consumption of local produce is that it only used to buy a few peaches from a few producers, now Wal-mart buys 12 million peaches annually from 18 different producers. This move by Wal-mart could easily change the market for farmers. Restaurants have been willing to spend more money for fruits and vegetables they know have come from local farmers, something that Rich Priog says could change when Wal-mart moves into the territory and negotiates. Also, identifying locally grown food in stores aisles could relieve customer concerns, especially after recent salmonella outbreak linked to tomatoes that sickened at least 869 people across the country.
Posted by Devin Turley at 7/09/2008 05:55:00 PM
During the days when people were willing to buy $4 lattes, Starbucks was a coffee “mecha”. But it is obvious that these days are over. On July 1, 2008, Starbucks Corp. announced it is closing 600 company operated stores in the next year, due to the US economies downward spiral, that had hastened the pain caused by the companies own rapid expansion. After the announcement of the future of the closing stores, stock prices jumped 72 cents. 70% of the stores that are planned to close were opened in 2006. The closing of these stores won’t be free, 12,000 workers will be unemployed. Starbucks will have to pay $8 million in severance costs and a total of $348 million in charges related to the closures. Pete Bocian, Chief Financial Officer, says 25-30 % of a Starbucks shop’s revenue is cannibalized when a new store opens and that the closure should help return some of that revenue to the remaining stores. Although the company is closing 600 stores this year, it plans to open fewer than 200 in 2009, and fewer than 400 in 2010 & 2011.
Posted by Devin Turley at 7/09/2008 05:53:00 PM
Because of the market conditions the past few years, Blockbuster announced that it is going to withdraw its proposal to buy Circuit City. Chief Executive James Keyes said that the proposal deal, a price of $1 billion, made no economic sense due to the market conditions. Keyes also announced that Blockbuster will merge movies and games with the sale of electronic devices under one roof, but it will be Blockbusters own stores.
Blockbuster stocks have fallen since April, by 20%. The shareholders stocks have dropped below $3 from its peak near $31 in May 2006. Many investors are skeptical of the marriage between Blockbuster and Circuit City because both companies lost money last year. Circuit City reported that its loss tripled and same store sales plunged 11% in the quarter that ended May 31, 2008. Best Buys profit also declined by 7% last quarter ending May 31, 2008 (losing $85 million last year on revenue of $5.54 billion). After the announcement Circuit City’s shares dropped 34 cents, or 11.8% and Best Buy’s shares rose 27 cents, or 11.6%.
Posted by Devin Turley at 7/09/2008 05:50:00 PM
Wednesday, July 02, 2008
Martin Feldstein gives his take on rising oil and commodity prices in this story here. A large part of his story involves the concept of price elasticity of demand (and supply). Both food and gasoline have very low price elasticities of demand in the short run as consumers find it difficult to substitute away from these products. Read his entire (short) article for the rest of the story (and then go impress your family and friends with you new knowledge of commodity markets).
Greg Mankiw has been keeping track of news reports that illustrate how consumers are reacting to higher gasoline prices here and here. He entitles his blog posts "Cross-Price Elasticity."
Posted by Greg Delemeester at 7/02/2008 06:08:00 AM