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It is no secret that consumers often perceive a price-quality relationship, attributing higher quality to products for which they pay more. A large body of pricing research supports the existence of this phenomenon and it is not hard to find personal examples. But what happens when price is compared to objective quality as measured by say, Consumer Reports? Strangely, the relationship between price and quality almost completely disappears. Why? New research points to a placebo action in marketing whereby self-fulfilling expectations could lead lower priced products to perform worse. In other words the quality you get may be related to what you pay because you (unconsciously, it appears) deem it so.

Baseball fans love to argue. That much we can say with certainty. Where uncertainty begins is in the facts brought forward to support the arguments. Baseball is awash with statistics but a common mistake (the availability error) is to use the easy ones to make one's argument regardless of its relevance. Situationally, a fan can use batting average, home runs, RBI, ERA, saves or other easily available statistics to bolster his case. Alternately, more subjective criteria such as fielding ability, speed, clutch hitting and leadership are also used to contend that certain players are better. Sabermetricians have created many objective measures (OPS, VORP, etc) for player quality which, while sometimes used, have not caught the popular imagination, largely because of a lack of simplicity and comparability. Wouldn't it be nice to have a single, simple number that can accurately summarize a player's complete contribution during a season and that allows players to be easily compared? That is what Bill James the patron saint of sabermetricians has developed. It is called Win Shares. In Part I of this post we will take a non-technical look at this statistic. In Part II we will look at highs and lows over time and why we may be witnessing one of the greatest baseball players of all time.

In Part I of this post the ides of Win Shares was introduced as the creation of the sabermetrician Bill James. It is a single number that encompasses the complete contribution of a baseball player during a season and hence allows measurement and comparison of player values over time. In this part we will look at specific Win Share numbers and players who excelled over time.

Researchers (Randomly) Fight Poverty

Posted by on in Rajan Sambandam

Researchers come in many flavors but tend to have a common aspiration; to do research that is meaningful. The researchers at the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT are doing exactly that. It is a diverse group of researchers from several institutions from areas such as economics, public policy, development, business and finance that conducts research on developmental issues around the world. What makes them different is that their research often leads to real world solutions that can be applied by governments and NGOs in the service of poverty elimination and related issue. A common technique they apply in this pursuit is the randomized trial.

Of Tightwads and Spendthrifts

Posted by on in Rajan Sambandam

Do you spend money a little too easily or does it hurt to spend at all? Do you wonder if you are the only one or if other people have the same problem too? Does your gender, age or income have anything to do with whether you are a tightwad or a spendthrift? What effect do marketing offers have on your tendency to hand over the cash, or for that matter, your credit card? Recent research shows that tightwads and spendthrifts do exist and are quite different in these behaviors.

The Election: Who Got It Right?

Posted by on in Rajan Sambandam

You can read my previous two election posts here and here. In this post I will take a look at who got the election right and what factors to look for in making that evaluation. Those factors include single polls versus (simple and complex) poll aggregations, use of combination forecasting, the use of cell phone only households in surveys and the astonishing performance of quantitative models that accurately predicted the final results almost a year back. Keep in mind that as of this writing, the final results are still not in both in terms of vote share and in terms of states (Missouri). That said, the results are close enough that we can get a good idea of what went right.

It is election day and you do your civic duty by going to your designated polling place, standing in line, chatting with a couple of nice people, drawing the curtain and pulling the lever. Do you notice where you have voted? Of course, it's at your local school (or church or firehouse). Did that have any iaanfluence on how you voted? Of course not, right? Not so fast. New research (by Jonah Berger, Marc Meredith and Christian Wheeler) indicates that the type of polling place can have a subtle effect on how people vote. The impact is small but it is there in both a controlled lab experiment and in a noisy real-world environment.

Jeopardy! Explains Gender Differences

Posted by on in Rajan Sambandam

OK, so Jeopardy! cannot possibly explain all the differences between the genders, but it helps quite a bit in understanding financial risk taking because of its unique format. Researchers studying gender differences in risk taking have known that men and women are different in several ways. For example, in general men are more willing to take risks, single women allocate less wealth to risky assets compared to single men, women have lower risk tolerance on health and retirement issues, women prefer broader insurance coverage than men, and men are more active in stock trading. But is it just gender or are there other factors mixed in with gender that influence financial risk taking? For example, would competence have an impact and how does that vary by gender? This was the issue studied by three researchers using data from the game show Jeopardy!

Does the Bradley Effect Exist?

Posted by on in Rajan Sambandam

The Bradley Effect is quite often mentioned in the media as we approach the Presidential election. It refers to the under-performance of a black candidate as compared to poll numbers. A good summary of various issues can be found here. A lot of the information about this effect is speculative or based on sparse polling numbers from other races which have led to questions of whether the effect really existed, whether it was seen in other races and whether in 2008 it is still likely to be seen. Perhaps the best study on this issue was conducted by Anthony Greenwald and Bethany Albertson the University of Washington. They used data from the Clinton-Obama primary, the most comprehensive source available and studied it using regression analysis to explore the existence of the Bradley effect.

Obama or McCain? Part II

Posted by on in Rajan Sambandam

To read the first part of this post click here. In that we discussed how to use the available information to predict a winner in the current presidential race. While the polls (including the poll average) gave a small edge to McCain at that time, the other measures gave a mixed picture with the combined measure giving Obama a slight edge. Since that post a month ago the race has changed quite a bit. In this post I will revisit those numbers to see where they stand, how they have changed and what that means when you track such numbers. In the next one we will look at the impact of race on the race, or the so called Bradley Effect.

Books: Against the Gods

Posted by on in TRC Book Club

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

Given what has been happening in the economy recently, this book (written ten years ago) provides an excellent foundation for understanding how we ended up here. In telling the story of risk, Bernstein focuses on how much people believe the past determines the future. The more we believe we understand the past, the more certain we are of what will happen in the future. Quantifying the past helps enormously in bringing certainty to the future. But risk lurks in the shadows surrounding certainty and underestimating it because of our blind faith in numbers and computers can lead, he says, to disaster. But what makes this book a wonderful read is that it really does tell a story stretching back millennia and is populated with exotic places and interesting characters. For someone interested in this topic it is time well spent.

Can Money Buy Happiness?

Posted by on in Rajan Sambandam

This question has been asked for millennia and before any research was done there were three possible answers: yes, no, maybe so. After some research was done in the 70's, we had what was called as the Easterlin paradox which seemed to show that money and happiness were not related. More recent research from the Wharton School at the University of Pennsylvania with data from many countries around the globe seems to indicate that people with more money are, in fact, happier.

Obama or McCain - who will win?

Posted by on in Rajan Sambandam

A question that is of great interest now and the common response tends to be "who's leading in the polls?". You often hear people say that the latest poll from some reputable organization shows one candidate with a 3 point lead. Is that the best measure we have of predicting who will win the Presidential election? I submit that it is not and will walk you through the different measures available and what is most likely the best one. I say most likely because nothing predicts the future with complete certainty. Further, the aim here is not to examine the political strategies used by the candidates or speculate on who has a better ground game. We just want to see what is the best way to predict the winner, using all publicly available information.

Babyface CEOs - Good or Bad?

Posted by on in Rajan Sambandam

Do you form judgments of others based on how they look? Very likely. These judgments are not just about commonly understood features such as skin color, but also about more subtle ones like the shape of a person's face. Research has shown that babyfaced people are seen as kinder, warmer and physically weaker than maturefaced people, as well as more honest and naive. Given this, are there consequences for a company that has a babyface CEO (or spokesperson) in a time of crisis? Will the shape of the person's face affect how the company is perceived and will these considerations have an effect on the hiring of a new CEO? These questions were investigated by some researchers in a series of experiments.

More or Less?

Posted by on in Rajan Sambandam
Let's say you are a cell phone manufacturer and you have to make a decision about a new phone. Your clever engineers have developed several new features that could make your phone much more distinctive in the market. What do you do? Do you put as many features as you can into one phone, or do you introduce several phones, each with a different set of features? Researchers at the University of Maryland asked this question and conducted a series of experiments to answer it.  Surprisingly, their conclusion is that having a larger number of specialized products would be better in the long run.

What's in a Name (or Initial)?

Posted by on in Rajan Sambandam

Do names have an impact on performance? How about initials? Would major league baseball players with the initial K strikeout more than others? Would people with intials C or D perform worse in class? Are people with white or black sounding names likely to be more or less successful in life? Interesting research has been done in both the areas of initials and names and the results are seemingly contradictory.

Insighter: Dallas Abbott

Posted by on in Rajan Sambandam

Asteroids are space objects and sometimes they hit earth. Depending on their size they can cause great damage. Small asteroids can burn up when they enter the atmosphere. Larger ones can hit earth and cause damage directly and indirectly. The most popular reason for the extinction of the dinosaurs 65 million years ago is asteroid strikes and the resulting global climactic changes. Okay, nothing new so far. Everyone can agree that asteroid strikes can have no to devastating impact. The next question is how likely are such impacts? To understand how frequently asteroids have struck earth in the past the traditional research method is to look for craters. Using this method scientists have estimated that large strikes happen about once in a million years or so. Then geophysicist Dallas Abbott began wondering if that kind of calculation made sense. Since about seventy percent of the earth is covered with water, wouldn't it make sense that most asteroid strikes are likely to have been in water than land. If so isn't it likely we have been underestimating the number of asteroid strikes on earth?

Books: Why Not?

Posted by on in TRC Book Club

Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small by Barry Nalebuff and Ian Ayres

As readers of their Forbes column know, Nalebuff and Ayres have a long history of suggesting quirky and unconventional ideas. In this book they show us how, with easy writing and plenty of examples. How do you ensure you don't forget your keys? Did you know a variation of the solution makes European hotels more energy efficient? Can you buy insurance to protect against a drop in your home value? How nice would it be if you didn't have to pay your mortgage for a month - especially when the shopping season depletes your wallet. How can you get your health insurance company to treat your life as if it were worth a million dollars? Sometimes the answers are real world solutions, sometimes they are simply interesting ideas. This is a book about problem solving - or as the authors put it, problem solving with a purpose. They want you to not only think in new ways, but also come up with solutions that could help society or seed new businesses. Their approach to problem solving is based on two perspectives: looking for problems in search of solutions, and solutions in search of problems.

In a series of classic studies done in the 1960's, the Swiss developmental psychologist Jean Piaget showed how children can misperceive volume. When colored liquid was poured from a taller cylinder to a shorter wider cylinder, they thought the volume of liquid had decreased. These primary school children were using only the height of the container when making volume judgments and were hence making mistakes. Ah, you say, they are children and are naive enough not to understand that more than height goes into determining the volume of liquid in a container. Full grown adults would never make that mistake. Why, if such height based illusions existed, wouldn't restaurants routinely use tall thin glasses to pour your drinks, rather than short wide glasses? Well. 

Books: The Reluctant Mr. Darwin

Posted by on in TRC Book Club

The Reluctant Mr. Darwin - An Intimate Portrait of Charles Darwin and the Making of His Theory of Evolution by David Quammen

On the evening of July 1, 1858, six scientific papers were read to the Linnean Society in London. One of them was an idea independently discovered by two authors, Charles Darwin and Alfred Russel Wallace. Neither author was there; the young man, Wallace, was in New Guinea collecting insects, while the older man, Darwin, was moaning the death of his young son at home. The idea, natural selection, had nearly zero impact and in the annual address given the following year, the president of the society said the past year hadn't seen "any of those striking discoveries which at once revolutionize" science. That was the official birth, 150 years ago, of the single biggest idea in the biological sciences.

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