Marginal Revolution

Marginal Revolution is far and away the most interesting, entertaining, and thought-provoking website I have yet to see. It is a daily blog by two economists from George Mason University, Tyler Cowen and Alex Tabarrok. While Tabarrok posts some occasionally fascinating analysis, Cowen provides the most consistent and entertaining topics of discussion. When taking breaks from work, I will be surfing their archives, reading every post they’ve made in the past 3 years, so expect some interesting links to come from them. Here is the first. Be sure to read his link as well.

Ever wonder why product quality often comes in threes? (Basic, Regular, Premium. Bronze, Silver, Gold. Third, Second, and First Class etc.) When there are only two product qualities consumers are torn between two "extremes," either of which makes them uneasy. Add a third quality and you create a happy medium. Simonson and Tversky (the cite is in the link below) report that when offered a low-end and a midrange microwave oven consumers chose the midrange 45% of the time. But when offered the same two ovens plus a high-end oven they significantly increased their purchases of the midrange. Even when few consumers buy the premium product the mere fact that it is offered can increase sales of the midrange product. Hal Varian calls this Goldilocks pricing (see discussion beginning at p.10).

I should also add that MR is also the site with the most intelligent and well-informed commenters that I have read. I hope Tammany can boast such a claim in the near future.