This main points of this article can be explained by game theory. In this article, using empircal evidence, CNN shows that gambling on the lotto is not a very good bet. It is unlikely on average that one will get as much out as they invest, and they get less than they would by other forms of gambling. Why then do people play the lotto?
According to game theory, it would be inadvisable to play the lotto. The chances of losing are very high, and one has a better strategy which is not to buy lottery tickets. However people do; why is that? I think that there are a few explanations, the first of which is that people don't think about the game correctly. They overestimate their chances, and this causes them to play a poor strategy. Another explanation, is that the opportunity cost for them to buy a ticket is low, so they do. This seems unlikely, as the article reports that many of the people who buy lottery tickets have a low income. I think that this article shows, that knowing the results or possible outcomes of the game can help one to pick the best strategy for the game.
Source: http://money.cnn.com/2012/03/30/news/economy/lottery-bad-bet/index.htm?iid=Lead
Saturday, March 31, 2012
Saudi Arabia
In this article, it is reported that Saudi Arabia wants to do what it can to mitigate the price of oil. Saudi Arabia also says that it would if it had control of the market, but that it sells its crude oil based on international prices. The autor of the article finds this statement by the Saudis to be a fallacy. In the article he talks about how OPEC, of which Saudi Arabia is the largest member, limits the supply of crude oil to the market to make prices high.
Saudi Arabia and OPEC, are parts of an oligopoly, but since they control almost all of the supply of crude oil they are able to act as a sort of monopoly. Doing this causes them to act like a monopoly, which hurts the economy in general, and creates dead-weight loss. Since they are a monopoly they do not want to produce any more oil then they would in a competitive market, and as we learned in class, they make a higher profit if they sell less. They do not have as high of costs and can also charge a higher price. This allows them to make the huge profits that they do.
The fact that Saudi Arabia and OPEC are basically a monopoly, causes policy implications for the United States. The United States would not have such a large interest in the Middle East, if it were not for it's oil.
Source:http://www.huffingtonpost.com/raymond-j-learsy/the-price-of-oil-saudi-hy_b_1390403.html?ref=business
Saudi Arabia and OPEC, are parts of an oligopoly, but since they control almost all of the supply of crude oil they are able to act as a sort of monopoly. Doing this causes them to act like a monopoly, which hurts the economy in general, and creates dead-weight loss. Since they are a monopoly they do not want to produce any more oil then they would in a competitive market, and as we learned in class, they make a higher profit if they sell less. They do not have as high of costs and can also charge a higher price. This allows them to make the huge profits that they do.
The fact that Saudi Arabia and OPEC are basically a monopoly, causes policy implications for the United States. The United States would not have such a large interest in the Middle East, if it were not for it's oil.
Source:http://www.huffingtonpost.com/raymond-j-learsy/the-price-of-oil-saudi-hy_b_1390403.html?ref=business
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