If you're a new xbox 360 gamer then read on as the following advice could help you avoid losing alot of time!
In order to play Halo 3 on my xbox 360 i had to create a profile. i was playing offline so i created an offline profile. the profile is basically an id and a record of gamer facts relating to my xbox games. so when i play halo 3 my offline profile records my in game achievements and various stats relating to the game. after playing for about 10 hours i decided to give xbox live a try. xbox live is like everything xbox over the internet. in order to access xbox live i had to create an online profile, so i created my online profile but little to my knowledge the halo 3 save game files hadn't been transferred across to my new online profile and so i would have to start from scratch! what a waste of time! there should be a way of transferring save game files from offline profiles to online profiles but there isn't as it doesn't exisit and i've looked on google for a way to do it but my searches were fruitless. readers who are unfamiliar with xbox gaming should realise that by gaining achievements by completing the games various stages unlocks rewards that go towards my profile.
let me digress for a moment, one letter costs £5! as you can imagine when creating a gamer tag name for yourself on the xbox 360 requires you to be quite original in your choice, given that there are millions of gamers its pretty hard to find a name that hasn't already been used, and xbox wont allow the same name to be used twice. after discovering my first 10 names were already used by other gamers i rather joyishly stumbled upon a name that no one had used, it was "chaotic komodo" , although at the time i hadn't realised that i had spelt it like "chatic komodo" so i proceeded in all my ignorance and completed my online profile. as soon as i had completed it i realised the spelling mistake, and so i immediately set about going to change it, but much to my horror to change the spelling mistake would cost me about £5 in gamer credits. now let me briefly explain what these gamer credits are, xbox operated an online market where people can exchange cold, hard money with online gamer credits which can then be used to purchase things in the xbox market place, such as game add ons, games, films, music etc. so i decided that one letter was not worth £5, and i was quite annoyed that microsoft were being so harsh in punishing me for an innocent spelling mistake, they sure think of the wierdest way to screw you out of some honest cash.
what should microsoft do next for the xbox 360?
microsoft should address the issue that people from other countries regularly play together but cant understand each others language. my proposed solution is to use speech recognition inter-language translation software essentially built into the microphone interface. see that language barrier fall! see it!
the economics of xbox 360 purchases
my advice for consumers in norwich is to buy xbox games from gamestation which can be found in the castle mall two shops down from zavvi (rip). you can get halo from gamestation for £10 when bought with another game such as elders scroll: oblivion iv. in zavvi halo 3 on its own is about £30! in hmv its over £20!
sellers of xbox 360's operate mixed bundling and product differentiation strategies to make maximum profits. the way bundling works is that xbox 360 consoles are sold with games for a price that is less than selling the games and console separately. the down side to this bundling is taht consumers dont have much choice over the games that come in the bundle, and so some people may be put off a particular bundle because of the games. the bundles are formed by complimentary products in the sense that games are a complimentary product for xbox 360 consoles. in most cases people find that buying a console on its own is just the same price as buying the exact same console bunled with some games, so people buy the console even though they have no desire to own the games that are bundled with it.
at first glance it may seem that there are in fact 3 different xbox consoles, but they are in fact just slightly different versions of the same product. the main difference between the consoles is the memory, the arcade version comes with 256mb, the pro version comes with 60gb and the elite console comes with 120gb.
Wednesday 31 December 2008
Monday 15 December 2008
CIA economics
I saw 'Body of lies' today at the cinema and it was a good movie. Leonardo Di Caprio and Russel Crowe acted excellently and Ridley Scott made everything come together superbly.
The CIA has a sort of economy of information, and this information is like the name and location of extremist martyr suicide bombers. The most vital information has the most demand and the market is constantly being updated with new intelligence which the CIA can trade. Information is supplied by CIA gatherers who drain information from contacts. The nature of the information being traded is such that if the wrong information falls into someones hands it can prove to be deadly.
CIA personnel need intelligence in order to better understand criminals in the world and to try and prevent acts of terrorism. Criminals have no desire to let vital intelligence fall into the hands of the CIA as it can thwart their plans. Criminals incentive not to leak information is that they will be severely punished for doing so. CIA incentives for getting intelligence is if they dont they lose their job.
Information must get traded otherwise it cant be used when it gets old. The role of technology is to allow information to be gathered and stored, for example pictures in digital cameras, and text messages on mobile phones, and this data can be sent on computers via the internet to destinations across the world.
Information is gathered by moles who lie and decieve in order to gain positions of trust, and then abuse these positions by selling the valuable information. In the situation of good versus evil when information contained within a good person has a high demand the evil people will use fear of pain and death by torture in order to extract the information. Similarly fear of imprisonment can provide enough incentive for evil people to divulge their secrets.
The CIA has a sort of economy of information, and this information is like the name and location of extremist martyr suicide bombers. The most vital information has the most demand and the market is constantly being updated with new intelligence which the CIA can trade. Information is supplied by CIA gatherers who drain information from contacts. The nature of the information being traded is such that if the wrong information falls into someones hands it can prove to be deadly.
CIA personnel need intelligence in order to better understand criminals in the world and to try and prevent acts of terrorism. Criminals have no desire to let vital intelligence fall into the hands of the CIA as it can thwart their plans. Criminals incentive not to leak information is that they will be severely punished for doing so. CIA incentives for getting intelligence is if they dont they lose their job.
Information must get traded otherwise it cant be used when it gets old. The role of technology is to allow information to be gathered and stored, for example pictures in digital cameras, and text messages on mobile phones, and this data can be sent on computers via the internet to destinations across the world.
Information is gathered by moles who lie and decieve in order to gain positions of trust, and then abuse these positions by selling the valuable information. In the situation of good versus evil when information contained within a good person has a high demand the evil people will use fear of pain and death by torture in order to extract the information. Similarly fear of imprisonment can provide enough incentive for evil people to divulge their secrets.
Sunday 7 December 2008
GE/Honeywell case Economic theory
Industrial Organisation
GE/Honeywell case
Economic theory
There are two main points regarding conglomerate effects
1. Financial strength of GE capital
2. Bundling
Below I will set out these points in more detail. Relate the theory to the case, and give examples to help people understand.
Financial power
GE and GE capital have a very large market capitalisation share compared to Rolls Royce and Pratt and Whitney. Financial power allows a firm to engage more in risky investments in order to further the success of the firm, and this is because the firm I less likely to go bust the more financial power it has so it can make more investment mistakes. The ramifications for this for GE is that the firm can engage in risky R&D ventures that P&W and RR cannot afford to risk.
Financial power can be used to attract purchasers of goods, such that financial power can allow greater advertising and promotion which can increase the chances of sales. This means that GE can gain extra sales revenue over RR and P&W which could lead to a reduction in competition in the industry as GE may foreclose its competitors from the market.
Foreclosure
A firm that has greater financial power can essentially vertically integrate with more firms, and this allows the firm to get greater market control which allows it to restrict output and increase prices. For GE this means that the firm can vertically integrate with engine repairers, engine service firms, and replacement parts providers. This reduces competition as RR and P&W have to pay more than GE for engine servicing, repairs and replacement parts which could lead to foreclosure.
Bundling
Bundling is a way that firms can out compete competitors which leads to foreclosure. In an industry with specialist suppliers for the industry to be a success there must be demand across the industry for the specialised products. If a firm only sells one product and it is highly specialised a sudden negative demand shock would severely deprive the firm of profit and lead to foreclosure. A firm with a lot of market power can bundle two or more specialised products together and out compete rivals that can only offer un bundled single product versions. For GE and Honeywell this means that the firms can bundle engines and avionics together to the detriment of RR and P&W. Bundling can take several forms: Mixed bundling is where two or more products are sold together for less money than buying the products separately. Pure bundling is where two or more products are sold together and cannot be purchased separately, and technical bundling is where products in a bundle are not compatible with rival firms’ products. GE and Honeywell through bundling can effectively starve RR and P&W of revenue leading to their market foreclosure, which is worse for consumers in the end as it has an adverse effect on their welfare.
Conglomerate effects: Extending dominance
The Court of first instance (CFI) proposed that GE would extend market dominance into the market for Honeywell through the practice of bundling. I will explain a bit more about this below.
Bolton and Scharfstein (1990), proposed an economic model where financial contracts are observable and firms with deep pockets use financial power to weaken the performance of other firms. When a firm faces competition in many markets it invests heavily in risky R&D projects in the market with the fiercest competition in order to provide rivals with an incentive to stop innovation by cutting R&D funding.
In conglomerates the internal management must deicide upon the re-allocation across the subsidiaries in the merger. The management can decide to use a “winner picking” approach where the majority of funding is channelled towards the most successful firms. The other approach is to “cross subsidisation” which means spreading the funding across the subsidiary firms. This latter approach allows a wider presence to be maintained than the winner picking way as firms have more of a competitive presence across the participating markets. The “winner picking” approach may result in some firms being unable to compete and having to close.
Cestone and Fumagalli propose a winner takes all model of the product market. Firms with the most financial power can engage in R&D spending that smaller firms with less financial power cannot engage in with equal levels of effectiveness. In the model groups of firms compete with more strength than stand alone firms. Even if a stand alone firm spends the same as a group of firms on R&D the benefits will be less effective because it's a stand alone. This means that subsidiary firms related to the group are less likely to be effected by R&D investment made by rivals and so the stand alone firms are more inclined to exit the industry.
The merger would result in the conglomerate charging higher prices for after sales services, but the consumers are rational and can see that the overall cost of the engines and the after sales service for the engine is too high and would have an incentive to shop elsewhere for cheaper deals. Firms know that prices will go up if one conglomerate gains significant market power, the consumer firms realise this and so they have an incentive to promote the interests of rival firms. For the case this means that Boeing and Airbus are likely to want to buy from RR and P&W in order to keep competition alive for the purpose of driving industry prices down.
Theory of Leverage and relation to Kosher certification
The theory of leverage is that a firm can force foreclosure by chosing to buy supplies from the same firm all the time. In the case here it would mean that GECAS would decide to buy all of its engines from GE, and then from Honeywell post merger. When manufacturers decide what to produce they consider the preferences of 1% of the market, given that the 99% are indifferent between products. Kosher is when a Jew has to obey a specific diet by eating only Kosher foods. Kosher Jews prefer to buy Kosher certified foods and will never decide to buy non-Kosher certified foods. Manufacturers know the preferences of one percent of the market as being Kosher and so decide to offer Kosher certified products because the other 99% have no preference as they are indifferent.
The group of Kosher consumers are able to tip the market. Similarly in the case GECAS will only buy from GE, and post merger from Honeywell. GECAS considers a plane to be certified kosher only when all of the parts required to build the plane come from GE and Honeywell. If other buyers in the market have no preferences than there is foreclosure. This happens because suppliers in the industry e.g. airframe sellers know that if they don’t supply GE/Honeywell parts than they sacrifice all of GE/Honeywell business.
GE/Honeywell case
Economic theory
There are two main points regarding conglomerate effects
1. Financial strength of GE capital
2. Bundling
Below I will set out these points in more detail. Relate the theory to the case, and give examples to help people understand.
Financial power
GE and GE capital have a very large market capitalisation share compared to Rolls Royce and Pratt and Whitney. Financial power allows a firm to engage more in risky investments in order to further the success of the firm, and this is because the firm I less likely to go bust the more financial power it has so it can make more investment mistakes. The ramifications for this for GE is that the firm can engage in risky R&D ventures that P&W and RR cannot afford to risk.
Financial power can be used to attract purchasers of goods, such that financial power can allow greater advertising and promotion which can increase the chances of sales. This means that GE can gain extra sales revenue over RR and P&W which could lead to a reduction in competition in the industry as GE may foreclose its competitors from the market.
Foreclosure
A firm that has greater financial power can essentially vertically integrate with more firms, and this allows the firm to get greater market control which allows it to restrict output and increase prices. For GE this means that the firm can vertically integrate with engine repairers, engine service firms, and replacement parts providers. This reduces competition as RR and P&W have to pay more than GE for engine servicing, repairs and replacement parts which could lead to foreclosure.
Bundling
Bundling is a way that firms can out compete competitors which leads to foreclosure. In an industry with specialist suppliers for the industry to be a success there must be demand across the industry for the specialised products. If a firm only sells one product and it is highly specialised a sudden negative demand shock would severely deprive the firm of profit and lead to foreclosure. A firm with a lot of market power can bundle two or more specialised products together and out compete rivals that can only offer un bundled single product versions. For GE and Honeywell this means that the firms can bundle engines and avionics together to the detriment of RR and P&W. Bundling can take several forms: Mixed bundling is where two or more products are sold together for less money than buying the products separately. Pure bundling is where two or more products are sold together and cannot be purchased separately, and technical bundling is where products in a bundle are not compatible with rival firms’ products. GE and Honeywell through bundling can effectively starve RR and P&W of revenue leading to their market foreclosure, which is worse for consumers in the end as it has an adverse effect on their welfare.
Conglomerate effects: Extending dominance
The Court of first instance (CFI) proposed that GE would extend market dominance into the market for Honeywell through the practice of bundling. I will explain a bit more about this below.
Bolton and Scharfstein (1990), proposed an economic model where financial contracts are observable and firms with deep pockets use financial power to weaken the performance of other firms. When a firm faces competition in many markets it invests heavily in risky R&D projects in the market with the fiercest competition in order to provide rivals with an incentive to stop innovation by cutting R&D funding.
In conglomerates the internal management must deicide upon the re-allocation across the subsidiaries in the merger. The management can decide to use a “winner picking” approach where the majority of funding is channelled towards the most successful firms. The other approach is to “cross subsidisation” which means spreading the funding across the subsidiary firms. This latter approach allows a wider presence to be maintained than the winner picking way as firms have more of a competitive presence across the participating markets. The “winner picking” approach may result in some firms being unable to compete and having to close.
Cestone and Fumagalli propose a winner takes all model of the product market. Firms with the most financial power can engage in R&D spending that smaller firms with less financial power cannot engage in with equal levels of effectiveness. In the model groups of firms compete with more strength than stand alone firms. Even if a stand alone firm spends the same as a group of firms on R&D the benefits will be less effective because it's a stand alone. This means that subsidiary firms related to the group are less likely to be effected by R&D investment made by rivals and so the stand alone firms are more inclined to exit the industry.
The merger would result in the conglomerate charging higher prices for after sales services, but the consumers are rational and can see that the overall cost of the engines and the after sales service for the engine is too high and would have an incentive to shop elsewhere for cheaper deals. Firms know that prices will go up if one conglomerate gains significant market power, the consumer firms realise this and so they have an incentive to promote the interests of rival firms. For the case this means that Boeing and Airbus are likely to want to buy from RR and P&W in order to keep competition alive for the purpose of driving industry prices down.
Theory of Leverage and relation to Kosher certification
The theory of leverage is that a firm can force foreclosure by chosing to buy supplies from the same firm all the time. In the case here it would mean that GECAS would decide to buy all of its engines from GE, and then from Honeywell post merger. When manufacturers decide what to produce they consider the preferences of 1% of the market, given that the 99% are indifferent between products. Kosher is when a Jew has to obey a specific diet by eating only Kosher foods. Kosher Jews prefer to buy Kosher certified foods and will never decide to buy non-Kosher certified foods. Manufacturers know the preferences of one percent of the market as being Kosher and so decide to offer Kosher certified products because the other 99% have no preference as they are indifferent.
The group of Kosher consumers are able to tip the market. Similarly in the case GECAS will only buy from GE, and post merger from Honeywell. GECAS considers a plane to be certified kosher only when all of the parts required to build the plane come from GE and Honeywell. If other buyers in the market have no preferences than there is foreclosure. This happens because suppliers in the industry e.g. airframe sellers know that if they don’t supply GE/Honeywell parts than they sacrifice all of GE/Honeywell business.
Subscribe to:
Posts (Atom)
