03.31.06

My thoughts on NetFlix

Posted in Entertainment, Movies at 4:05 pm by Jason Permalink

As an avid movie renter I was dropping some serious coin at the local Blockbuster, so I finally decided to give online rental a go. I first tried Blockbuster.com and was quite happy with the service until they modified their ‘New Release’ list. For some insane reason they kneecapped it, and it began only showing a VERY small subset of movies soon to be released. This frustrated me so I wrote to them And they sent me some stupid reply that made no sense whatsoever. So, against the warnings of many of my friends and family who had bad experiences (the exact ones I was soon to enjoy), I switched to NetFlix.com.

At first it was GREAT! I had the 3 out plan and was tracking a very tidy ROI over my in-store expenditures… I had an average turnaround time of about 2 days (I staggered the movies). It was awesome. Then something odd began to happen. It started to take longer and longer to process my returns and get me the next movie in my queue. I sent them a note and got the same idiotic response that my naysayer friends had gotten “The movies must be coming from a distribution hub that is farther from your house”. Well sure that makes sense, but why on earth was my distribution center changed?? Being the data base guru that I am I started pondering the possibility that they may be discriminating against certain ‘active’ users. Perhaps people that were getting too good of a deal were being throttled to bring their rental patterns more into line with the average customer… No, couldn’t be

Well… I have had on a few separate occasions spoken with consultants who actually worked on this very system!! What the HELL!

Anyway, I switched back to Blockbuster.com before i had direct confirmation anyway. It began costing more per movie from netflix than my local blockbuster, defeating the whole idea of renting online. I overcame the deficiency of blockbusters ‘new release’ listings by using IMDBs instead, which is VERY comprehensive. I have never had a problem with Blockbuster throttling my mailings and they even give you free in-store rentals as well.

So screw NetFlix and take blockbuster.com, that’s what I tell anyone who asks and even some who don’t

Permalink Comments

03.30.06

Best way to kill a new show: move it…

Posted in Entertainment, TV at 10:09 pm by Jason Permalink

Why on earth do TV execs slot a new show only to move it half a season later? I mean I do understand the initial strategy behind slotting a new show like Courting Alex behind a successful show like Two and a half Men. It really helps build a viewer base from viewers looking for something to watch after their favorite show (I know that’s why I started watching). It’s been the bread and butter of TV scheduling for a looong time. Ok, that I get, makes perfect sense. Then they go and move the show to stand on it’s own before anyone has really gotten into the groove of watching it… A half a season is NOT LONG ENOUGH!! whoosh and the show is gone…

Poor Jenna Elfman… Another failed show in the making, in the string of many failed shows killed by the idiots running the networks.

I know, I watch Courting Alex. So sue me

Permalink Comments

A Beautiful Mind

Posted in MBA, Marketing at 3:56 pm by Jason Permalink

Ok… So I just said I wouldn’t talk about other classes. Now I’m about to talk about something that I learned about first by watching a movie then in more detail in economics. What is so striking about this topic, though, is that I then heard about it in finance, marketing, statistics, and decision theory, but it was invented by a mathematician… So when that old dude from the Nobel Committee tells John Nash that his theory has had an incredible impact on a vast array of subjects, he wasn’t kidding

Unless you were hibernating in a cave for all of 2001, you’ve proly heard of the movie ‘A Beautiful Mind’ and it’s main character John Nash (if you haven’t I highly recommend it). So you may have a flavor for what I’m about to lay out. In short John Nash figured out that Adam Smith’s ‘Invisible Hand’ was only partially optimal. Smith said that in a capitalist free market economy, the ‘Invisible Hand’ would guide the market to an optimal equilibrium. He called it the invisible hand because by the mere fact that all parties are acting for the sole purpose of profit maximization prices could be set and quantities determined. Inefficient firms would leave the market and overpriced markets would attract competition…

What Nash realized is that this is in-fact not always the best way… A firm should also take into account the actions of their competition. This is simple game theory… I will illustrate with a very simple example.

- First, we assume that all parties act rationally (I know this is a BIG assumption But mathematicians and economists are optimistic folks)

- Second, for this example, we will assume a simultaneous move one shot game. This means that both players move at the same time and there is only one move to the game. We can extrapolate this out to multi move games; then it gets even more interesting. (I’ll write that up in another post, I promise )

OK… Here we go…

We have two players Sav-On and Walgreen’s. They are located on the same corner of some street USA and each is trying to decide how to set prices on a new product. They can choose to set price either HIGH or LOW. The decisions are interdependent…

We represent the game in a matrix normal form:

Game Setup

From the matrix we see the various outcomes of total profits to each firm depending on the combination of moves by each player.

Now we’ll analyze the game from the perspective of Sav-On:

Savon HIGH

First we ask what is Sav-On’s best response if we think Walgreen’s will price HIGH? From the above diagram we see it is to price LOW.

Savon LOW

Next we ask what is Sav-On’s best response if we believe Walgreen’s will price LOW? Again, we see that Sav-On should price LOW.

Savon Dominant

We see that no matter what Walgreen’s does, Sav-On’s best response is to price LOW. This represents a DOMINANT strategy for Sav-On.

Walgreen's Dominant

Now we analyze the game from the perspective of Walgreen’s and we again see that there exists a dominant strategy, which is to price LOW.

Nash Equilibrium

A Nash Equilibrium exists that takes into account each player’s BEST response, which is for both firms to price LOW. This maximizes the expected profits assuming that neither player is allowed to collude.

Colusive Equilibrium

We see that there is a better equilibrium that can only exist in the presence of some sort of collusion… These equilibriums tend to be unstable, but stabilization strategies do exist. Perhaps I will post on that sometime

OK… This was a very very simple example of a Nash equilibrium. A Nash equilibrium doesn’t necessarily have to exist, neither does a Dominant strategy. In these cases there are certain decision strategies that can be employed, but optimality is no longer guaranteed.

Here we have used game theory to set the optimal price for a new item. We can also use the same approach to determine if market entry would be profitable…

Permalink 3 Comments

A Brief Aside…

Posted in Uncategorized at 1:17 pm by Jason Permalink

When i started this blog I really had the intention of writing a lot I wanted to also write about the different lessons from each of the classes i was taking and the experiences i had along the way… Well… Fast forward 3 months and I’m not really keeping up

Also, I found that I’m not really digging most of the CORE courses (ie finance, opperations…) so I am most likely going to be writing on Marketing, which I do enjoy very much. I will also try to write ore on the experiences along the way for anyone out there in the aether…

Hey I said I was new to this and you’d have to forgive some shortcomings

Permalink Comments

03.17.06

AWOL

Posted in Uncategorized at 12:42 pm by Jason Permalink

Sorry I haven’t been around lately… School has gotten out of control and between work, marriage, and sleep Bloging has, unfortunately, fallen off. I will return shortly, finals are next week!

Permalink 1 Comment