Why You’ll Love Paying for Roads That Used to Be Free

But is this fair? Haven’t we already paid for these roads with our tax dollars? Won’t the wealthy buy their way out of congestion, while the rest of us are stuck? And won’t conditions in the free lanes deteriorate as they are packed with all the drivers who have fled the toll lanes?

在我们国家争论怎样解决几百万的收费站（toll）的工作人员时，美国却和我们走相反的路，具有借鉴意义！

但是收费站搁在中国是另一种情况，人民普遍不相信政府和资本家是现实。收费人民觉得是剥削，虽然可以改善路况。但是，从经济学角度来看得话，在现有基础上，改变收费站的工作性质，即为了改变路况，而不是仅仅是收费，在经济学上来说是有意义的，是一个不错的选择，虽然这种选择有副作用，哪种经济政策没有副作用呢？

当然博弈论学得好的人可能会提出其它的方案解决congestion的问题，但是都因为难以实施而丢脸。

The Fiendish Genius of Credit-Card Minimum Payments

New research finds that credit-card holders pay down their debts more slowly when their statements suggest a minimum monthly installment. The Economist reports on the study, by University of Warwick psychologist Dr.Neil Stewart:

Mr. Stewart presented 413 people with mock credit-card bills of £435.76 (about $650) that were identical — except that only half mentioned a minimum payment of £5.42. Participants were asked how much they would pay.

Among those inclined to pay the bill in full, the presence of the minimum payment hardly made any difference. However, those who wanted to pay just part of it handed over 43 percent less on average when presented with a minimum payment. In the real world, this would roughly double interest charges.

It turns out that, for those inclined to pay their debt bit by bit, the monthly minimum acts as a mental anchor, exerting an enormous amount of influence on how quickly that debt gets paid.

Stewart found that as suggested minimums drop, actual payments fall right along with them, even among people who pay above that bottom limit.

So the minimum payment can be a helpful tool for card holders. It gives them a guide on how much money to pay to keep their debt from exploding under compound interest. But it’s a much better deal for the companies that issue the cards.

Say you’re a credit card company. You make money every time one of your card holders carries a balance at the end of the month, because you charge interest on that debt. A lot of interest. The longer your card holder carries debt, the more money you make.

But if that debt tips out of control, and the card holder defaults, you lose everything.

So you want to find a middle road, a strategy that will keep your card holder’s debt manageable, but that will stretch out repayment as far into the future as possible, maximizing your profits.

Considering Stewart’s findings (paper available here), minimum monthly payments seem like the most surefire way down that middle path.

An All-Pay Auction

Martin Shubik invented a famous game-theory exercise, sometimes called “the dollar auction,” where a teacher auctions off a $20 bill to the highest bidder. Bids have to be in round dollar amounts, but the twist is that both the highest and the second-highest bidder have to pay. When uninitiated students start to play this game, someone rushes to bid $3 or $4 dollars for the prospect of winning $20, and then other students respond by bidding up the price.

But then something amazing happens as the auction price starts approaching $20. The remaining bidders realize that they could end up having to pay a lot of money and not win the auction. Imagine that you had bid $19, and another bidder upped the ante by bidding $20. What would you do? Is it better to bid $21 for a $20 prize or to remain silent and pay $19 for nothing?

What starts off as a feel-good exercise to take advantage of a generous professorial offer suddenly becomes a sickening war of attrition, where the last two bidders pay more than what the prize is worth. These games routinely end with the winning bid being 50 percent higher than the value of the prize. Since both the highest and second-highest bidders pay, this means that the professor rakes in about three times the amount being auctioned.

This is an example of what auction theorists call an “all-pay” auction, and it’s a game you want to avoid playing if you possibly can.

But Barry Nalebuff pointed me toward a scary website — calledswoopo.com — that seems to be exploiting the low-price allure of all-pay auctions. And it seems to be working.

Swoopo auctions off desirable (gotta have) electronic items (Wii’s, smartphones) for really low prices and with really short fuses — often less than a minute before the auction expires. It’s kind of seductive to watch these fast-paced auctions — because if someone ups the high bid, 15 seconds of extra time is added to the auction length. I found myself waiting to see if a TomTom GPS device would really end up selling for $18.

But there is an important hitch: you have to pay Swoopo $1 every time you bid. This creates an analogous all-pay effect. Swoopo may only sell a Wii for $30, but it might collect an extra $1,000 from bids. This website is a great experiment to see whether sunk costs matter. I’m thinking that someone who has already invested $5 in bidding costs is more likely to keep bidding to “protect” his or her sunk investments.

Of course, there is also the concern that you might end up competing against a Swoopo-bot that outbids you just before the time is about to expire. This is a game that I don’t want to start playing.