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Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Formula Bollywood, Retail and Implied Demand Uncertainty

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  The past posts have often portrayed the applications of economics in real life. To stress the obvious again, economics is far from abstract. There is inherent application of its concepts in day to day life. Often the application might be sub-conscious or maybe many a times, the applications find themselves convenient to be theorized. Theory flows from evidence and theory created has to be backed by evidence. Maybe it is a typical chicken egg problem but nevertheless, makes economics attractive. Contrary to many economists who portray a dull life for an economist, in reality, the applications of economic theories in every aspect of life can make the subject very colourful. In continuation of the past analysis, the current post too takes up a few more examples to illustrate economics in real life or what Robert Frank would call economic naturalist.   Let us take the instance of the film industry, India in particular. The Indian film industry thrives on remaking the Western films in
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What Makes a Successful Joint Venture?

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  More than 15 years back, there was an important piece published in Harvard Business Review about the joint ventures. The piece titled “Launching a World Class Joint Venture” was written by James Bamford, David Ernst and David Fubini was published in HBR in February 2004. Like other classics, this piece retains its importance and value even today. Joint ventures pose significant challenges to the firms as they move into different markets. The objective might be essentially to create a temporary vehicle in testing waters of the new river but the challenges it brings to the tables often drowns the objective and the end result may end up very differently from what was sought to be achieved. Therefore, revisiting the tenets posed by this article is worth the time.   The article posits challenges for the joint venture to emerge in four different areas. It examines each of these areas and then goes to suggest how the firms can work in resolving the conflicts that emerge in building the
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Converting Passenger Trains to Express Trains: Some Thoughts

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  It might sound a cliché but suffice to say that railways are the lifeline of Indian economy and society would be an understatement in many ways. Almost every Indian town or taluka place have a railway station within 20-30 kms from their place. The only exceptions perhaps would be those in the hills in the Himalayas or the North East and the islands. Railway transport has been critical in bringing together people at multiple levels. Distances have reduced psychologically. It is said in the days of Madras Presidency, the introduction of railways made relationships expand to distant regions. Girls would be given in marriage to grooms in nearby villages, the reason being easy to stay connected. Once the railways came around, it was easy to stay connected even to distant places (relatively speaking from those times) as the girl’s family could visit her frequently and vice versa.   Railways in India essentially not only carried freight and military but also was means to transport passe
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Intellectual Property Differentials Across Industries

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  The debate on intellectual property rights (IPRs) at the global level seems to rest primarily on a single size fits all model. The US driven agenda to enforce stricter norms for IP across countries is ostensibly an attempt to push the US agenda. Now that the incoming US administration led by President Biden is likely to revive TPP, it is possible that IP issues might come to the fore yet again. However, while examining the empirical realities, the IP practices vary from industry to industry. Rarely there exists an industry which has an uniform IP practice relative to other industries. It must beg to be explained why the differentials in IP exists across industries. In an earlier paper, one had discussed at certain length on how IP differentials could be linked to interplay between costs and utility. In economics, firms strive for profit maximization while consumers seek maximization of utility. The interplay between the two can be analysed through an examination of the firm’s cost
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Decoding the Tata Big-Basket Deal

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  The e-commerce market in India is looking for boom times. The market which for long seemed to be finding difficult to cross the Moore chasm seems to be moving to headier times. Reliance with its JioMart might shake things up like it did in telecom. It has managed to get numerous investors on board Reliance Retail and Reliance Jio. Meanwhile, there is a battle building up between Reliance and Amazon that is being fought over India in Singapore with the issue being of their rival Future Group which perhaps is facing testing times. The e-commerce market too faces network externalities. The number of apps an individual users uses in his or her smartphone is obviously limited. It is difficult to experiment with multiple shopping options. By and large barring exceptions, most users prefer to shop from one or two apps. Without doubt, it is important for an e-commerce user to be on the top of the mind recall for an individual user. Very few would be willing to experiment with multiple shoppi
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Political Communication and the Tenali Rama Problem

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  The farm bill protests seem to take Delhi by siege. Yet the predominant proportion of farmers protesting are from a single state Punjab. The very nature of the protest does point towards enough indicators of a political protest being disguised as a farmer’s protest. The left liberal ecosystem in India that has long thrived on the patronage of the Congress and its lackeys is desperately creating a Ram Lila 2011 redux. More than the Ram Lila fast by Anna Hazare per se, it was the Congress response to it that effectively sunk the Congress. The Congress and its ecosystem is recover from the same and want to do a Ram Lila 2.0 on Modi. Yet their efforts so far have not fructified. The electoral victories have once again proved that Modi continues to be trusted and popular. The Congress is in serious danger of turning irrelevant. It is in this context one has to look the Punjab farmers protests which has shifted its action to Delhi.   The right wing on the social media and Twitter in pa
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Real Life Economics: Big Tech and Network Effects

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  In a few recent posts the increasing power of Big Tech and the possible consequences of the same were discussed. There is an increasing tendency of over reach by the Big Tech and thus has potential impact on the socio-economic-politic equilibrium of the society or the country. Their over reach was manifested in the US elections of late and has been in some ways manifesting itself in the Indian context too.   It would not erroneous to assume Big Tech is growing too big for their shoes and the states need to curb them. The roots of this power perhaps can be traced to early 2000s when Bill Clinton administration compromised with Microsoft in the anti-trust suits thus ensuring Microsoft was not split. Given the more than generous help given by the Big Tech in their campaign, President Biden is unlikely to go hard on them. In fact, this might embolden them to scale in their experiments in different countries. However a question at this stage would be what gives them the power to dictate t
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