Traditional economic and business strategy encourages product differentiation, which results in less competition and greater profit for a company. However, this is not often the reality of business strategy in many industries. The mobile phone industry is a perfect example. The introduction of touch screen devices just a few years ago started a new trend, or “fad.” Producers and consumers alike have a growing focus on creating and buying touch screen phones. As technology improves, new features are added. These new features, including the introduction of a larger touch screen, for instance, seem to be adopted by many companies almost simultaneously. It seems as though mobile phone producers are making their products more and more similar. This seems to be contradictory to the theory that differentiation will increase profit margins.
Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades points to information cascades as the cause of this market homogeneity. Bikhchandani, Hirshleifer, and Welch explain that, while market demand and consumer satisfaction are common factors that impact firms’ decisions to produce similar products, there is certainly an information cascade effect taking place. They call this effect “strategic imitation.” They argue that larger companies tend to invest money in areas that their competitors are not – fitting with the strategy of differentiation. However, these large companies become “fashion leaders” – they are viewed as having better information and insight, as they are already successful and have more money to spend on market research. Thus, smaller companies observe the decisions and investments made by the fashion leaders and make similar investments. This is the start of an information cascade and, in turn, the loss of product differentiation.
“Badminton and the Science of Rule Making” gives a survey of the science of Mechanism Design, which can be understood as the inverse of game theory. Instead of being given a game with players and payoffs where you seek the outcome, you have an outcome in mind and seek to construct a game such that the players reach that desired outcome. One example of failure in proper Mechanism design is from the Summer Olympics: in the lead up to the tennis finals, there were players who deliberately tried to lose their match so they would go up against a weaker opponent. Good mechanism design would dictate that losing a match should never advance someone’s outcome. On the other hand, a successful implementation of mechanism design is the matching system used for Doctors seeking Medical Residency.
This relates to a few examples we’ve done in class. The first is about the Prisoner’s dilemma. With the original prisoner’s dilemma, each person gets the worst outcome. But if each player feels the other person’s pain or payoff, the outcome is better for everyone. This would be something to consider when designing a mechanism for not only prisoners, but any strategic action. Similarly, we saw with Braess’ Paradox that if you build a third road between the two existing roads, it can slow down the travel time for everyone. This is bad mechanism design. Finally, the market works so well because of excellent mechanism design. People with the highest value get the item with the highest cost, which leads to a stable perfect matching between people and items. These all illustrate the importance of well thought out mechanisms for achieving social good.
Google’s newest phone, the LG Nexus 4, has gotten a fair bit of attention lately. Not because of its functions or specifications, but because of its record time of selling out in multiple countries in about in hour after launch. This in itself speaks for volumes about the fraction of people who wish to purchase the phone – possibly enough to entice other people who may not have been thinking about purchasing this phone to consider it. When going with other people’s judgments, the phone would definitely would seem like a good choice, especially given its high demand. Thus, the demand would rise even higher. This is exemplified by numerous people who have built up hype for the phone and deeming it one of the best deals for its price. With all of these factors, one might wonder if this was a good choice by Google.
On the other hand, the Nexus 4, while having fame for its demand, might just have a high demand relative to its supply. It does not seem although the new phone is flooding the market in the same way that the iPhone4 did last year or its close relatives the Galaxy Nexus series has to a lesser degree. With less people owning the phone, there are also less people who would be able to, in person, speak of the positives about the phone. This is especially true a possible consumer had close ties to someone with the phone – that person would likely influence the possible customer to buying it over its competitors.
Furthermore, when a cascade effect has no effect if the person has criteria that other people may not have. Notably, the new phone is still sold out – someone who places urgency of a new phone as a top priority would definitely not value the phone that much. Thus, one can’t help but to think that Google definitely should have put more phones into production before the launch.
The nature of social media has revealed a new importance to the study of networks. Social media has given us the opportunity to understand the vast and complex networks that control our lives. Over the summer, I worked on creating a social media website. The website was directed toward a specific audience – the art community. The website’s purpose is to give any artist a forum to post their work and collaborate on projects with other artists. In addition, the website gives the art community the ability to comment, critique, view and discuss new works. The hope is that by increasing communication, the social media website will give the art community a new fever. During the course of developing the website, there were many factors to consider besides the basic programming and website design. The most important aspect of creating a successful website beyond the ”production” is the method of introducing the website to the rest of the world.
Even companies such as Facebook and Twitter had humble beginnings. Obviously both companies provide an amazing networking tool and are designed to the highest standards. However, neither Facebook nor Twitter started with the large user base, which the each now control. In fact, much of the success of these social media sites can be attributed to the analysis of their original networks. For example, Facebook started by targeting a much smaller audience – Harvard University. Facebook, as many know, was started by Mark Zuckerburg. Mark created Facebook as a way for a student to communicate with any other Harvard student about anything from parties to study groups. The combination of Facebook’s usefulness and the “proximity” of the Harvard student network caused the website to achieve a critical mass very quickly. As we learned in class the fraction of users within the network exceeded the reserve fraction for each student to join, causing the entire network to join Facebook within a matter of days.
Although Twitter was released to the general public, there was also a critical moment in Twitter’s development that can be labeled the company’s “watershed” moment. This occurred in 2007 at the SXSW (South by Southwest) festival. SXSW is a music festival that also focuses on film and emerging technology. Twitter posted several ”insta-blog” LCD screens, showing the tweets of any user that posted with the #SXSW. Individuals at the festival reacted to these live tweets positively and suddenly there was a huge spike in activity. Soon the majority of festival goers where sending tweets about the best bands and the best place to grab a bite to eat. The people at the festival are usually more receptive to new technology, which caused the threshold fraction to decrease compared to the general population.
So, you might be asking yourself: Why were these companies successful in introducing their websites? Well to start, both companies provide an amazing and original service, but beyond that they were both introduced into smaller “target audiences”. This target audience was not just a random grouping of people, but a small very inter-connected network, which contained individuals, who were open to new technology. This type of network helped to foster each company by lowering the critical mass of people needed to convert the entire network. In addition, it helped the companies to set up further expansion by introducing many links to other network clusters. It is amazing how much can be learned by looking at the origins of these companies. In understanding the beginnings of these major companies, I was able to see the importance of choosing a specific and highly-interconnected network for my own target audience. At the moment, my website is still undergoing beta testing, yet I know that I will release the website at some point. When I do, I will be more likely to succeed in my endeavour with this knowledge.
Below are the article on Twitter, as well as the websites, which helped me realized the importance of a target audience.
In the months leading up to the 2012 U.S. presidential election, many people were unhappy with both Obama and Romney. Rather than voting for a candidate, they were merely voting against their least-preferred of the two. These people were deciding to cast their vote for the “lesser of two evils.”
This isn’t just anecdotal; if we look at Google Trends’ chart of search interest in the phrase, we can see that it has been rising sharply since August, from a fairly steady baseline. What’s more, there were more modest peaks around the 2008 and 2004 elections.
Clearly, in this country’s elections, many people are not particularly happy with the candidate that they voted for. It’s not just the presidential candidates, however. Recent Congress job approval ratings have been below 40% since 2005 (Gallup), lasting through Republican and Democratic control of both the House and the Senate.
Now, it’s hard to say exactly what fraction of people are dissatisfied with the current two parties, and what fraction would vote for a third party instead, but it would have to be very high before it would make a difference, because of the setup of our elections.
Using terminology from our class’s treatment of used car sales, let’s say that dissatisfied voters have a preferred, “good” candidate G, a “bad” candidate B, and a “lemon” candidate, L. The voter’s valuation for G winning is positive, B winning is negative, and L winning is more negative than B. Now, let us assume that the voter v’s vote actually has a chance of impacting the election (so maybe v actually represents a demographic, rather than an individual voter). If v believes that only B and L have a chance of winning, then v’s best option is to vote for B rather than G, because G has no chance of winning anyway, and having B isn’t as bad as having L.
Nationally, third-party candidates amassed only 1.64% of the vote. Either people aren’t as dissatisfied as they let on, or they felt in the same position as voter v, and ended up casting their vote for the less-bad candidate.
Now imagine voter w who thinks B is just as bad as L – both have the same negative valuation in w’s opinion. In this case, it makes sense for w to vote for G as a protest vote, and also on the offchance that others do the same, since w has nothing to lose.
There were likely some people who felt like voter w – they didn’t care who won; they disliked both candidates. Given this, it isn’t surprising that the third party candidate with the most votes, Gary Johnson, is a libertarian – not a liberal or a conservative. A liberal voter might prefer the Green party over the Democrats, but would probably be motivated to elect a Democrat over a Republican. A conservative voter might feel the same way about the Constitution party. However, many libertarians are equally upset at both parties, as they disagree with the Democrats on economic issues, and the Republicans on social issues. Therefore, more libertarians than liberals or conservatives were indifferent about Obama vs. Romney, and voted for their third party candidate.
Finally, if v prefers B over L again, and G still has no chance of winning, but v expects B to do significantly better than L, or vice versa, it again makes sense for v to vote for G. v has reason to believe that his/her vote won’t change the outcome, so v has the luxury of voting for G again as a protest vote.
Because of the electoral college system, in which the winner of a popular vote of a state – no matter how small the margin of victory – gets all that state’s electoral votes, some voters were more important than others to the outcome of the election. For instance, New York is solidly Democratic. Therefore, a voter there can feel safe about voting for G, as B doesn’t need their vote (because B is certain to either win or lose). As might be expected, competitive states like Ohio, Florida, and Virginia had somewhat lower rates of third party candidate votes (although this trend wasn’t as sharp as might be expected).
All the indications point to the Republicans and Democrats remaining as the only two important political parties in America. How is it that other democracies often have three or more parties with substantial power? There are many possible reasons, but some are because of the specifics of countries’ election systems. For instance, many countries use proportional representation, meaning that a party will have a number of seats in whatever assembly that is being elected equivalent to the proportion of votes it received. If the U.S. House used this system, then the libertarians, with their 1% of the vote, would have about 43 seats!
Under our current system, majorities have to be won for a politician to be elected to an office. Ironically, this is similar to the situation discussed in class about protesters in an oppressive regime; the protesters need to know that enough people will be there. The original dissatisfied voter v needs to know whether enough other people will vote for G to make it worth his/her while. Unfortunately, this information is hard to come by. To make things worse, polls before the election generally overestimate the fraction of votes of a third-party candidate, as there is no cost to reporting in a poll that you prefer G; however, you might end up voting for B anyway.
At this point, it is clear that it would take a tremendous swing in voter preference, or a significant change in our election process, to allow a third party to be successful in America’s political climate.
Election statistics from http://uselectionatlas.org/
Nate Silver and Thomas Bayes
In this article by the Guardian, we explore the usage of Bayes Theorem by celebrated political predictor Nate Silver. During the recent Presidential election, armies of pollsters were claiming that the race was too close to call, some even giving the upper hand to Romney. But not Nate Silver. Nate Silver dismissed the national polls, even when they showed Romney up by a significant margin, and called the race for Obama. He did this thanks in no small part to Bayes’ Theorem. As we learned in class, Bayes Theorem gives the relationship of conditional probabilities of A and B . Nate Silver summarizes the rule as ”a statement – expressed both mathematically and philosophically – about how we learn about the universe: that we learn about it through approximation, getting closer and closer to the truth as we gather more evidence.”
In the article, Nate Silver discusses the probabilities of 9/11. The conditional probability discussed is whether or not the event of planes crashing into the Twin Towers was a terrorist event. The conditional probability is how likely terrorists are to fly planes into skyscrapers in Manhattan. Or rather the chances that event A (terrorists hijacking the planes) would occur given B (the number of planes hitting the towers). Before the planes hit, the likelihood of terrorists hijacking aircraft and flying them into buildings in Manhattan was 0.005%. Then, when a plane hit, the likelihood of a terror attack (A) went up to 38% because the number of planes (B) had increased. After the 2nd plane hit the tower, the probability increased to a 99.99% chance. This is a simplified version of the entire formula in class, and a depressing example, but it gets the point across.
At the end of the article we are reminded by Silver that it is “not that much of an accomplishment to describe history in statistical terms.”
In the article, the idea of PC gaming dying out due to rises in the console gaming market is discussed. The notion is ruled out as something that will not likely take place because of the versatility and upgrade-ability of PC systems; however the author addresses that the notion does gain a foothold every so often and begin to be accepted as truth. How does this notion get popular from time to time?
In general, it all begins with a small spike in the console gaming market. This initial spike is often due to people trying to get away from negatives of PC gaming mentioned in the article (e.g. it is more expensive, it is more difficult to maintain, it has a greater density of bugs and glitches) or alternatively, a very popular game is released that is exclusive to a certain console. Then the rumour that PC gaming is going to die out begins to circulate in gaming communities. This is a self-fulfilling prophecy in a way: the more people hear that PC gaming is dying out, the more they switch away from PC gaming and to a console because of the direct benefit effect, and the more people that switch to consoles, the more believable the spreading notion becomes. But how does the direct benefit effect begin to come into play here? When a game is released it is often initially released on one system. It is then “ported” or made into different, slightly altered, versions to work on the other popular systems. Unfortunately, many times multiple ports of the same game are not compatible for online multiplayer, which is currently one of the most popular form of interaction between gamers. For instance, suppose gamer A is playing game A on system A and gamer B is playing game A on system B. Now suppose the two would like to play the game together via an internet connection across their systems. This is often not possible as two ports of the same game are sometimes not compatible. Therefore people will want to be using the console that the most people are using so that there will be more gamers and friends to play with without having to worry about cross-platform compatibility issues. In this way the direct benefit effect takes hold and fuels the self fulfilling prophecy because a gaming platform becomes more desirable if it has more people using it just because it has more people using it. The cascade begins but stops because there is always a devoted core of hardware-loving PC gamers who cling to the PC platform for it’s customisation and upgrade-ability in a market of stagnant consoles, as described in the article. This core group of gamers stops the cascade and prevent console gaming from completely taking over the market. Yours truly tries to keep things interesting by playing a mix of console games and pc games, something many gamers do, because we gamers like to have our cake and eat it too. That is, as long as said cake is not a lie. -S.J.H.
Ever since a young age I always knew what my favorite search engine was: Google. All of my family used it, and so did almost all of my friends. For the longest time I actually didn’t know other search engines existed except for Wikipedia because I needed to look up a lot of quick summaries/descriptions for things. However, even though I really did not have the faintest idea of what link analysis and ranking meant, it was clear that Google was probably the fastest and most relevant search engines out there. Still now, after learning about how search engines are created and are supposed to operate, I use Google as my primary search engine: half because I’ve grown used to it, but also half because it still is the quickest and most helpful search engine that is always improving. I have experimented with other search engines like Yahoo and MSN and through comparison have found that Google has never disappointed me in any type of search. Using the same search content, most of the good sites I would eventually use turned up through Google. The interesting thing is that most people think Google is so successful because of its brilliant technological advances for its web search engines. While that is true, the real aspect of Google that makes it stand out among its competitors is the success it has in bringing in Revenue.
In other words, AdWords is the thing that is making Google so good at generating Revenue through advertisements. This internally designed auction system seems similar to a lot of other previous designs but from what we know about it – because Google is still pretty closemouthed about its design- it is innovative and different from the usual auction design. It works so well because instead of just giving ad space to the buyer who would pay the most money per click, Google takes it one more step in that it gives this ad space to the buyer that would give Google the most money in total. They do this by not only seeing how much a buyer would pay per click, but also on how likely it is for a person to click on the advertisement. Through this ingenuity, Google takes in a commanding 30% more revenue than Yahoo does. Also, Google’s auction style is opposite of what most search engines might choose for their style. Whereas most would want to promote honesty in making telling the truth beneficial, Google has a second-price auction that “by understating the top price they’re willing to pay, advertisers could get a slightly lower position on the search page for a lot less money.”
In short, Google has all other search engines beat not only in its quality of searching, but also how well it uses its advertising space.
Last week, as the aftermath of Hurricane Sandy gripped the country, most of the focus shifted to how catastrophic the damage was. In lieu of this damage, however, I feel that the government handled preparation relatively well. As a cohesive unit, the government took the necessary steps in preparing the citizens of the tri-state area for the impending disaster. For instance, government officials in New York and New Jersey informed residents of proper preparation procedures and even issued evacuation orders. President Obama canceled campaign visits across the country to do his part to communicate to the public the looming dangers of Hurricane Sandy. This constant communication not only allowed efficient interaction between government officials, but also helped to create an information cascade among the residents of the Tri-state area and the rest of the east coast.
This urgent media communication that the government implemented could be related to an informational cascade. In this cascade, the government assessed the state of the world to be bad, and sent out proper signals to everyone in danger. These signals varied on the level of extremity, but all of the signals pointed to the same conclusion: proactivity and preparation. Some were encouraged to evacuate their homes, while others were told just to take necessary precautions. Being a New Jersey resident, living ten minutes away from the shore, my family received their own personal signal and prepared for the worst. I, on the other hand, had received a separate signal (many, many times thanks to the flood of Cornell e-mails we received) informing me that the storm was being tracked and was not predicted to hit Ithaca. In this scenario, I had received three pieces of information: I knew there existed a cascade in my hometown, where everybody had decided to prepare for the storm, I knew my own family’s decision to prepare for the storm, and I also had my own personal signal. Knowing the cascade that had already formed and knowing that my family had decided in agreement with the cascade was enough for me to ignore my own personal signal and take the necessary precautions to prepare for the storm. This personal scenario depicts the forming of an information cascade created by the government, in which the extra knowledge I had received from my family swayed me to ignore my personal signal.
In my own opinion, I feel that the government did all the right things in preparation for this hurricane. Their media communication created an information cascade that was impossible to ignore, and allowed people to be proactive in preparing themselves and their families for the oncoming storm. Though the damage was considerable, this truly was a natural disaster that could not have been better prepared for. I believe in our government to lead the east coast in recovery: we will rebuild, we will restore, and I am Jersey strong.
With an increase in social media, candidates have been able to extend their reach to a greater number of people than ever before, informing them of their respective policies, beliefs, and overall electoral ideologies. With more information readily available, people are given more opportunities to educated themselves about the election. On the other hand, social media has also given voters an impact on other voters — for example with Facebook’s new “I’m Voting” feature, which they rolled out just in time for this year’s election. As the article states, the feature allows the Facebook user to share on his or her wall, as well as the newsfeeds of many friends, that he or she voted in the election. From this, researchers have concluded that an additional 2.2 percent of people voted in this election because they saw that their friends had voted.
Apart from the Facebook feature, many other forms of social media allowed users to indicate that they voted on election day. Even more, on some of the social networking sites, such a Twitter, people announced their allegiance to specific candidates (ie. tweeting “Just voted for Obama!” or “Romney 2012!”). Now, taking this social aspect of the election and tying it into how people decide who to vote for, we can see how an information cascade may be produced in these situations.
Similar to the models we’ve seen, the voters in the election cast their ballots in succession and they have knowledge of who some people voted for due to social media. With this, in addition to their own private information (from reading about the candidates), they make their own decision on who to vote for. One difference, however, is the effect of whether a state is a swing state or not. In the case of a non-swing state, there is more likely to be a larger information cascade because a greater majority of the people will have chosen one candidate, thereby making people more likely to join the masses and also vote the same way. In addition, with the knowledge of what color their state will become (ie. I am registered in NY and know that it will remain a blue state), they will be even more likely to continue to vote that way, regardless of how much they actually know about the candidates or how passionate they are about the election.
In the case of a swing state, however, voters are more split and less partial to candidates, thus making it less likely for a large number to be influenced by others through social media (although some still might be), and as a result, more difficult for an information cascade to occur. For example, because the state has people from both parties, it is possible for an information cascade to begin on one side, but then even up. As such, if there were two voters who were pro-Obama and voted for him, and then a few friends of theirs who were unsure, they could end up voting for Obama as a result of their friends’ influence. However, if a few more people were to come who were all pro-Romney, they would vote for Romney regardless of how many people they saw voted for Obama. As a result, people who were more impartial but leaning towards Romney (however, they wouldn’t have voted for him if no one else had) would feel more comfortable now voting for Romney because they saw that some of their friends had as well. This would start a cascade for Romney and thus even out the votes. In effect, this could also be how swing states are created in the first place, as opposed to non-swing states.
Overall, elections today have gained better turnout and more effect on other voters as a result of social media. By being able to see which ones of your friends voted, and even more, sometimes seeing who they voted for, people become more influenced by one another and information cascades have the ability to be created.
http://www.nbcsandiego.com/blogs/press-here/Facebooks-Im-Voting-Can-Increase-Voter-Turnout-177504231.html« go back — keep looking »