23.2.07

SEX, DEATH, AND WHY THE LINES ARE LONGEST AT THE ROLLER COASTER. The current thesis nailed to Newmark's Door.
If you didn't already know it, economics has no boundaries.
Indeed not.
Our empirical analysis suggests that older and more educated suicide bombers are being assigned by their terror organization to more important targets. We find that more educated and older suicide bombers are less likely to fail in their mission, and are more likely to cause increased casualties when they attack.
Elsewhere in the news, California's Department of Motor Vehicles isn't as clever as Six Flags when it comes to selling the right to cut the line.

In 2006, the California legislature authorized the state Department of Motor Vehicles to distribute 85,000 stickers to the owners of gasoline-electric hybrid cars. The stickers allow drivers to travel without passengers in all of the state's high occupancy vehicle (HOV) lanes, which were formerly restricted to cars with two or more passengers. A report determined that California's HOV lanes were operating only at two-thirds of their capacity and not easing congestion as much as they could; the idea was to stimulate demand for hybrids and thus reduce the emissions of greenhouse pollutants.

The sticker distribution did exactly what it was supposed to do. People wanted to shave time off their commute, and the stickers drove up demand for hybrids for the Toyota Prius and Honda Civic hybrid (the only cars that qualified for stickers), so much so that the small Prius has been selling for over $30,000, and until recently had waiting lists. The Civic hybrid has carried a dealer "added premium" to the manufacturer's suggested list price of as much as $4,000 (with the hybrid Civic total price nearly $7,500 higher than the quoted price of a non-hybrid Civic).

But it seems that the hybrid HOV program, rather than suppressing automobile use, did the exact opposite: The program was wildly popular, and the HOV lanes became clogged. Californians began talking about "Prius backlash."

But unlike the reservations at the roller coaster, the stock of permits ran out before the stock of hybrids did.
Then at the end of January, the DMV ran out of stickers, leaving more than 800 new Prius and Civic hybrid owners, who may have been enticed to buy their hybrids at premium prices inflated by sticker advantage and who applied for the stickers, without the right to drive alone in the state's HOV lanes.
Because the permits accompany the cars, one could see a used Prius trading for a higher price than a new one, lemons principle be darned.

Since the HOV-lane stickers stay with the hybrids, the demand for used hybrids can be expected to rise, along with their prices, perhaps dramatically, especially since Honda and Toyota can no longer accommodate the demand for reduced commute times with more cars.

The growing number of drivers with long commutes and high opportunity hourly earnings can be lead bidders for used hybrids.

Other incentives remain at work. (Years ago I characterized President Reagan's decontrol of domestic crude oil prices as a better choice than strengthening the incentive to steal license plates.)
As a consequence of the used hybrid sales, we should expect the HOV lanes to become even more crowded (since the lanes will be dominated to a greater extent by people with longer commutes), which will, of course, undercut (albeit marginally) the value of the stickers and the price of used hybrids. Given the market value of stickers and the fact that the DMV appears to have distributed stickers that are far from counterfeit-proof, anecdotal evidence suggests a healthy black market for stickers, with the counterfeit stickers dampening the rise in the used prices of hybrids.
There has to be an efficient way of pricing a congestible facility in such a way that both the premium-price for no waiting and the low price wait your turn riders have no incentive to change their types. There appears to be a lot of type-switching going on. The sufficient conditions for efficiency, however, are very messy (although a pretty structure is emerging from my calculations.)

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