MGEC

Pre-read 1- Excellence v equity

• Main point - The American model of higher education is spreading. It is good at producing
excellence, but needs to get better at providing access to decent education at a reasonable cost

Pg 1
• American institutions have made several useful innovations
• Spending on education increasing and shift from European model (state funded) towards
ameircan model of research universities (pvt, paid by invidividuals)
• But problems at home in American universities

Pg 2
1. Reasons for growth in number of graduates
a. Need for degrees/qualifications
b. Automation
2. Should society invest in education?
a. ROI clear for individuals but not for society?
b. Even if no social returns, political motive to get loans at lower rates for students with no
collateral, etc
Pg 3 -4
1. American university model selective – Europe homogenous
a. Rankings
2. How to improve rankings
a. Invite foreign established brands
i. Endowment
ii. Partnerships
b. Improve existing uni
3. Competition for academics and students by better pay, etc
4. Rankings have concerns – more input oriented, unreliable
5. Resistance from all corners
a. Shanghai - Existing faculty against new
b. Germany – all uni equal
c. France – launched own ranking with different parameters

Pg 5 - example of Abu dhabi univ

Pg 6
1. why mixed funding is picking up as opposed to govt funding education
a. higher demand leading to higher education costs for govt
b. healthcare costs increasing so more important
2. how are universities coping with lower govt funding
a. increase fees
b. endowments
 c. let it deteriorate
3. alternative approaches by govt.s – private sector involvement
a. india – pvt sector creating univs
b. Latin America- govt handed over to pvt sector

Pg 7
1. 2 customers of higher education, American uni performance on parameters
a. Students
b. Govt
i. Research – doing well
ii. Human capital – no
iii. Equity – no

Pg 10
1. ideas for equity + excellence
a. Australian system – charge high earners more and income-contingent loans
b. control costs through tech
c. provide proof of value of higher education
Reading 2 - Economics focus - The regulators' best friend
1. author believes that not anti-govt to weigh costs of public action/regulation
a. Europeans want to remove unwanted regulations and subject new ones to CBA
2. cost benefit analysis – pros and cons
3. Benefits
a. Removes regulation not needed
b. And identifies that which can be added
4. cons
a. everything cant be quantified
b. future costs less than present as discounted
i. But are lives saved 12 months' hence really worth less than lives saved this
year? To say so, the critics argue, is to make a false analogy between
Post session 1 – Comparative advantage
Comparative advantage

Linked to opportunity cost – next best alternative cost

Pre session 2 – Law of demand
Law of demand

• As price goes up, qty demanded decreases (not demand decreases)

• The norm is qty on x axis, price on y axis
Pre read 1 - Croissantonomics

Bakery business demand needs to be predicted accurately to avoid losses and need to diversify to higher
margin products

Pre read 2 - Snow Leopard Takes a Page From the App Store Playbook
App store effect – reduce cost by half, qty demanded more than doubles etc

Pre read 3 - Net benefits

How to quantify the gains that the internet has brought to consumers
Post session 2 – aggregate demand
Pre session 3 – costs
Questions

1. What is the Q as function of capital, labor? For starbucks example

2. Total fixed costs fixed only in short term correct? Similarly for labour, capital - What happens in
longer term – for costs, product etc?
3. How/why total product start decreasing as we add more labour after a point?
a. Eventually, when there are too many workers, some of them become ineffective and
their margi nal product falls

Product – Total, average, Marginal product

• Capital fixed in short term, labor variable

• Total product = f(K,L)
o Marginal product = dQ/dL
o Average product = Q/L
• As labor increases, total product first increases at increasing rate, then at decreasing rate
• Marginal, Average product first increase then decrease
o When marginal > average, average increases
o When marginal < average, average decreases
Costs
• Average cost = TC/Q
• Marginal cost = dTC/dQ= d(FC+VC)/dQ = dVC/dQ (as dFC=0 in short term)
• AVC and MC are mirror image of AP, MP (Avg, marginal product)
Pre read 1 - Coconuts Go Upscale
1. Overall key takeaways from article?
a. Demand for particular type of coconut (young) increasing leading to increase in costs
b. so all industry players moving towards those
c. however supply for other coconut types (old) further reducing due to this
d. lack of subsititutes making it even more difficult
2. but is it possible/feasible to shift from for eg conventional coconut products to higher margin
products? what if thats not a core speciality/brand etc
a. or is it saying that suppliers moved from dried coconut to more of younger coconuts
which are used for trendy products like coconut water, virgin oil etc
3. supply constraints due to hurricane, lack of govt intervention/programs to replace old trees
which bear less fruit with new ones
a. Substitute inputs in place of coconutoil not possible as product formulas may not be
flexible, branding may be hit due to unhealthy substitutes
b.
Pre read 2 - Apparel industry model holds the key for India’s job creation
requirements
1. How to increase jobs in India market, why India needs such jobs
2. Shahi exports – 1200 jobs per USD2.2m in assets – India needs more such jobs as low entry
barriers, decent pay, China leaving the market
3. Challenges
a. Small scale firms, not efficient
b. Larger family businesses not involved currently. But have scale and know-how etc
4. Solutions
a. Reduce regulations
b. Tax reimbursement
c. Exchange rates
5. These can be expanded to multiple industries in addition to apparel
Pre read 3 - Profit and Sauce: How Much Do D.C. Restaurants Really
Make Off of Meals?
1. TBD
Post read 1 - Rent Control Needs Retirement, Not a Comeback
https://www.bloomberg.com/opinion/articles/2018-02-07/rent-control-needs-retirement-not-a-
comeback

1. Rent/price control has not worked in the past also as

a. People with higher incomes and resources take advantage as rent remains low so
accessibility for poor is low; and then don’t move out
b. Landlords don’t invest in maintenance and don’t build new housing due to pricing gap
c. Leads to higher demand as everyone wants lower rent apartments
d. Leads to lower supply as lower incentive to build, and suppliers can shift to other forms
of office spave which don’t include rent control
2. Solution
a. If politicians actually want to make sure everyone who needs a place to rest their head
has one, there’s only one way to do it: Build more housing.
b. Which means, in turn, loosening the legal restrictions and community veto points that
make it so hard to add supply
Post read 2 - Rent control is crippling India’s richest city
https://www.livemint.com/Opinion/2sEX5MD7aW1whVkxFllNCL/Rent-control-is-crippling-Indias-
richest-city.html

1. Imposing price ceilings on any product below market rates will cause demand to rise even as
supply dips. Thus, rent control has a host of damaging effects:
a. The stock of new housing in the market falls as investment dries up;
b. landlords lose the incentive to keep their property in good repair;
c. property tax revenue falls; administrative costs and burdens rise, and with these, the
potential for corruption.
d. And contrary to its main purpose, rent control does more to harm poor and middle-
income individuals and families than help them; the wealthy have greater capability to
tap into the networks that give access to rent-controlled housing. For instance, multiple
studies have found that the median income of families living in rent-controlled housing
in New York is higher than that of those living in unregulated housing.
e. For the rest, there are the slums—or rental housing in far-flung areas, adding to the
burgeoning economic cost of traffic congestion in the city and burdening its
infrastructure further.
2. In 1961, self-occupied and tenanted housing were in about equal proportion. Between 1961 and
2010, about 95% of residential construction was for ownership and only 5% for rental. This
crunch, compounded by a floor space index that is, unfathomably, among the lowest of any
major city, leaves migrants with few options.
3. Indeed, removing rent control in one go is both politically unviable and potentially too disruptive
economically. But moving from the current first-generation controls to second-generation rent
stabilization—where landlords are allowed to raise rents with a cap linked to market rates—is a
must. And the eventual goal must be phasing out controls altogether.
Pre read 1 - Is Natural Gas Too Cheap to Drill?
https://perma.cc/4PJS-ZT5N

1. Gas rigs have been disappearing particularly fast since late October, the last time prices were
above $4. Essentially, gas is so cheap that it’s no longer profitable to drill
2. Why drilling activity still persists
a. Low borrowing costs have helped spur a healthy appetite to invest in gas drilling despite
low prices, with a lot of funding coming from equity markets and in the form of joint
ventures. According to Greely, producers have continued drilling, despite low prices, in
an effort to expand volume and hold on to leases, which require that they continue
drilling.
3. The primary driver of low prices right now is the lack of winter and lack of demand,
4. Shere feels that the market is overly bearish about the price of gas,
a. discounting in particular the longer-term production declines from falling industry
capital expenditures,
b. as well as increased demand from power plants that are switching from coal to gas
5. but demand likely to bounce back, and thus prices to also rise once excess supply removed
a. as switching from coal to gas
b. lower production in near future
Pre-read 2 - The EpiPen, a Case Study in Health System Dysfunction
Mylan monopoly

1. Epinephrine is very, very cheap. Even in the developing world, it costs less than a dollar per
milliliter, and there’s less than a third of that in an EpiPen.
2. Few competitors existed, and for various reasons, that has remained the case. The device
actually worked and saved lives. People needed it. Mylan raised the price. It also began to raise
awareness.
a. competition would bring the price down. But it’s very hard to bring such a device to
market and competitors have failed
b. alternative still exists but challenges associated
3. Unfortunately, epinephrine is inherently unstable. Research shows that it degrades pretty
quickly over time, and it’s recommended that EpiPens be replaced every year.
a. People in anaphylaxis need a full dose every time. They therefore need to replace all
their EpiPens every year, again and again.
4. Mylan price increases
a. Needed by more people (children) at more places ➔ more demand
i. More revenue for Mylan. And it raised the price.
b. Then in 2010, federal guidelines changed to recommend that two EpiPens be sold in a
package instead of one.
i. Mylan stopped selling individual EpiPens and began to sell only twin-packs. It
also raised the price.
c. In 2013, the government went further. It passed a law that gave funding preferences for
asthma treatment grants to states that maintained an emergency supply of EpiPens.
i. As the near sole supplier of the devices, Mylan stood to make even more
money. That year, Mylan raised the price again.
d. Competitor failure - These setbacks, all in the last year, have once again left Mylan with
a veritable run of the market. It raised the price of EpiPens again.
Pre-read 3 - Why a Media Merger That Should Go Through Might Not
https://www.nytimes.com/2016/10/26/business/economy/why-a-media-merger-that-should-go-
through-might-not.html

1. Opponents of the proposed AT&T purchase of Time Warner don’t want to just block the $84.5
billion deal: They want to overturn decades of antitrust policy and case law.
2. Would a combined AT&T and Time Warner put too much power in one company? That’s the big
question.
3. Over the last 40 to 50 years, antitrust law has evolved to be almost completely indifferent to
vertical mergers
a. At nearly every opportunity, Randall Stephenson, AT&T’s chief executive, and other
architects of the deal have repeated the “vertical” mantra. As Mr. Stephenson told me
this weekend, “This is strictly a vertical merger. We’re combining with one of our big
suppliers. You’d be hard pressed to find a vertical merger denied by the regulators. They
won’t give us a free pass, but we expect that if they have concerns, they’ll impose
conditions to address them.
b. Time Warner is just one of many content suppliers to AT&T, albeit an important one.
Time Warner competes vigorously with other film and television studios, cable
networks, and producers of news and entertainment.
c. AT&T competes in cable delivery systems, satellite and wireless. While more
concentrated than news and entertainment (there are just four major wireless carriers),
they are still competitive markets.
Pre-read 4 - The Evolving Economics of the App

1. SoundHound isn't the only app with uneven prices. Using a wealth of data from mobile devices,
developers of apps ranging from children's games to fitness trackers are increasingly testing an
array of price points and business models.
a. They are drawing some conclusions: Free remains king, though users on iPhones and
iPads generally have a greater tolerance to pay the price to download apps and shut off
advertising than those on Android devices. Users of apps in Amazon's app store,
meanwhile, tend to make more purchases within the apps
2. The variable pricing trend may soon extend to in-app purchases as well. Amazon, for instance, is
allowing developers to test different pricing schemes within an app to understand customer
behavior, said Aaron Rubenson, director of the Amazon app store. So one app user could be
prompted to upgrade or buy virtual goods at different points than another, helping developers
determine when customers are most likely to open their wallets and how much they are willing
to pay
3. Many developers said they have found different price sensitivities for purchasers on the
different app stores which has influenced how they price the apps for particular outlets. In
general, Android device owners are less likely than iOS users to spend money on apps, including
for downloads as well as in-app purchases, developers say. That is due in part to the greater
availability of low-end Android smartphones and tablets, which tend to attract lower-income
people compared with iPhone and iPad users
Pre-read 5 - How Uber could become a nightmarish monopoly
https://theweek.com/articles/675434/how-uber-could-become-nightmarish-monopoly

Perfect price discrimination

1. With traditional cab companies collapsing and most cities reticent to tackle ride-sharing apps
head on, Uber would have a chance to dominate the American taxi market to an unprecedented
degree. And because any such nationwide taxi monopoly would also have powerful high-tech
tools at its disposal, it could be the first company in history to be able to attempt perfect price
discrimination — adjusting individual prices so that every taxi customer pays as much as she can
afford
2. Either investors are fooling themselves, or they "are assuming this will be a monopoly service
The strategy would be to undercut competition with investor-subsidized fares, and then when
everyone else is driven out of business, jack prices through the roof and collect monopoly
profits. Indeed, the firm claims it already controls over 80 percent of the taxi app market
3. There are several ways to charge individuals differently for the same product, but let's focus on
what's called "first-degree" price discrimination. This means perfectly individualized pricing,
where each consumer is charged their absolute maximum willingness to pay. (In economics
lingo, this is called an exact reservation price.)
4. He found that Netflix could have increased its profits by 0.8 percent using simple demographic
data — but by 12.2 percent using the detailed information available from browser surveillance.
5. Pros of price discrimination
a. Some researchers argue that price discrimination could actually benefit the poor. "Given
reasonable assumptions, there will be a redistributive effect," says Glen Weyl, a senior
researcher for Microsoft Northeast. This is because while a single price will be higher
than many poorer people would be willing to pay, it might still be profitable to sell to
them at a lower price. For example, price discrimination allows poor nations access to
prescription drugs that would be otherwise unaffordable.