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Probabilistic Coke Pricing

In 1950 Coke had a problem. They had been selling bottles for 5¢ but inflation was making this impractical. They wanted to raise prices, but vending machine technology was an issue. Over 25% of their sales were through their 400k vending machines, which were almost all "nickle only". By limiting the machines to a single coin, they could get a very reliable mechanism. The problem is, the next coin above 5¢ is 10¢, which is a huge price increase.

A 7.5¢ coin would solve this, right? Coke actually lobbied the Treasury to produce one, but they understandably refused. So if you still want to take a single coin, and your small coins are limited to 1¢, 5¢, and 10¢, what can you do?

Coke explored the idea of probabilistic pricing, where your nickle usually gets you a bottle but doesn't always:

Instead of offering one Coke for 6¢ the coin cooler offers eight Cokes for 45¢, which is only 5.625¢ per bottle. [The] coin cooler [delivers] either an empty bottle or no bottle at all for one nickel in every nine deposited. This absence of Coke is called an official blank. Please be warned that, if you fail to deposit nine nickels, at worst you will strike the blank and have to deposit another nickel for your Coke. At best you will miss the blank (8 times out of 9) and your Coke will cost only a nickel, but as stated, on the average Coke sells for 5.625¢ per bottle—the only price at which it is offered.
  • —Eugene Kelly, Single Coin Plan, 1951, Coca-Cola Company Archives. Quoted in Levy and Young 2004.

The main problem with this is that you set people up to be disappointed. Usually their 5¢ gets them a bottle, but sometimes it gets them nothing. Greedy vendor! So here's an alternate approach: require dimes [1], but return the coin 44% of the time (giving them their bottle for free). It's the same 5.6¢ cost, but now you've set up people for a positive surprise instead of a negative one.

There are still other problems with this probabilistic approach to change-making, including that you're stepping a bit close to gambling and slot machines, but I'm curious whether their Single Coin Plan would have gotten farther with test audiences as "sometimes you get a free Coke" than "sometimes you get no Coke".

(For more history of how and why Coke kept their bottles at 5¢ for over 60 years, see Levy and Young's 2004 "The Real Thing": Nominal Price Rigidity of the Nickel Coke, 1886–1959.)

[1] This does mean you have to update your vending machines to take dimes, but they were willing to do that for a new 7.5¢ coin so it seems like they they would have been ok doing that here.

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Negative News

"Wheat prices fell for a fifth straight year today. We're here with a fourth generation farmer, trying to understand how a race to the bottom makes it harder and harder for small farmers to make ends meet."

"Walk down the aisles at any grocery store and you can see the impact everywhere: a loaf of bread that costs 40% more than this time last year, a pound of pasta for $1.50, flour in four pound bags when the same price used to get you five. The costs of these basic necessities are out of control, and it's hitting us right in the pocketbook."

"While buying a house used to be a mark of adulthood, more and more millenials are realizing that with rising prices they may never be able to afford the stability of a home to call their own. Their futures mortgaged to pay for ever more expensive degrees, America's young workers can only look at escallating real estate prices and sigh."

"Over the years American workers have been sold on home ownership. 'Buy land', they said, 'they're not making any more of it!' Everyone believed the only direction property values could go was up. But as with all bubbles, this one had to burst, and falling home values have hurt the elderly the most. After paying hundreds of thousands of dollars to the bank over decades, many would-be retirees are finding that their home is worth far less than they expected. We're sitting here with a 65-year-old grandmother of five, on how the best offer on her home was $100k less than she needs to retire, and how she's had to put her plans on hold for the forseable future."

"The changes seemed nice at first. High paying jobs meant more investment in the local community. The old industrial buildings that had been empty for decades were seeing new life as offices, the city was turning vacant lots into parks, the subway extension opened up with a stop right in the square. First time in my memory our neighborhood was somewhere people wanted to live. But then the evictions started. People who I'd known for years started seeing their rents bumped by 2x, friends getting pushed out by childless professionals who could afford to pay more in rent than my friends even earned. And while in theory those of us who owned our houses were now sitting on top of land that was worth a pretty penny, in practice the only real effects were exploding property taxes and lots of entitled yuppies who wanted to 'live carfree' and talk about which taco place was more 'authentic'. And now my next door neighbor is raising chickens in their backyard, all excited about the 'sustainability' of their noisy smelly foul fowl."

"When I grew up our city was bustling. Those were boom years, when there were far more jobs than people to do them. Wages were high, the subway was expanding, and new homes were going up on every block. But the industry changed, jobs moved away, and our city is now a shell of its former self. There are more houses than people, so they rent for less than it costs to keep them in good repair. Which of course the landlords don't bother with, since their properties are worth less and less every year. I keep hearing on the news about another meth lab getting busted, and it's harder and harder for me to get my pseuedofed refils. This town is becoming a dump and it just makes me so sad and angry when I remember what it used to be."

Nearly any change that's positive for some people is negative for others, but it's much easier to tell a story about the people who are hurt. Stories about people who are doing well in life feel superficial and unimportant, while stories about struggles feel real and meaningful. In one sense this is good: it's important for us to see the things that aren't working well so we can fix them. On the other hand, this widespread negativity leads to a perception that things are worse than they are, and getting more serious over time. Worse, a negativity that pushes back reflexively against all changes by finding the people most hurt by them works to strengthen our attachment to the status quo, maintaining harmful systems. What would reporting look like that didn't have this problem? How could we change the incentives for journalism to get us there?

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Contra Caller Gender

Ruthie posted recently about gender in contra dance playing and calling, finding:

Women called 47% of dances in my sample, and were about a third of musicians (weighted by gigs). This is compared to a baseline of about 54% women in the Bay Area contra dance community.
I'd looked at musicians before but I hadn't looked at callers, so I was curious what I'd see in the historical weekend stats I collected. more...
EA Global Videos

Videos from the EA Global conference in Mountain View this summer are out! [1] Here's all the talks with videos, in the order that they were presented on the conference program: more...

Thoughtful Non-consumption

Note: read to the end.

A: You really should give up hot showers. That hot water means wasted energy, fossil fuels warming the planet, damaging ecosystems and displacing people.

B: But I like my warm showers!

A: Global warming is a huge catastrophe on the horizon, and if we want to limit the scope of the disaster we need to act. Yes, you like your showers, but people who live in low-lying villages like having their homes and land! Are you so selfish that you value this material comfort over billions of lives?

B: Surely my showers aren't costing billions of lives all on their own, though? I mean, I stay in there a little while, but billions?

A: Billions are at risk from climate change, and our wasteful first-world lifestyle is the cause. If we can get everyone's consumption down to sustainable levels then we can avert the worst of the damage.

B: How bad are my showers, really? This calculator says I use 48 therms/year, and the EPA says it's 0.005T of CO2-equivalent per therm, so that's 0.25T/year. We can avert CO2 emissions at a bit under $2/T, so offsetting my warm showers is $0.50/year. That's really not that much! Wouldn't you rather I give $5/year to fight global warming than switch to cold showers? more...

Repeat Wins By Sport

I was waiting in the airport security line at Logan, and they have a big row of banners for Boston's championships in various sports. Kind of like this:

What stood out to me, seeing this, is (a) it looks like Boston used to have one good team at a time and (b) there used to be more times where one team would win many times in a short period. How general are these? Do they hold in other cities? Now, (a) is hard to look at because I don't know how to categorize teams by city properly, but I can look at (b) across cities without too much work. What does that look like? more...

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