AEJ Journal Applied

The January edition of the AEJ: Applied is available on this link. The journal policy means that the data-sets and do-files used to create the results are made available. As well as promoting transparency, this is also potentially a very good resource for graduate teaching.

Greene Microeconometrics at Galway

NUIG have done a good service by organising this. I could not recommend this highly enough to any graduate student in Europe who is working on applied microeconometrics. The lecturer is among the most highly regarded econometrics professors in the world and has written some of the most widely used textbooks and software. For those outside of Ireland, Galway is a gem of a place to visit and this would be a good excuse to do so.

Topics in Microeconometrics

Professor William Greene

Stern School of Business, New York University

at

National University of Ireland, Galway

June 1-3, 2011

The National University of Ireland Galway, J.E. Cairnes School of Business and Economics is delighted to host a three day intensive course on 'Topics in Microeconometrics' with Professor William Greene of the Stern School of Business at New York University.

This course will introduce the student to methods and models used to analyze cross section and panel data. We will depart from the linear regression model to specifications for binary and censored data, ordered choices, count data and multinomial choices. The discussion will present basic models for cross section data then introduce theory and methods for extensions to panel data and stated choice experiments.

The presentation will include roughly ten morning classroom meetings. In the afternoon of each day, we will do some hands on analysis using “live” data sets and a familiar computer package.

Course Fee

The course fee is €350 if registered on or before April 15th 2011 and €420 thereafter. Places are limited to 50 so early booking is recommended. The fee includes refreshments throughout the course.

Conference Venue

The conference will be held at the National University of Ireland, Galway in the Aras Moyola Building.

Further Information

Contact conference secretariat: Sinéad Keogh
Email: s.keogh4@nuigalway.ie

Tesco Metrics: Every Little Bit of Data Helps

Liam linked to an article in the Guardian earlier this week, which was all about Nudge. One comment in the article was that "while shopping, working, or even deciding on who to share their lives with, individuals are less thoughtful and less calculating than modern-day economists... typically assume." This blog-post zones in on shopping, in particular the data-analysis of consumer purchasing behaviour at Tesco. The Guardian article linked above also suggests that "any critic who points out that that's hardly news to the women...(and) the men at Tesco... is spot on." Indeed, Tesco have been conducting interesting micro-level analysis on individual behaviour for many years now.

An informative article on this topic was written by Jenny Davies in the Sunday Times last year. According to Davies, Tesco gets its data from its loyalty clubcard scheme; this was launched 15 years ago with much fanfare - the advert below may jog memories for some readers. Davies also informs us that around this time last year, Tesco was tracking "the shopping habits of 16 million families across Britain, delivering an extraordinary insight into their lives — not only for itself but for companies such as Coca-Cola, Nestlé and Unilever, which buy the rights to the data." Readers in the Republic of Ireland might also remember that the Tesco Clubcard was launched there on the 13th. Oct 1997. To date almost 800,000 members have joined in the Republic.



Jenny Davies also tells us that: "Each bill detailing every item in a customer’s shopping basket is logged in a data centre in London Docklands and decoded by Dunnhumby, the marketing firm that is in charge of the scheme. It has to process 100 baskets a second — six million transactions a day. This helps Tesco to decide which products should go on to the shelves at what times, and in early trials it increased sales by as much as 12% in some of the supermarkets." According to the Guardian (in this article), the power of the clubcard was demonstrated in 2009, "when Tesco harnessed the card's database to halt the exodus of shoppers to cheaper retailers because (of) the recession, by doubling the points available to shoppers."

In a blog-post on Tesco data from two years ago, Tony Hirst desribes the early analysis conducted by Dunnhumby, and how this has changed over the last 15 years. A couple of months ago, Dunnhumby (and its recently departed co-founders) were profiled in the Guardian. The article says:

According to company lore, there was a 30-second silence after Humby presented the initial trial's results to the Tesco board, until the then chairman, Lord MacLaurin, declared: "What scares me is that you know more about my customers after three months than I know after 30 years."

One question that readers might have is: what's in it for club-card holders? According to Tony Hirst, a good place to get an answer to this question is the book: Scoring Points: How Tesco Continues to Win Customer Loyalty. Hirst describes the "Clubcard customer contract: more data means better segmentation, means more targeted/personalised services, means better profiling. In short, the more you shop with us, the more benefit you will accrue." According to the Marketing Week magazine, "from the day of its launch in February 1995 the Tesco Clubcard was immediately embraced by customers attracted to the 1% discount off their shopping bills. But its long term success has not been built on discounts alone, rather on the personalisation of the shopping experience."

However, perhaps the last word should go to UCD social psychologist Ken McKenzie, writing on his A Head in Business Blog: "I don’t have a loyalty card, and every time I’m in Boots, Tesco or Dunnes, and they ask if I have one, I feel a slight sense that I should justify why I don’t, as it it’s odd to not have one. And according to rational actor theory in Economics, it is odd to not have a loyalty card and avail of discounts. However, there’s a small but growing body of work in the overlapping area between Psychology and Economics that might explain why (some) people might behave like me."

On a lighter note

Fixed or Random Effects?

New IZA Working Paper

The Choice Between Fixed and Random Effects Models: Some Considerations for Educational Research

Paul Clarke, Claire Crawford, Fiona Steele, Anna Vignoles

Abstract:
We discuss fixed and random effects models in the context of educational research and set out the assumptions behind the two approaches. To illustrate the issues, we analyse the determinants of pupil achievement in primary school, using data from the Avon Longitudinal Study of Parents and Children. We conclude that a fixed effects approach will be preferable in scenarios where the primary interest is in policy-relevant inference of the effects of individual characteristics, but the process through which pupils are selected into schools is poorly understood or the data are too limited to adjust for the effects of selection. In this context, the robustness of the fixed effects approach to the random effects assumption is attractive, and educational researchers should consider using it, even if only to assess the robustness of estimates obtained from random effects models. When the selection mechanism is fairly well understood and the researcher has access to rich data, the random effects model should be preferred because it can produce policy-relevant estimates while allowing a wider range of research questions to be addressed. Moreover, random effects estimators of regression coefficients and shrinkage estimators of school effects are more statistically efficient than those for fixed effects.

http://ftp.iza.org/dp5287.pdf

Economics at Yahoo!

I've blogged before about Hal Varian, Chief Economist at Google, and how his role in the organisation has been central to Google's business model. I have also mentioned pioneering work at Yahoo! Research on the effectiveness of online advertising, the battle between Google, Yahoo! and Bing in the economics of internet search, and the statement by Yahoo! Research that they routinely compete for talent with the top ten economics departments in the world.

However, it has only now come to my attention that Varian has a counterpart at Yahoo! The economist in question is Preston McAfee, on leave from the position of J. Stanley Johnson Professor of Business, Economics, and Management at the California Institute of Technology. At Yahoo!, Professor McAfee is Vice President and Research Fellow at Yahoo! Research in Burbank, CA, where he leads a group focused on microeconomics research. Here is a list of recent publications from the Microeconomics and Social Systems cluster at Yahoo!

Professor McAfee wrote Introduction to Economic Analysis, a free, open-source text that spans both principles and intermediate microeconomics. In 1994, the FCC in the USA auctioned access to a number of radio frequencies for new communications services, using an auction designed by Paul Milgrom, Robert B. Wilson, and Professor McAfee, and raised over $17 billion. This auction design was copied around the world. McAfee, Milgrom, Wilson and John McMillan (1951-2007) formed a company, Market Design, Inc., that advises governments on how to maximize the return from sales of radio frequencies, mineral rights, airports, and other assets.

Returning to Yahoo!, The Register magazine describe the company's Right Media exchange — a display advertising marketplace that matches advertisers with publishers and ad networks — as (by one measure) the largest exchange in the world, running over nine billion auctions each day. Finally, the Yahoo! Advertising Blog is also an interesting read; the current post - Mad Men No More - features a discussion by "advertising’s new guard" on how they are re-defining the industry.

A Reminder About The Dangers of Interpreting Interaction Effects in Non-Linear Models

"The magnitude of the interaction effect in nonlinear models does not equal the marginal effect of the interaction term, can be of opposite sign, and its statistical significance is not calculated by standard software. We present the correct way to estimate the magnitude and standard errors of the interaction effect in nonlinear models."

Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.

The Stata programme inteff is recommended.