Bundles of Cables

Straw Bundle
Which color?

James Surowiecki from New Yorker talks about the effects of the recent Fox vs Time-Warner Cable affair on public perception. His focus was that the event reminds viewers that much of the money they pay are for stuff they don’t use or don’t want – the idea of bundling, allowing consumer surpluses in one product/good spill over to others which are bundled together with it. This allows less mainstream stuff to be sold to the mass market or introduced to consumers since without bundling their proceeds wouldn’t pay for the cost.

The complexity of the modern economy supports bundling; it helps people make some of their choices. Imagine if you’ve to assemble exactly which channels you want each month based on what is going to be screened on them; or to decide every single module running in your computer during installation (the Linux style); or to decide which brand of sugar, type of coffee beans, water and cup to use for takeaway coffee at breakfast. And James show how customers like them:

The appeal of bundling is partly that it reduces transaction costs: instead of having to figure out how much each part of a package is worth to you, you can make a blanket judgment. Bundling eliminates the problem of fretting about small expenditures, which may be one reason that flat-rate pricing is very common in the vacation industry (cruise ships, all-inclusive travel packages, and so on). It also offers what economists call option value: you may never watch those sixty other channels, but the fact that you could if you wanted to is worth something. Many consumers also perceive bundles as bargains; getting a bunch of things for one price feels like a deal, even when it’s not.

Of course, like what James mentioned at the end of the article, when components of the bundle start fighting over the cost of each of them or the proportion of their share over the entire bundle’s proceeds, it will raise the appeal of à la carte. Imagine when the addition of a Sashimi palette into the buffet table results in the waiter going around to collect extra money from the patrons still in the restaurant and able to enjoy the Sashimi. Those who don’t want the Sashimi and just entered the restaurant would opt for à la carte while those leaving would protest.

Back in Competition

A recent article on Slate.com revisited the theme of competition, something I’ve been writing about (here and here) in response to their articles. Ray Fisman discusses studies on whether man or women are more competitive and whether any difference is explained by nature or nurture.

More importantly perhaps, he questions the significance of competition in our world and whether it is a good thing at all. I believe, like many other things, a balance has got to be struck somehow. Once we reach a certain threshold whereby competition achieves positive gains, its cost will start outweighing benefits.

Look whos trailing....
Look who's trailing....

But perhaps the problem isn’t one of female passivity—many have claimed that if women ran the world, there wouldn’t be any wars, and anyone who has read testosterone-driven Wall Street accounts like Liar’s Poker, or more recently House of Cards, might question whether all-out competition is the best way of managing our economy. If competition is nurture rather than nature, perhaps we’d all be better off if we lost a little of our warrior instincts.

I know it sounds rather like an economic analysis but this applies for practically everything. We are entering an age of sophistication where competition basically consist of sub-units of collaboration, which is in turn divided into sub-units of competition. Just think about it, when we work at a company, we may be competing with our colleagues for attention from boss but the whole department, together with the boss is collaborating to compete against other departments and other bosses to a higher level and the company on the whole is collaborating to compete against a rival company and the industry as a whole (perhaps beverages) is competing against another (say food, they’re all competing for consumers’ stomach space). Competition and collaboration are not ends of a spectrum but co-evolutionary forces that shapes the world and our sophisticated activities.