Toll strategery

Bay Bridge commuters must now pay congestion pricing tolls, $2 higher (from $6 to $4) during the commute hours of 7am to 10am. This has led to the predictable consequence of late-commute drivers slowing, or even stopping on the highway, to delay their tollbooth arrival till 10am.

Arbitrary "hard" limits often create problems. A better solution? The toll charged to any individual car could be the product of a maximum toll and a probabilistic weighting factor. So our Bay Bridge driver would be charged anywhere between $4 and $6, with a probably (but not certainly) higher toll during the rush hours, and a probably (but not certainly) lower toll the rest of the day, and only a gradual change in the weighting factor throughout the morning. The weighting factor would be varied to generate the same total toll revenue as currently.

Too complicated? Too controversial? If the state can push through a $6 (!!) toll in the first place, they can push this through, and ease the commute headache just a little bit.

Using the lingo

Oh yeah, about that title. Economics has such a wonderful vocabulary; I particularly enjoy the pithy "revealed preference," meaning "figure out what people want by what they do [not what they say]."

Speaking of vocabulary, and more generally, language, behavioral economics isn't mathematics, but I'll do my best to be precise. If I slip up, let me know.

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Economics is in the soul of every Bengali man (e.g. Amartya Sen, Muhammad Yunus, ...), though I began my formal study only in business school. Despite the appeal of economic analysis, it's hard not to notice that so often, psychology, not "rationality," is the decider. Kinda like George.

Where economics and psychology overlap lies the field of "behavioral economics," described in Dan Ariely's wonderfully readable Predictably Irrational. You know that question "If you could have dinner with anyone, whom would you choose?" Dan is my choice. Insightful thinker, and apparently also a really decent guy. I just learned from Wikipedia that Dan was a Business PhD student at Duke right when I might have been there, if I'd pushed to get off the waitlist! Oh well. If he got my spot, then not going was for a good cause.

In this blog, I'll discuss applications of behavioral economics for entrepreneurs and marketers, with plenty of case studies - including my own. Join me for a journey of exploration.