Marginal Revolution

Tyler Cowen has been making some very interesting posts over at Marginal Revolution (Alex Tabarrok has too, but I’m not going to say anything about them here, now!). I particularly thank and curse him for the reference to this normblog greatest jazz albums poll (although with RIAA Radar, I am loathe to buy many of them that I don’t already own!) and to AllMusic. Thanks, Tyler, thanks a lot …

And I often pose the why are rug stores always having sales question to my students, and the two answers he suggests are the top two that I’ve heard and come up with. It’s a fascinating question, and illustrtes the importance of both information and reputation.

The other thing that carpet stores illustrate in economics is the Hotelling model. Put another way, the question is this: why do all of the Persian rug stores locate in such close proximity to each other? You can ask the same question about antique stores, boutiques, etc. It makes for a great industrial organization analysis. Basically the idea is that if you have customers uniformly distributed across a space, it is profit maximizing for the stores to locate as close to the middle of the space as possible (assuming away different product characteristics etc., although the Hotelling model certainly applies to product differentiation), so you get clustering.