All Together Now

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Why do local television stations tend to schedule their news shows all at the same time? Do they all get together and conspire to set some standard? There is an good explanation in The Economics of Network Industries by Oz Shy blaming it all on network effects. He uses game theory. The payoff matrix creates game where the stations move into synch because that splits the available of viewers.

As a kid I used to wonder how the TV stations managed to conspire to get their commercials to all play in synch. As an adult I ponder why all my children’s schools have their spring vacations scheduled in different weeks, or why my west coast friends occasionally schedule meetings at my dinner time, but my east coast friends rarely schedule meetings at their breakfast time.

This kind of synchronization, or lack of synchronization is a public good, like a standard.

Here’s another interesting example: the monthly billing cycle. Recently (I’m told by my wife who actually pays the bills) vendors have started playing games with the billing cycle. It used to be that you could pay all your bills once a month. It would seem bill vendors have discovered they can trigger more late payment fines by introducing nonstandard cycles.

These “fines” are probably very nice source of revenue for them. Very similar to how video stores make most of their income on late return fees. The video store that tunes their return policies to maximize fines will be more profitable and thus more likely to survive than one that doesn’t – assuming customers don’t notice.

The billing cycle game is a nice example of cost shifting due to measurement difficulties. Trivial to measure: the increased income for the billing department. Hard to measure: the inconvenience inflicted on customers. Even harder to measure: number of customers that switch vendors do to this marginal decrease in the quality of the company’s service. Management in the billing department gets a bonus in situations like this.

Another example – meeting scheduling software. The gorilla in that domain is Microsoft’s exchange server.

People gloss over how sticky these issues are.

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