Social Econ Blog

Arthur De Vany, recently retired professor of economics.... De Vany likes to illustrate the oddities of the film business by comparing films to breakfast cereal. If breakfast cereals were like films... our typical cereal breakfast would consist of a product we had never before tried, and very well might not like, but bought because we heard about it from friends or read of it in the newspaper cereal section. That's precisely how films behave in the marketplace. If we hear good things, we go and perhaps tell others; if we hear bad things, we stay away. It's that process—-the way consumers learn from others about the expected quality of the product—-that De Vany found is the key to the odd behavior of the film business today. Economists call it an "information cascade." "People's behavior is simple," De Vany says, "but in the aggregate it leads to a complex system, a system bordering on chaos."...

If hits are so hard to predict, why does it often appear that certain people, at certain times, have a hot hand? The work of former UC Berkeley professor Daniel Kahneman helps explain this.... Not only are people bad at recognizing random processes, they also are easily fooled into thinking they are controlling them....

// posted by BW @ 7:07 PM