Reflection #2

ECON 490 LA Prompt for Reflection #2
First, for the new students, this is a reminder that you are free to choose your own topic as long as it is somehow related to what the class is working on. Second, this week you might write about your own experience with organizations, particularly ones that undergone some change. For example, have you been in an RSO that merged with another RSO and if so why? Finally, you might talk about "transaction costs" in some of your school or work (or social) relationships. How did the transaction costs matter? Again, the idea here is tie your own experience to the concepts we are studying to give those concepts more meaning for you.


Last week, there were a few topics that particularly interested me.  First was the Hudson Bay example, where we concluded it was ultimately more profitable to have trading posts or stores closer to where the customers are.  It immediately reminded me of Apple and the placement of their stores. They are always in centralized areas with high traffic such as large malls, city centers, and busy hubs.  Such is the case with the stores I've visited in the US, Germany, and China.  Even the newest Apple store that opened in New York's Grand Central Station follows the same principle.  With the lines that form upon new product releases and the overwhelming success of Apple, it's easy to see why the North West Company prevailed over the Hudson Bay Company using a similar approach to store placement.

Next was the Liar's Poker overview.  Although I haven't read Liar's Poker, it sounds quite similar to a book I have read, Monkey Business (by Rolfe & Troob).  It focuses on the lives of 2 investment bankers working at Donaldson, Lufkin, and Jenrette on Wall Street before, during, and after the financial crisis.  The details in Monkey Business touch upon huge bonuses, cost benefit consequences of working extremely long hours, and other facets of a grueling climb to the top of the investment banking industry.  After hearing about Liar's Poker, it is now on my To-Read list.

Finally, I can relate to the quote "These transaction costs are killing me."  When I was subleasing an apartment for this Spring semester, I inadvertently experienced the downsides of transaction costs.  It was less than one week before the start of the term when I was finalizing my housing situation.  I had incurred search and information costs in earlier weeks, which cost plenty of time contacting sub-lessors using the internet and phone.  I had bargaining costs when negotiating with potential sub-lessors about the cost of rent for various apartments.  This came in the form of me inching my rent price closer and closer to my maximum budget.  The worst transaction costs of all hit me the weekend before school started.  After I had come to an agreement with a sub-lessor on the rent price, I prepared to move in on Saturday.  I drove down to campus with all my stuff at 6 AM and prepared to meet with my sub-lessor.  However, the sub-lessor kept saying they were busy and kept postponing our meeting time.  It ended up that the meeting time was pushed from 9 AM to 8 PM.  To make matters worse, the sub-lessor told me in the evening I would not be able to move in until Monday morning.  So I ended up staying in a hotel ($50/night) near campus for Saturday and Sunday night.  For the weekend, my transaction costs included almost 48 hours of time, ~$100 hotel expenses, ~$90 fuel costs, and other miscellaneous expenses.  It was terrible since all the money, time, and energy could have been put to better use, and it was an unexpected extra cost on top of the agreed upon rent.  The whole ordeal made it much more complicated compared to a simple "sign contract, move in, pay monthly" situation.