Welcome to week 11 of The Power of Markets course. The end is in sight. We're going to spend the sessions this week focusing on input supply and how prices and hiring levels get determined for inputs once we bring supply together with demand. The focus will be almost exclusively on labor markets. Labor is the input that accounts for 70% of national income. We will focus this week on the remainder of chapter 16, for those that are following in the text from section 16.3 to 16.7 and then the opening set of sections for chapter 17, 17.1 to 17.6. Next week's sessions will focus on applications of input market analysis. And then also looking at reasons for government intervention. Where, where do competitive markets break down? And what conditions are needed for competition to achieve efficiency in markets. Just a few applications from the last few weeks that came to mind in the last few days that I wanted to share with you. We talked in game theory, for example, about dominant strategy. Two ways to remember dominant strategy for those of you that are into literature. Lord Byron had a quote, it is better to have loved and lost than never to have loved at all. So from Lord Byron's perspective, the author, loving is the dominant strategy even if one ends up losing. And then for those who follow baseball closely, when you have a forced runner and that runner there's a full count on the batter at the plate. It's always better to, for the runner to be going with the pitch. Running with the pitch is a dominant strategy. Why, if there's a strike out of the batter. If there's a pop-out of the batter, it doesn't matter that the runner's going. If there's a walk, the runner would have been, the forced runner would have advanced anyway. And if there's a hit, it's definitely be better to be running to have that added momentum to acquire additional bases if your'e on the move already. So running with the pitches, on a full count in baseball for baseball aficionados, is also a dominant strategy. And then last week, we talked about imperfect information and advertisement. To what extent does it provide information or does it serve to potentially obfuscate or build a barrier to entry for the, for the firm or the individuals providing the information. And just one interesting example is studies that have been done recently of on-line dating, including one by Eric, including one by Steve Levitt, who's the Freakanomics co-author. And what Steve and a coauthor find is to what extent people tell the truth when they're dating online. And some interesting results that vary by gender. For example, the average male in the United States participating in online dating clai, 4% of the male daters claim to have an income of 200,000 a year. For the overall male population, adult population in the United States, only 1% earns at least that amount of money. The average height that male online daters claim is an inch taller than for the average population of the United States. What do women miss-state for one, weight. The average online female dater claims to be 20 pounds lighter than the average woman in the U.S., the adult woman in the U.S. population. 70% claim to have above average looks. 24% good looks. And then, 28% claim to be blonde, which is significantly above the average. Now, all these results need to be taken with a grain of salt. Because we have to compare the effecacy of dating online versus more traditional means such as ads in the paper, services, match making services or just going to a local restaurant or bar. So, but to what extent online dating serves to provide a wider array of potential mates and services to promote information the evidence also suggest that when you take into count the relative other options, it does allow people to better find the ideal mate. Now let's start further delving into the supply of inputs and looking at the supply curve for any input, we have to very much focus on what time period's involved and what particular market setting we're focusing on. And to drive that home, point home, let's look at figure 16.5. When we look at the labor supply to all industries, it will generally be much more inelastic, much more price insensitive than the labor supplied to a particular industry such a software programming in panel b. An increase in the wage from w1 to w2. And, and again, in panel a, the supply curve needn't be perfectly inelastic, but in this case where it's drawn, it is perfectly inelastic. There's no additional labor supply when the wage rate goes up. When we look at the aggregate of labor supply curve. And this curve may be relevant for certain analyses, looking at particular policies. We'll see them, and we'll see how in next week's sessions. Labor in panel b to the software programming industry. An increase in the wage will produce, at least the way this supply curve is drawn, a much more dramatic increase in supply. The smaller, the particular market relative to the overall market, the more elastic supply becomes. So if we're looking at just hiring by a particular firm or an industry that, that accounts for just a small subset of employment, the supply curve of the input labor in this case would be even more elastic.
