Author: shyam

Some of our regulatory bodies put out fascinating studies – studies that only tax-payer funded entities dare sponsor. I found this gem in our Competition Commission website: a report on the economics of onion markets. Some of its conclusions reiterate what our inner cynics had already judged:

• Market structure of onion is unilaterally dictated by the traders, not farmers.
• A few big traders having well connected networks with market intermediaries seem to play a major role in hoarding for expected high prices.
• A clear case of oligopolistic entry barriers were found.
• Farmers generally take reference of the local markets’ rates, while traders compare rates of all markets, including major distant and export market and then decide where to send their produce of a particular grade. This brings greater profits to them.
• Export ban and arbitrary practice of fixing Minimum Export Prices (MEP) for onion often cost exporters in in terms of losing their credibility in export markets as irregular suppliers. Fixation of MEP makes small exporters reluctant to export which sometimes leads to excess supplies in domestic markets, leading to fall in prices.

Grab a cup of coffee and read the whole thing.

Source: Competitive Assessment of Onion Markets in India (pdf)

Is more information better information?

Eight experienced bookmakers were shown a list of 88 variables found on a typical past performance chart on a horse, e.g. the weight to be carried, the number of races won, the performance in different conditions, etc. Each bookmaker was then asked to rank the pieces of information by importance.

Having done this, the bookmakers were then given data for 45 past races and asked to rank the top five horses in each race. Each bookmaker was given the past data in increments of the 5,10, 20 and 40 variables he had selected as most important. Hence each bookmaker predicted the outcome of each race four times – once for each of the information sets. For each prediction the bookmakers were asked to give a degree of confidence ranking in their forecast.

The chart below shows how both accuracy and confidence change as the information set grows over time.

Accuracy is pretty much a flat line regardless of the amount of information the bookmakers had at their disposal. However, confidence soared as the information set increased. With five pieces of information, accuracy and confidence were quite closely related. However, by the time 40 pieces of information were being used, accuracy was still exactly the same, but confidence has soared to over 30%.

So more information isn’t better information, it is what you do with it rather than how much you can get that truly matters.

Source: Behavioral problems adhering to a decision policy (pdf)