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The economics of valentine’s day

The one day in the year, when couples have the right to be clingy and the singles are allowed to complain about being single. I’m talking about Valentine’s day of course. Besides the day being about celebrating the people you care about, it is also one of the days that make a lot of economic profit. In this article, I will tell you some more about that.

Jiri Blog

Life as treasurer of Asset | Economics

In this week’s Off the Charts article, I want to give you all more insight i what it is like being the treasurer of Asset | Economics.

At first, let me introduce myself to you all. My name is Jiri van Baren, I am 22 years old and did three years of committee work at Asset | Economics before I applied for a board year at Asset | Economics. I am currently in my Bachelor “Economie en Bedrijfseconomie” and still playing soccer in my hometown.

Why am I doing a board year?

I applied for a board year because of several reasons. One of these reasons is that it seemed like a great opportunity to develop certain skills you can only develop in practice Examples of these skills are leading meetings and solving problems. Next to this, it is a nice addition to my resume since I only had to do 1 course and my bachelor thesis at the start of this year. Lastly, I think a board year can bring a lot of beautiful and fun moments, which is definitely important!

To give you an idea about my tasks during the week, I will tell something about both the financial aspect and other matters at Asset | Economics. Furthermore, I will give an insight in the financial tasks I am doing for Asset in general, besides Asset | Economics.

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‘Cracking the luxury code with Millennials’ (part I)

‘Nobody knows what luxury is anymore’ – Marc Bain

Gucci, Chanel, Louis Vuitton, Hermes, Rolex, Tiffany, Dior, Armani, Prada, and Balenciaga are at the top of the list of the most luxurious online brands, thanks to their high ranking in share of search interest, web traffic, social media audience and social media engagement (Luxe Digital). Yet, the classical definition of luxury goods has been reshaped by these brands in such a way that ‘the concept of luxury is getting blurry, making it less clear where it begins and ends.’ 

Goods for which demand increases more than proportionally as income rises, and are a contrast to “necessity goods”, where demand increases proportionally less than income do not fully represent the concept of luxury as it is currently harder to define, and designers and businesses are ready to capitalize on the ongoing transformation in the fashion industry.

Why are luxury goods in the fashion industry different now?

Piter

Life as chairman of Asset | Economics

 

Often, I got questions like: ‘What is it like to be the chairman of Asset | Economics?’ or ‘What does the chairman of Asset | Economics do on a daily base?’. In this article, I will give you more insight in what it is like to be the chairman of Asset | Economics. I will briefly introduce myself before moving on. My name is Peter, I’m 24 years old and already active at Asset | Economics for 4 years now. I have obtained a bachelor degree in Economics and Business Economics, and a master degree in Finance. I have always looked for opportunities to develop myself besides my studies, and that is one of the reasons I have chosen to do a board year. While reading this article, you hopefully get some more insight in what a board year, and especially the position as chairman, brings for me.

“Being part of two boards at the same time can be complicated sometimes, but above all it gives various opportunities to excel and it is lots of fun!”

Let’s start with asking the honest question to yourself: Do you know what the chairman of Asset | Economics or a chairman of a study association in general does on a daily base? I guess most of you do answer this question with a solid ‘no’. I have to admit, before this year I also did not have an exact idea of what it would be like. First of all, it is good to know that the chairman of an Asset department does approximately devotes half of his or her time to tasks for Asset general. For this reason I would like to take you with me in my experiences as chairman of Asset | Economics at one side, and board member of Asset general at the other side. Being part of two boards at the same time can be complicated sometimes, but above all it gives various opportunities to excel and it is lots of fun! 

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The effects of Brexit

Two years ago, the majority in the UK voted for Brexit. The negotiations between the UK and the rest of Europe are still in full swing. These negotiations are about the terms on which the UK will leave Europe. In the time that they have been negotiating, a lot has happened in the economy of both the UK and the rest of Europe. In this article I will line up these consequences that have already taken their effect and will also discuss the consequences that are yet to happen.

Behavioural Economics Part II (Christmas Edition)

“It’s beginning to look a lot like…money spent on gift buying, Christmas deadweight loss and chaos in the market.”

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It’s that time of the year again. The end of the year is rapidly approaching and everyone is looking forward to seeing their presents under the Christmas tree on the morning of the 25th.

However, since Christmas is also about being selfless, economists have analysed the impacts of gift giving around the winter holiday period, as well as why people tend to behave less rationally from an economic point of view.

As it has already been established in Part I, people tend to display unexpected, irrational behaviour despite the microeconomic assumption that people are rational.

According to Joel Waldfogel, gift-giving has a healthy effect from a macro perspective as it positively affects spending. From a microeconomic perspective, gift-giving may actually lead to deadweight loss. The most evident reason is why it may lead to deadweight loss is the possible mismatch of preferences. The person offering the gift may not be familiar with the preferences the other person has. Furthermore, it has also been proven that the recipient undervalues the actual value of the present as he or she is not perfectly informed, ultimately destroying a third of the value of the gift. Since holiday expenditures average around 40 billion dollars/year, the deadweight loss of Christmas gift-giving is a tenth as large as the deadweight loss of income taxation (Waldfogel, 2014).

So what would be the most effective present that would lead to a reduced deadweight loss?

Money. And gift cards. Such a present will allow the recipient to maximize their level of satisfaction by making their own choices with the received money – or so that is objectively the ‘ideal’ economic situation.

However, people don’t always think in terms of efficiency or reduced loss when purchasing a present. Since emotion and social factors are a driving force in decision making, some may find it impersonal and self-interested to give banknotes to friends, family members or a significant other. Therefore, retailers observe the unpredicted behaviour of consumers and take advantage of their irrational decisions during the festive season. One of the ways in which retailers take advantage of people’s irrational behaviour is entailed by the endowment effect and loss aversion. People tend to evaluate the price they are willing to for a product, based on their relationship with the product. Simply owning the product seems to make it more valuable to us. “Losing” the product by not purchasing it sometimes has a stronger influence on our decision making than purchasing or “gaining” the object.

Another way in which people’s illogical behaviour can be an advantage for retailers is the illusion effect. When purchasing presents, people tend to think of the impact that the present has at that moment, also known as the “wow” effect – rather than evaluation how practical the present will be in the long-run. Knowing this, retailers manipulate consumers’ decisions by placing certain products at more accessible shelves or decorating stores in yellow, giving free samples; because subconsciously, yellow gives people the tendency to feel happier.

In short, markets know how to jog with people’s consuming behaviour during the cold season. So choose presents wisely this Christmas. :)

 

Bibliography:

Albertson, Kevin, and Manchester Metropolitan University. “The Economics of Christmas.”

World Economic Forum, 2013, www.weforum.org/agenda/2014/12/the-economics-of-christmas/.

Waldfogel, Joel. “The Deadweight Loss of Christmas .” Www.amherst.edu, 2001,

www.amherst.edu/media/view/104699/original/christmas.pdf.

Weissmann, Jordan. “The Behavioral Economist’s Guide to Buying Presents.” The Atlantic,

Atlantic Media Company, 16 Dec. 2011,

www.theatlantic.com/business/archive/2011/12/the-behavioral-economists-guide-to-buying-presents/249993/.

 

Customer expectations

Customer expectations [Shortread]

Marketing – In an ever increasing globalizing world marketing, both online as well as offline, is vital for the performance of the modern firm. An immense growth of the service industry, including increased competition  between service organizations, has led to an increased focus on customer expectations and perceptions.  In this article mainly the concept of customer expectations will be addressed. Furthermore, customer expectations will be put into perspective regarding customer perceptions and satisfaction, making a clear distinction between the two.

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Health care insurance, an evergrowing expense

Last Monday was the deadline day for health insurers to announce their insurance rates for the upcoming year. On average, the increase in insurance rate is almost 6%. This is for the basic insurances, if you want to have more freedom of healthcare choice, the rates go up a little more than the 6%. In the annual budget the cabinet predicted how much the premiums for health insurance would increase, which would result in an increase of 10.33 euros per month. This would be a total of almost 124 euros a year.  Therefore, the actual increase is lower than the predicted increase. In this article, I will discuss the main factors that cause the health insurance premium to rise.