prior probability

No, this is not the name of some fictional judge from the Star Wars expanded universe. Instead, it is one of the candidates on President Trump’s short list of potential nominees for the U.S. Supreme Court. In particular, our colleagues Dan Katz, Mike Bommarito, and Josh Blackman recently launched a quasi-prediction market called “FantasyJustice.” Their site allows one to vote on who Trump will appoint to the Supreme Court. (We describe this site as a “quasi-prediction market” because, ideally, voters should be allowed to place bets to back up their votes, but unfortunately, federal law prohibits most forms of Internet gambling.) So, who is the front runner? Professor Blackman reports (edited by us for clarity): “Since we launched the FantasyJustice marketplace in November [2016], one judge has been consistently perched in first place: Judge Neil Gorsuch. Even though the conventional wisdom of the Federalist Society [a libertarian organization] … centered around judges Bill Pryor and Diane Sykes, Gorsuch continues to rise above all others. Why? We will write about the details in the future, but at a minimum, those selecting the Colorado-based judge had some insights that others did not. This [prediction may be] the function of the wisdom of the crowds.”

Update (1/31): Gorsuch it is! Now that we know who the nominee is, what is the probability that the Senate will confirm Trump’s man by the end of March?

Update #2 (2/1): Based on this actuarial table (via Josh Blackman), and the fact that federal judges have lifetime tenure, Judge Gorsuch (if confirmed) can be expected to serve on the Supreme Court bench for 22 years. Given that Mr Gorsuch is only a year older than me, this little exercise leads me to consider my own mortality and how little time we all have …

Image Credit: Josh Blackman

At some restaurants (like Qdoba), a side of guacamole is included in the price of your burrito, while at other places (Chipotle), the guac is extra. Not surprisingly, the cost of a burrito is about $1 more at Qdoba than at Chipotle, but at the same time, a side of guac at Chipotle costs $1.80. (Check out this Quora on Chipotle’s arguably abusive guacamole pricing policy.) So, from a business or economic perspective, which pricing policy is the optimal one? 

Bonus questions: Why doesn’t Chipotle charge extra for other sides like salsa or sour cream? Also, how “elastic” is the demand for guacamole, and why might the price elasticity of guac explain Chipotle’s pricing policy?

Update (1/28): Our friend and colleague Jonathan Kariv responds as follows: “My first thought (which could well be obviously wrong to people who’ve thought harder about this than I have) is that maybe it’s beneficial to both Chipotle and Qdoba to have different pricing models. Perhaps if they do the same thing, then they’re competing more directly, but if they do different things, then they both get to dominate a different section of the market. This might be extendable to the bonus question of other add ons. Maybe they’re just adapting to the other guys strategy.”

Hat tip: Sydjia Guerra

Notice how both contestants solemnly promise to each other not to steal. Notice too how they provide compelling reasons in support of their promises. (Hat tip: Mike Munger.)

In our first business law class this semester (BUL3130), we introduced our students to the movie “The Social Network” (see preview below) and to the real-life protoganists in our semester-long case study on the origins and growth of Facebook: hacker Mark Zuckerberg and his best friend Eduardo Saverin, their business and social rivals the Winklevoss twins, entrepreneur Sean Parker, and angel investor Peter Thiel. In class #2, we will examine whether Zuckerberg broke any laws or breached any legal duties when he built a website known as Facemash.