Interaction Effects

In the Book Nudge by Richard Thaler and Cass Sunstein, I had read that the urinals in the toilet at the Schiphol Airport, Amsterdam, contain the image of a fly. The image of a fly nudges people to aim and try to pee on the fly. The fly is said to have reduced spillage and hence the cleaning costs, considerably. When I got off the plane at Schiphol airport two weeks back, I was most excited to see if this actually exists and I ran to the toilet. In the toilet that I went to, I didn't find an image of a fly but that of a flag. I did, however, find the image of a fly in the toilet at Tilburg University. The tagline of urinals should be "Let's make peeing great again." Permanent link

Diwali is a festival celebrated in India in the month of November. The date of the festival varies from year to year. It’s a festival marked by happiness. Given its auspiciousness, the NSE opens the stock market for an hour on this day, which is referred to as “Muhurat trading”. The word “Muhurat” means auspicious. It is a symbolic and old ritual which has been going on for several years. It is believed that trading on this day, brings wealth and prosperity .  Diwali also marks the beginning of the fiscal year for several businesses.  Historical information about market behavior at the time of Diwali is useful to make a generalization, if possible, about the effect of Diwali on the stock market and would allow arbitrageurs to make decisions based on this information. The key questions we can ask here is does Diwali lead to higher returns and higher volume of trade in the Indian markets? The seasonal effect of Diwali violates the Efficient Market Hypothesis (EMH). EMH...

Probably one of the most popular games in the world is Rock-Paper-Scissors. It is a game usually played by two people, where players simultaneously form one of three shapes with an outstretched hand. The "rock" beats scissors, the "scissors" beats paper and the "paper" beats rock; if both players throw the same shape, the game is tied. This game can be analyzed using game theory. If both players play the same shape they both get a payoff of 0. If one player plays a shape that beats the other player's shape then he gets a payoff of 1 while his opponent gets a payoff of 0. This situation yields what Game Theorists call a Mixed Strategy Equilibrium. This means that a player would randomize between rock, paper, and scissors, playing each of these strategies with an equal probability of a third. This makes sense considering that the probability of winning by playing any of the three strategies is the same. Von Neumann and Morgenstern [1] in one of the...