Thursday, March 23, 2006

Newmark, you magnificent ba*****, I read your book!! 

Like most people we run a pool hereabouts for the NCAA, in which teams are auctioned off, money gets split from a pool for the best-finishing eight teams. Problem with it was, nobody bids on Southern or Monmouth. So we create incentives by paying out winnings to the lowest-ranked (or lowest-seeded) teams to win one game and two games. It's less than what those other teams get paid, but it's enough to induce some bidding on the lower seeds. Craig Newmark demonstrates what happens when you don't think about incentives enough. (Unlike her pool, ours was designed by economists and originally was for economists, but now more non-economists play.)

And, as an econ blogger with libertarian tendencies, I had to buy George Mason. Winner!

UPDATE: Tyler Cowen might be the bigger winner.