Economics

Question 1

What is omnichannel price strategy

Answer 1

Using the same price in every channel (e.g. online and offline). This strategy is believed to improve customer loyalty.

Question 2

Why can an AI price optimization model improve scalability and consistency?

Answer 2

Because you don’t need to train new managers to set prices manually by intuition; the software does the job.

Question 3

How can requirements of double blind study (i.e. medicine and placebo) prevent development of new cancer drugs

Answer 3

The incentives for patients to join such a study are low, as they risk getting a placebo treatment when they are in a serious need for proper treatment.

Question 4

What is “skin in the game”

Answer 4

To have incurred risk (monetary or otherwise) by being involved in achieving a goal.

Question 5

What is CAGR?

Answer 5

CAGR = compound annual growth rate, roughly speaking the “average” growth rate in the time period. CAGR = (end_balance/start_balance)^(1/n) -1

Question 6

What is price elasticity of demand?

Answer 6

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price. A product is elastic if the above coefficient is above 1, and inelastic if the coefficient is less than 1.

Question 7

What is KVI (key value item)

Answer 7

The items in store where the customers are price sensitive, and actually know if the product’s price is large or not.

Question 8

What is a simple, typical price strategy for setting prices for KVIs and non-KVI products?

Answer 8

Prices for KVI products should have low margins because the customers actually care about these prices, while the store can have higher margins on non-KVIs, and make most of their money there.

Question 9

What is dynamic pricing

Answer 9

A price strategy in which businesses set flexible prices for products or service based on current market demands. Also, it may be used deliberately in data science project to find price elasticity.

Question 10

Nevn et eksempel der dynamisk prising kan være upopulært.

Answer 10

Under kuldebølger vil etterspørsel etter strøm stige, og med dynamisk prising vil prisene også stige - noe som rammer hardest de som har minst penger.

Question 11

What is the difference between dynamic pricing based on a group and on time

Answer 11

Group: different individuals get a different price based on what they are willing to pay (this may in some cases be illegal)
Time: the price of a product changes because market demand changes with time.

Question 12

What does Shoshana Zuboff mean by saying that surveillance capitalism leads to economies of action?

Answer 12

Not only do Google & Facebook predict behavior (such as predicting probability that a user will click on an ad), but they try to explicitly change actions in the real world, such as making people visit places in Pokemon GO.

Question 13

What is fast fashion retail?

Answer 13

Instead of having the production in developing countries, much of the production is local. This gives a higher labor cost, but also more flexibility to change production according to market demand.

Question 14

Given two variables: product life cycle, and demand function change. Under which conditions can the passive price optimization (learning demand function without actively exploring) be efficient?

Answer 14

If product life cycle is long, and demand function does not change rapidly; thsi

Question 15

What is one problem with the incentives on developing antibiotics compared to for example blood pressure medicine?

Answer 15

Antibiotics are, ideally, supposed to be used very rarely, hence it’s hard to make money on them. Blood pressure medicine, on the other hand, are used all the time for the rest of the patience’s life.

Question 16

Why are multi armed bandits more effective than A/B testing (in cases with multiple arms).

Answer 16

1. You learn immediately (i.e. you don’t have to wait until the end of the test period to check if something is statistically significant better than the other)
2. You stop wasting resources on bad options rather fast (in the A/B, if one option is really bad, you still have to choose that option throughout the test period)
3. You get most of your data where you want, helping you to separate “good” and “great” candidates (it may take a while to get there with normal A/B-testing)

Question 17

Explain collaborative filtering and content filtering in terms of recommendation systems.

Answer 17

Collaborative filtering is giving recommendations based on recognizing similarities across users; content filtering identifies new items that matches with existing items.

Question 18

What’s your new Telia pin code

Answer 18

3900

Question 19

What is predatory pricing?

Answer 19

A strategy where you reduce prices on the market to try to become a monopolist. This is illegal in many countries, but hard to prove, and I guess there’s always a fine line where some degree of predatory pricing is allowed.

Question 20

What is a confounding variable?

Answer 20

If you have a correlation between A and B, there may be a confounding variable C that causes both A and B.

Question 21

What is non-parametric statistics?

Answer 21

A branch of statistics based on either distribution free data, or having a specified distribution with the parameters not specified. A histogram, or a kernel density estimation, are examples of non-parametric models.

Question 22

How is first margin defined?

Answer 22

First margin = volume*(price_sold - price_bought)

Question 23

How is second margin defined, and why does it make sense to use it?

Answer 23

Second margin = First margin - volume_in_stock(handling_cost + price_boughtcapital_loss)
Second margin puts a cost on having items in stock, which makes sense.