Tuesday, March 03, 2009

How to save money, even on personal shopping, with prediction markets

I have a few stories about using Inkling's prediction markets for my own personal shopping habits. Maybe they'll spark some new ideas on using them to save money.

The biggest win was when I used a market to save $100 on buying a new TV.

The basic gist is that I feel I can save some money, if I could predict whether or not new products or sales are coming soon.

Especially the sales part.

I can take the probability of a sale happening, multiply it by the money I expect to save, and that gets me my "expected savings". Expected savings is like expected value, a fun lesson from probability.


Let's look at saving money on a TV.

My wife and I were fortunate enough to be able to buy a new TV over the holidays. We had been saving for awhile, and finally got to replace a 200lb+ analog TV we've had for about 7 years. Needless to say we were excited to see what this HDTV stuff is all about!

I'm an extremely conscientious shopper, especially with these big ticket items. I debate and debate and debate. We finally settled on a Samsung LCD LN52A650, and decided that we'd get it in time for company and entertaining over the holidays.

Just as I was about to buy the thing, the worrier in me that hates seeing electronics fall in price just after I buy something, decided to see what the odds might be of the price coming down. Specifically, would the price of the TV come down at least $100 before Xmas. If the odds were pretty low, I'd probably stop spending all this time looking online and get the thing already:


And even though this only ran for a few days, the market had a little better than coinflip odds that I could save at least $100.

In other words, my "expected savings" then was at least $100 * (50 to 60%), so about $55 or more I could save if I wait. If the odds had been 20%, my expected savings would have been about $20, and I probably would have just gotten the task done with immediately. All the looking online costs me time, of which little I have.

But $55+ in expected savings seemed worth it.

So I came back to Amazon a few more times over the next few days, and sure enough, the price came down, and I pulled the trigger.


Not time to buy a new Apple laptop.

Running a software company, I go through a lot of technology, including various computers. These days I have a 15 inch Macbook Pro that has 4GB of memory. And crazy enough, the memory just isn't enough to run all the things that I need to run day to day.

In January, Apple announced a new 17 inch laptop that can run 8GB of RAM. Now the 17 inch is far from ideal for me, and I don't want to carry it around. But that extra RAM and horsepower sure would be useful.

Again, I went to Inkling to get an idea of how probable would Apple release a 15 inch laptop supporting 8GB in the next 6 months. I figured if the odds were too low, it might not be worth waiting, and maybe I could bear the heavier/bigger laptop so that I could get the benefits of a more powerful machine today.

From a cost savings perspective, I'd probably have to spend at least $300 more too on the 17 inch.

With the chances of a 15 inch 8GB Macbook Pro coming between 70% and 50% (about 60%), my expected savings of waiting for the 15 inch this summer would be about 60% * $300, or about $180. Now $180 dollars isn't that much in terms of the time I waste in my CPU/memory problems right now. :)

But I just wanted to walk through the expected savings example.

So savings + not really wanting to get such a heavy machine, at 60% chance of seeing the laptop I do want by this summer, I'll wait it out.


What video games are coming.

I've also started to use Inkling to help with shopping for video games. I was recently in the market for a new Wii game. Well, I really want to play a first person shooter game on the Wii. So I went looking, and found that a game called The Conduit is coming soon in 2009.

I thought I'd check to see what the odds might be for The Conduit coming in the first half of 2009, as well has how good the game might be.

The chances have been in between 50 and 70% that it would make it's release date. And also no one wanted to move the price off of a Gamespot score of 8.

I'm not an extremely frequent video game player so there's no real urgency in getting any particular kind of game. I just don't want to have a good probability of it going to waste when I could have waited for a much better one.

So with 50-70% chance of having a pretty good first person shooter by June 2009, I'll wait until this summer to get a new game.

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