How much for that egg

The most compelling global stories straight to your ears. That's what we do at State of the World from NPR. Developments in Ukraine, Iran, with Ebola, but also how British beavers are fighting the effects of climate change. So we said the beavers can do it probably fraction of the cost, certainly more sustainably. Listen to State of the World every weekday, on the NPR app or wherever you get your podcasts. This is Planet Money from NPR. All right, Sam, you posted a thing in Slack. Do you just want to like read that message to start? Sure. I'm bringing it up right now. A couple of weeks ago, our NPR colleague, Sam Mertens, wrote something in our shared company messaging system. We called him up and asked him to read his message. Today, I successfully delivered a dozen farm fresh eggs to a coworker at HQ for $5. HQ meaning NPR's headquarters in Washington, DC. And $5 meaning $5 for a dozen farm fresh eggs in this economy. Yeah, coming out of this nationwide egg shortage, where farm fresh eggs have been selling for as much as $12. Sam has eggs and sold them for just $5. I would be willing to do this again, but I expect a man to far exceed supplies. I'm sure I could jack up the price, but I'm not in the mood to price gouge any suggestions for a fair and equitable system. Okay. Now, I mean, I'll just say this caught fire in the planet money slack, but like we just saw it as a bat signal for us. We're like, we can help. Um, sure. Sam clearly wanted our help. Uh, or at least that is what I'm hearing. Because look, we've got a scarce commodity with a dramatically low price ceiling in need of an optimized system of fair distribution. I mean, what is planet money here for if not to get overly involved in this various situation? So Sam needs a way to decide who among his colleagues should get his future orders of his one dozen eggs at his very low price. But first order of business, why does he even have these eggs? What is his egg hookup? The answer apparently Sam is the hookup himself at work. Sam helps write computer programs that help NPR get to your ears, dear listener, but at home, apparently Sam has chickens backyards chickens. What we do is we have a they have a very spacious run. Um, actually, I've got a, um, I've got a chicken cam up available on YouTube. Uh, if you can see it. Oh, really? Yeah, let's check. Let's check on Sam's chickens here. And when we check in on Sam's chickens. Oh, chicken cam. Oh, wow, look at that. You got little steps for them. Yeah. They're in a whole covered thing. Yeah, that's their run. It's so loud. Yes. Wow. Okay, I'm counting one, two, three, four. Yeah, it's not just a few backyard chickens. Seven. It is so many backyard chickens. Six and 17, 18, 19, 20 chickens in there. Uh, there are a total of 26. And they lay way more eggs than Sam and his family could ever need. Sam points out his favorite chicken, a scraggly black and gold flecked hen named Lacey. She's my favorite because we had a fox attack one year. Oh, no. And we thought we'd lost Lacey. And then that evening, this bird came limping back to the coop to be led in. And Lacey, she survived a fox attack. Yeah, Sam loves his chickens so much. He'll never eat them. They all have names. The one named Cookie knows her name and and sticks out her little wing to get scratches like a puppy from Sam. But Sam being sweetie, okay, is also an issue for us. Sam is capping his egg sale prices at just $5. Basically to cover some of the cost of taking care of the chickens. And we explained to Sam that this does take the easiest option off the table. Like, you could just sell your eggs to whatever NPR colleague is willing to pay the most. Well, I mean Sam, you know, plan a money shows up. We are going to, we are going to suggest an auction first and foremost. But you're, I think your initial condition is you don't want to do that. No, I certainly don't want to be. Oh, yeah, there's the guy who was selling eggs for 15 bucks. It doesn't know. No, I know. Sam was also not interested in the next most obvious option. Generally the fairest way lottery to allocators. Correct. Lottery. Sam says you seem not interested in a lottery. Not fun. Isn't fun. I'm not getting money. I might as well get fun out of this. Okay. I have to shut this up so distracting I have to turn it down. All right, hold on. It's so loud. Okay, okay. I've paused the chickens. I can listen to any and all suggestions as long as you're fine with me saying no thank you. I think we are okay with that. As long as you are okay with us having no limit on the increasing complexity of our suggestions. That's part of the fun, isn't it? I hope so. Yes. Hello and welcome to Planet Money. I'm Jeff Guowe. And I'm Kenny Malone today on the show a very planet money puzzle. We look for ways to determine which of Sam's colleagues, which are also our colleagues, values Sam's eggs the most. Therefore winning the right to buy a dozen of his precious eggs at his absurdly low price of five dollars. We try out some techniques from the world of new product development to see if we can secretly test for egg love. And we discover a pricing method from a development economist that forces people to express their true value for an item. And maybe America's next great game show. Okay, everybody, welcome to. How much more than eggs! That's after the break. This week on sources and methods, missiles cost money and the Pentagon is running low on both. One of the concerns for the Middle East, Qatar and Kuwait and other locations, maybe Saudi, is are there enough Patriot missiles to go around to protect their bases? The State of the US Arsenal, this week on sources and methods, the National Security Podcast from NPR. GLP ones are best known as weight loss drugs, but they may also help people cut back on alcohol, cigarettes and opioids. They seem to work for many types of addiction. Maybe these effects are much broader than we previously thought. Ideas about the brain, addiction and empathy. That's on the Ted Radio Hour podcast, listen on the NPR app or wherever you get your podcasts. Our colleague Sam Mertens has backyard chickens, which in an egg shortage makes him the egg king. And he has tasked us, we made him task us a little bit, with figuring out who should get eggs when he has an extra dozen. Now, there are a group of people at NPR, about 15 of them, who have at some point expressed interest in buying a dozen of Sam's eggs. Econ 101 would say, "Sam's extra eggs should just go to whichever of those colleagues values Sam's eggs the most." But Sam has given us an interesting little twist. His egg price is fixed. He will not let us sell a dozen eggs for anything other than $5, which basically covers his backyard chicken costs. So what this means is that we cannot just do the planet money thing and let the market decide sell to the highest bidder. So with our invisible hands tied behind our invisible backs, we went looking for some other way to determine who values Sam's eggs the most. And that is how we ended up talking to Abigail Jones. Yeah, so I work in market research and consulting on the vendor side. I don't know. That's really boring. You want to jazz it up? I don't know. Like professional survey designer? Yeah, I'm a professional survey designer. I help answer questions via surveys. And we went to Abigail because we were curious if we could answer our question via survey. Right. Is there a way we could ask our 15 NPR colleagues how much they value eggs? Yeah, that's a great question for a survey. My fear is that they'll just be like, "Oh, this is about whether I get to buy the eggs. I'm going to pretend to like eggs the most." Yes. Yes. If people know they're taking a survey about this, it certainly could mess up the results. So what we would want to do is what we call blinding it. So you basically disguise eggs among everything else. To blind our survey of its egginess, she says we will need to casually include eggs within a set of other foods. And so in the industry, we would call that a competitive set. And how do eggs stack up relative to those other choices? Can my list of foods just be like, I don't know, the items that the holiday in Express Gluffet? Yeah, for sure. Now, I would think great. We now show people 10 breakfast buffet items and have them rank them. But Abigail says, "Oh, no, no, no, no." We try to avoid having people rank a lot of things because people are really bad at putting things in order. They can tell you their top, they can tell you maybe they're second top or third top, beyond that the quality of the response really starts to diminish. So Abigail recommended that we adapt a survey technique that companies use to design new products, where you basically force people to make trade-offs. Yeah, so in the company world, this would look like, oh, I don't know, I'm a car company. And I ask people, if you had to choose, do you want a car with fancy sound system or fancy navigation system? Now, how about choosing between a powerful engine? and good mileage. If you put enough of these choices in front of people, you can figure out what trade-offs people really care about. In our case, we use those forced trade-offs to test for love of eggs. So we created a survey with a series of questions that force people to make breakfast trade-offs. Abigail suggested we add a couple traditional survey questions about some of those foods. How often do they eat them all? Well, what are their views of those foods? And then we can show kind of a composite like egg lovers score. Composite-eg-lovers scores. Good. Good. Yes. Do you remember that there was an egg council campaign that was like, I love eggs from a head down to my legs? No. No. No. Okay. Because I would love to call this the I love eggs from my head down to my legs. Composite score. I think that's a it's a great name for a score. Okay. And with that, hello. Hello. Hey, Kenny. Hello. Hi. Hey there. We started calling people from that list of 15 NPR colleagues interested in buying Sam's eggs. Of course, we needed to blind the fact that this survey was secretly actually about those eggs. Welcome to the inaugural Planet Money Presents, a food breakfast food preferences survey. Okay. Too many foods, editor. Oh, I think it's what makes it wonderful. Here's how this all worked. Imagine that you go into a holiday in express breakfast buffet. Okay. Each survey participant was shown a random grouping of four foods, waffles, eggs, bacon, yogurt. We asked them to choose their most desired food. Most bagel, most eggs. Yeah, most desired eggs. I pretty much always grab eggs. Waffles most. Bacon's always number one. Should be keeping kosher, but I don't, but bacon is it's just always the top. We also had them choose their least desired food. So I'll put the eggs at the least on this. And probably waffles least least biscuits and great, babe. The yogurt. I have bad vibes about that. Bagels the bottom because I'm trying to cut carbs. I don't eat meat. So I feel like I have to say bacon, but I probably would rather eat bacon than oatmeal. I don't know what that means. We had each person do this over waffles top and over will not eat oatmeal and over bacon six times in total. There were six different groupings of food that they are forced to make tradeoffs within. I feel like the bagels always suck. Now one big lesson for us is how a tiny decision in survey design can have unintended consequences. So I thought that literally telling everyone to imagine they were looking at a hotel breakfast buffet would be fun and make this all concrete and real for them. But immediately like in the very first survey, the issue became clear. Depending how barely the place makes the eggs, scrambled eggs can be really disgusting. Yeah, we unintentionally caused people to imagine the worst versions of all of these foods, especially the eggs. It's just like a vat of liquid that Reese's lime on it's like the powdered reconstituted eggs. That's just like there's barely flavor there. Not exactly what I wanted them to picture. And yet this survey still did exactly what it was supposed to do. It identified a single person from the crowd. Yeah, there was exactly one only one person who over and over chose eggs above all other foods every single time. That person was named Mike Myers. He's an NPR audio visual engineer and our survey would conclude that he values eggs more than anyone else, even if they are holiday in express buffet eggs. Were you picturing a big vat of watery eggs? I honestly was. Yes, I'm indiscriminate. You know, eggs are eggs. You know, throw enough salt and pepper on them, maybe some hot sauce. You know, maybe the weird hotel inclusion was accidentally a great way to separate people who love eggs from people who truly love eggs from their head down to their legs. Test test, check one, two. Later that week we brought Mike into a studio with someone coming in. Come on in. And we had Sam Mertens surprise him with one dozen way below market price backyard chicken eggs. Mike, do you know Sam? Sam? Hello, you have been selected as the person who most desires these. Oh, wow. That's a gorgeous. What can Mike expect in terms of flavor profiles? They are all going to have much stronger, um, eager flavors than anything you get at the store. I don't know if that sounds good or not. If you don't like egg, you're not going to like these eggs. Well, if you like eggs, you're going to love these eggs. Mike, Mike, sounds like I love them. Okay. And cue the music. I love it. Keep going, Jeff. I'll dance. So we found a way to allocate the first dozen of Sam's $5 eggs. Success. Sort of because that method did rely entirely on us being sneaky. We were hiding eggs in a blinded survey. So that's probably only going to work one time. What about the next time Sam has a dozen eggs? After the break, one more carton of eggs, one new customer, and a method that forces people to honestly state their truest value or anything. This is Fresh Air's Dave Davies. Renowned classic scholar Emily Wilson made headlines when she called Christopher Nolan's adaptation of the Odyssey of Bismillie written. It says star study cost and that doing that absolute best with the script they were given. I talked with Wilson about her scathing critique and so much more. Listen to Fresh Air on the NPR app or wherever you listen to podcasts. Are we doomed? Looks at big problems. Nobody would rationally want nuclear war. That's not wait correct. How can we add friction? Put the launch codes inside somebody's chest cavity and you have to kill them to get them out. Are we doomed? Solving humanity's biggest threats. Part of the NPR network. Listen wherever you get your podcasts. Hi girls. Sam Mertens is up early to give his hands some treats. What was that? What was that? Another day, another round of eggs to be collected. But everybody seems to be in good spirits. Now, before we decide how to allocate the next dozen eggs from Sam, we needed to have a delicate conversation with him. Right. Because only charging $5 for a dozen eggs. Respect. That is a solid, not jerky colleague move. But the thing is how much someone is willing to pay is a very useful, very economic seed data point that we would love to use as we figure out who values Sam's eggs the most. Or as we put it to Sam, I don't know how else to say this, but planet money gonna plant it money. It's very hard for us to not use price to some degree. As long as I can point to you guys and say it was your idea. Sam was in. Now, the obvious thing to do would to be just to ask our 15 NPR colleagues how much they'd be willing to theoretically pay for a dozen of Sam's eggs. Whoever values them the most, they get the dozen. For $5 of course. How ever this method has some problems. Can I ask you how much would you pay for a dozen eggs? Oh, interesting. Rebecca, Deezon Ross, not one of our colleagues. You Chicago economist, big egg spender, apparently. Farm fresh eggs may be $89. $89. It's pretty good. One of the things that Rebecca studies is how to figure out how much people value things using price. There's a term for this. It's called willingness to pay. Willing is to pay is simply the absolute maximum dollar amount someone is willing to pay for something. But that is deceptively complicated to measure. If we just ask our NPR egg colleagues, hey, what's the most you would pay for a dozen eggs like we did with Rebecca? Maybe they want to impress you with how much they would be willing to pay or maybe they want to show off that they're a hard burglar. And so they name something low. And so you worry that if you just ask them that you might not get the real response. It's not even that people are lying necessarily. They might just have trouble discovering what in their heart of hearts is their true maximum willingness to pay. So how then do you get people to zero in on that true value? Well, economists and researchers haven't developed a very clever way to do this. It is it's a little topsy turvy. I'll be honest, it took me a couple of times to really understand it, but it is so cool and has become my new favorite cocktail party trick. And we're going to show you how we use this on our egg curious NPR colleagues. But first, okay, we're going to take a detour to Uganda because it really helps to see why and how economists use this technique in real life. So Rebecca was in rural Uganda conducting an economics experiment. The experiment. was actually about the parents willing this to pay for educational and health goods for their kids. So, there's this idea that mothers may value things like educational and health goods more than fathers. And so maybe eight groups would do better delivering that kind of aid through mothers. Rebecca was in Uganda to test that theory. She wanted to see how much moms and dads valued a bunch of different items, like a math workbook or candy or shoes or deworming medicine. Now, like we've discussed just asking, "Hey, how much is this worth to you?" That will not necessarily work. As a result of that concern, a sort of more credible or commonly used way of doing it is to use this method called the Becker-Degroot Marshaq or BDM. Sorry, sorry. Can you say it again? Becker-Degroot. Marshaq. The Becker-Degroot Marshaq. It's really fun to say. Or BDM method, as it's known, it is like a magic trick. It is a specific way of asking people about price that sort of forces them into a rational corner. Yeah. So, the key here is that this gives you the incentive to tell your true willingness to pay for the products. So, here is how this worked for Rebecca in Uganda. She would find parents willing to participate in her research. They'd let us into their homes, give us some place to sit, and then we'd say, "Okay, now we're interested in selling you some goods for your kids." Like they were actually selling items. That part is key to this whole thing. And let's say you, dear listener, you are the parent here. Rebecca pulls out a math workbook. She then tells you, "She is about to generate a random price for this book." Okay. I have some random number generator that will generate a price between, say, you know, in the range of the relevant prices. But, but, before she generates that random price, she needs from you your max willingness to pay price. I ask you to tell me how much you value the good, or in particular, how much you would be willing to pay for it. It's not a negotiation. It's not an offer. You are simply stating the absolute max you'd be willing to pay. And then, Rebecca randomly generates the book price. And if that price is higher than your max, then you have agreed to not buy the book. But anything else, if it's lower than your max, you do buy the book. That's the only way that you can guarantee that you will get to buy it in the cases that you would want to buy it, and not buy it in the cases that you don't. And that, that's it. That's the becker to Groot Marshak method. They found a way to give you the incentives to exactly tell your exact willingness to pay. If it is not entirely clear how this method pushes people to be honest about their max price, well, that is understandable. The good news is that we have been becker to Groot Marshak, the heck out of our colleagues at NPR, and you're about to see it in action. Yeah. Because it is the perfect method to figure out which of our NPR colleagues values eggs the most. Hello, hello, Becky, you are the next contestant on how much is that? That was so simultaneous. This is NPR audio engineer Becky Brown. She is one of the 15 people who expressed interest in Sam's eggs. A couple of notes about our version of Becker to Groot Marshak ours is a game show. And what each person would be asked to value was not one dozen eggs, but one one single Sam Merton's chicken egg. This was a test. A test to see how much each person valued Sam's eggs. Right. But what we couldn't tell them because it might skew the results was that whoever valued this single egg the most would be the winner of more eggs. They would get to buy a full dozen of Sam's eggs at his fixed price of $5. Say, we didn't violate his terms. No. No. So we begin our BDM assessment with Becky Brown, audio engineer. We show her a basket of Sam's eggs. So is there one of these eggs in particular that looks great? If I were looking for like platonic egginess, I think that dark brown one is really like that came from a chicken that is not depressed. In fact, Sam told me that egg came from noodles who is indeed a very happy chicken. But we asked Becky to think long and hard about her willingness to pay for this one egg. Just that one egg. If it's one egg and I'm doing the math, and it's just one egg, I feel like I guess maybe 90 cents. Why not for one egg? Oh, Becky just landed there. Okay. 90 cents. Yeah. And here, here listeners, is where you can see why the BDM method forces people into a rational corner, forces them to reveal their true willingness to pay. We run through a couple scenarios with Becky. First, we said, imagine that the random price we generate is 89 cents. Yeah. Okay. That is below Becky's 90 cents. She will have to buy the egg for that random price, 89 cents. I am not upset. It sounds like a good egg and a good egg and it'll go to a good home and into a good stomach. If this random number generator, it comes back and it's like $2. How do you say that? I would dismiss the random number generator as mad. Like completely mad. It would not, I would not understand this $2 egg. Okay. 91 cents. You're not allowed to buy it. Uh, cruel twist of fate, probably. Mm-hmm. Is how I would feel, but not like disbandant. It feels like this is your maximum willingness to pay for this egg. Yes. Now it was time to see if that's true in reality. We're going to go to Cheezoy, our random number generator, which is held by Jeff. Jeff, go ahead. Be by our app. Beep. Okay. Beep. Good hacker type. How are you feeling? This egg is in the hands of fate, and I have no control over what happens from here on out. Either I have egg or I don't have egg. Wow, really healthy Becky. Truly healthy. Okay. Jeff, drum roll, please. Now, remember, Becky buys the incredibly precious Sam Burton's back-yard chicken egg at 9. 90 cents or lower. Here we go. Oh, dollar. A dollar, 12. Wow. Wow. So close, Becky. No egg. That's okay. You look a little disappointed. I'm going to be honest. Well, no, because I feel like then we sad, but not the end of the world. Which means that was it, Becky named the exact right price for her and did not overpay for an egg. Congratulations, Becky. You go home with nothing. Nice. Now, again, Becky had no idea that this was all our test to determine who would get to buy a full dozen of Sam's eggs for a mere $5. And to figure that out. Hello, Maggie Goodhall. And Sherbert. Sure. Sure. Hoffman. We had to play the same game with the rest of our NPR egg colleagues. It is time to play how much for that egg. We explain the rules and ask them each to give us the absolute maximum price they pay for a single egg. We're going to put 10 seconds on the clock. Talk us through your thinking. Can I use a calculator? Sure. Looking up a calculator. I have questions about how the random price is generated. Jeff is going to randomly generate a number within a reasonable interval. Got it. I'm thinking about the rarity of the egg. Think about what you could make with the egg. I would really like a nice egg from these beautiful chickens. I will pay $0.50. So I'm dividing $0.8 by $12. And that gives me $0.66. Uh, $0.82. I'm just going to let the number come to me. OK. $1.44. They can probably give Sam $2.50. I am going to go with $2.65. Wow. Ooh, $65. $5. What? What was that number again? $5. All right. We may need to take a time out. Jeff, how do we do it? Pause the game. Pause the game. OK. We should say it is not best beckerd to Groot Marshaq in practice to immediately reveal to someone that you think their number is way too high. But this person had had a little bit broken our game, I suppose. Her name was Valentina Rodriguez Sanchez. She's another NPR audio engineer. And her number was so high, it was actually higher than the highest egg price our random number generator was set to produce. Because again, $5 was the amount Sam was selling an entire dozen of his eggs for. So we needed to make extra sure that this was in fact her truest in her heart of hearts value for a single egg. You said $5? Yes. For one egg. Yes. Like, if the number generator comes up with like $5, then you have to literally pay $5 for an egg. Yeah. I've spent $5 on some dumb things and I really like eggs. be a turned one single egg into too much of a prize, imbued it with more value than we had intended. Nevertheless, it was clear even after we tried to dissuade Valentina from this bonkers valuation, she was sticking to it. So we increased the max on our random number generator, random number generator activates (mimics beeping) - Oh, oh. (laughing) - Okay. And now we reveal. - Okay, here we go. Are you ready for this? (mimics beeping) - Not sure how to feel about your reaction. - If it's below your number, you will have to buy this. - You have to buy the egg for that amount. - That's fine. I get paid tomorrow. - Again, Valentina was willing to pay up to $5, but she would only have to pay the random price. - Oh, my, okay, here we go. - All right, all right. - And the number is 22 cents. (laughing) - Oh my God. (laughing) - I just saved. - You saved $4.78 of consumer surplus. That's what you just got. - Oh, wow. - My goodness. - The next week we asked Valentina to meet us in a studio. - Hello. - Valentina, in playing the single egg game, we were trying to determine using an economic technique who valued eggs the most based on willingness to pay. - Indeed. - It wasn't even close. (laughing) - It was me. (laughing) - As has become our custom, we had Sam Merton's surprise her with a visit. - Hi, how are you? - I'm good, thank you very much. - I've been told that you are willing to pay $5 for a single egg. - Indeed. - And Sam would you like to tell Valentina what she's won? (crunching) - Oh my God, they're all different colors. (gasps) - These are 12 eggs. - Stop. - From my chickens. - This is so cool. - They're all within the week laid and available for $5. - This is exciting. I should buy some bagels and make some bacon egg and cheese bagels. - None of my chickens lay bagels. (laughing) - Maybe we leave it on Sam making a chicken dad joke. That's where we leave things. - In any event, these here are-- - I think it's green. - Yes, they are laid by all of the eggers. - Who are actually as free. - If you're looking for more economic explainers to help you make sense of this moment, check out our feed. We have a deep dive into trade deficits. What are they? Why do they matter? Also, in up close look at how the new tariffs are actually playing out in Canada. This episode of Planet Money was produced by M. Epis way and edited by Mary Ann McHughan. This fact check by Sierra Huarez and engineered by Jimmy Keele. Alex Goldmark is our executive producer. - Special thanks this week too, Lentesta, Tim Hartford, Alice Evans and the University of Minnesota women's ultimate team, go Golden Gofers! - I'm Jeff Klo, I'm Kenny Malone. This is NPR. Thanks for listening. (upbeat music) - This is Terry Gross. When I was celebrating my 50th anniversary hosting Fresh Air, I asked my guest, Rosemaster General Jeff Ross to roast me. - Terry Gross, a barely living legend. (laughing) - Still at it, listen to Fresh Air on the NPR app or wherever you get podcasts. (upbeat music)