Giving up your seat

So the wife has done a kind of sociological analysis of who offers seats to baby-carrying people on the London Metro. Based on the data points she’s collected over the last three months we’ve been in London, she concludes that people who are most willing to give up their seats are those who have been beneficiaries of similar actions in the past – basically a social capital kind of argument.

I don’t have such an overarching thesis on who gives up seats, but one major observation based on my collection of data points. Most of my train rides with Berry have been between Ealing Broadway, the station closest to where we live, and St. Paul’s in Central London, close to Berry’s nursery and Pinky’s office.

The Central Line, which I take for this journey, is typically crowded in both directions, since most of my trips are during peak office commute hours. However, my experience in terms of people offering me a seat (I’ve never asked for it) has been very different in terms of where I’ve boarded.

What I’ve found is that people have been far more willing to give up their seats when I’ve boarded at St. Paul’s (or anywhere else in the city), than at Ealing. In fact, in about 30-40 train rides originating in Ealing when I’ve been carrying Berry, I only recall one occasion when someone has offered me their seat. On the other hand, it’s rare for me to board at St Paul’s and NOT have someone offer me their seat.

I have one major hypothesis on why it happens – on what goes into getting a seat, and a sense of entitlement. Essentially, Ealing Broadway is a terminus for the tube, and thus an originating station for journeys into town. And I’ve seen people work hard in order to get a seat.

So you have people who leave multiple trains in order to find one where they can find a seat. They get to the station well in advance of a train leaving so that they can get a place to sit. And having invested so much effort in occupying the seat, they feel entitled to the seat, and don’t want to give it up so easily.

On the other hand, St. Paul’s is right in the middle of the Central Line, and people who have seats when the train arrives there are typically those who got them somewhere along the way. Now, while there exist strategies to figure out where a seat might fall empty, and grabbing it, finding a seat in a non-empty train after you’ve boarded is more a matter of luck.

So if you think you got your seat by sheer luck, you feel less entitled to it, and are more than happy to give it up for someone who might have need it more!

Feel free to draw your own analogies!

Analyzing IIMA Admissions

In response to an RTI query, IIM Ahmedabad has disclosed the cutoff percentiles across various categories for getting a seat in IIMA. Before we analyze further, there are two points to be noted. Firstly, what has been disclosed is the “minimum cutoff percentile”, which means that at least one student with that percentile score was admitted to IIMA in that year. It gives us no information on the “average percentile score” for admitted students belonging to that particular category. Secondly, CAT percentile is only one of the criteria used for admission into IIMs. A response by IIM Bangalore a few years back to an RTI query showed that the CAT percentile has only a 15% weight in the entire admission process (the rest going to 10th and 12th standard board exam scores, college CGPA, performance in interviews and the like). Given these two conditions, we should look at the following analysis with a bit of salt.

First up, here is a graph showing the minimum percentile among admitted students of various categories over the years:



There are a few things that stand out from this graph:

1. The cutoff percentage for general category students has been consistently high. Despite a comprehensive set of factors being used for admissions, if you belong to the general category, a high CAT percentile is a necessary condition to join IIMA

2. Reservations for Other Backward Classes (OBCs) happened in a phased manner. In the first year (2008) only about 5% of the seats were reserved for students from these classes. This has been gradually ramped up to the statutory 27.5%. In the initial years, after reservation for OBCs was imposed, commentators mentioned that their cutoff was not much lower than that for general category students and so there would be no dilution in quality. However, the data above shows that it was a function of the extent of reservation that the cutoffs were similar. If CAT percentile is to be taken as a general statement of an MBA student’s quality, reservation for OBCs has definitely led to dilution.

3. There is massive volatility in cutoffs for SC/STs. It must be noted here that the percentile scores are national – percentiles for students from different categories are not disclosed separately. It seems like the quality of applicants belonging to SC/ST categories has been varying significantly over the years. One year (2008/09) SC/ST students need to be in top 10% of all applicants to gain admission into IIMA. In another (2013) students belonging to ST category need to beat only 40% of all applicants to get in! This is bizarre, and it brings us to..

4. Students from ST category getting admission with 40 percentile in CAT in 2013 is plain absurd. What makes it more absurd is that more than half the students who attempted CAT in 2013 got ZERO or less (remember that CAT has negative marking). Maybe there was a real dearth of applicants from the ST category last year but what this tells us is that someone who got an overall negative score in CAT got admission into IIMA last year. Actually this is beyond bizarre.

5. Time for a personal anecdote. Close to 20 out of the 180 odd people who started at IIM Bangalore with me (2004-06) did not make it to the second year, based on their performance in the first year. About half of those were put on a “slow track programme” and finished their MBA in three years. The other ten did so badly they were asked to repeat the first year in full, without concessions. From what I remember all of them eventually dropped out. A large proportion of these twenty who did not make it past the first year belonged to SC/ST categories. I must also mention here that there was a significant number of students from these categories that did rather well and finished close to the top of the batch.

While it might be seen as an act of nobility to give admission in a premier college to someone with a low score but from a historically underprivileged background, the impact on their careers must also be taken into account. All said and done, the flagship course in IIMs is a rather tough course, and it is not difficult to fall behind. What is the use of giving someone admission only for him to fail and eventually drop out? Would he not have been better off continuing in his pre-MBA job rather than having his career disrupted by admission to a premier institute and subsequent failure?

All this said, it would make sense for someone in an IIM (a professor involved in admissions, perhaps) to do an analysis of correlation of CAT scores with performance at IIMs (I understand that one of the reasons the weight of CAT score was  reduced was that one such study revealed CAT score was less of a predictor of IIM performance than high school and undergraduate scores). An analysis such as that might reveal that there is an absolute lower cutoff in terms of performance in CAT such that students scoring lower are extremely unlikely to do well. It might give a case for reassessment of the affirmative action policies.

Inefficiency of Restaurant Reservations

Quartz reports that restaurant reservations have been taken over by bots in San Francisco. Certain restaurants in that city are incredibly hard to get reservations at, so people have started letting lose bots that check for availability every minute and grab the table as soon as it’s available. In fact, there are enough bots out there that at a particular restaurant which opens reservations at 4 am, all tables are taken by 4:01. Every day.

In Kannada, there is an idiom that says “gubbi mEle brahmAstra”, which means using the weapon of Brahma (widely recognized in Hindu epics are the most powerful weapon) to annihilate a sparrow. Using a bot for restaurant reservations is a solution that falls under this category. However, that someone had to think up of this solution shows that there is something wrong with the restaurant reservation market. And it is not just in San Francisco (I guess this solution was first implemented there thanks to the penetration of online restaurant reservations and the high number of techies in the city. Bangalore fails on the first count).

The problem with the way restaurant reservations currently work is that the option is priced at zero. And thus gets allocated on a first come first served basis. Suppose I want to go out on a date tonight but am not sure what cuisine my wife is craving today. Anticipating crowds, given that it is a Saturday, I will make reservations in four different restaurants serving four different cuisines. There is nothing that currently prevents me from doing that. And it costs me nothing (apart from the cost of four phone calls).

A restaurant reservation is essentially an option to occupy a table of a certain size at a certain restaurant in a particular time period. If you show up at the restaurant at the appointed time, the restaurant is obliged to offer you a table. However, the way it is currently implemented is that you are not obliged to show up at that restaurant at that particular time. If you don’t show up, the table the restaurant had “reserved” for you will go empty for that evening, thus resulting in loss of business.

How can a restaurant handle this? One idea is to overbook. If you have 10 tables, allow 12 people to make reservations, in the hope that on an average day, 10 or less will show up. While this may lead to higher occupancy, problem is when all 12 show up. You then run the reputational risk of making a reserved guest wait, or worse, turning them away. Another option is to book only a fraction of the tables. If you have 10 tables, give out reservations only for 8, and let people know that you are open to walkins (if someone calls after the 8 are taken, you can say “I’m sorry, but we can’t take any reservations. However, we have some unreserved tables. You can come and check it out. If you’re lucky you’ll get it”). That way, by keeping yourself open for walkins, you can prevent loss of inventory- except that if you are a high end restaurant you are unlikely to get too many walk in customers.

Another option (which I believe is a method online retailers in India use for cash-on-delivery customers) is to maintain a list of people who called you along with their phone numbers and whether they showed up. That way, you can deny habitual offenders a reservation. However, considering that if you are a high end restaurant people are unlikely to visit you very often this may not work either.

The ideal economic solution, of course, would be to charge for reservations. People pay a small deposit when they make a reservation. If they do show up, this amount gets adjusted against their bill. However, given that most reservations happen over the phone (except in SF), you have no way to charge for it. So is the solution that you move your reservations exclusively online, so that you can charge for it? Then you could lose out on customers who are uncomfortable with making reservations online.

Even if all your reservations were online (like in SF), there is a problem in charging for reservations – you wouldn’t want to be the first restaurant doing that. One thing high end restaurants pride themselves on is their reputation, and charging for reservations can make them appear “cheap”, and they wouldn’t want to do that unless it is the done thing.

So how are restaurants managing the situation now? My take is that they are adjusting for it in the price. They are not overbooking, but assuming the cost of empty tables (as a result of no shows) in their overall pricing. This way, customers who are honouring reservations are effectively subsidizing those that don’t. While the market “clears”, the implicit subsidy towards customers who don’t honour their reservations leads to dead weight loss. There is also moral hazard – since desirable customers (the ones who show up) are subsidizing the un-desirable (the ones that don’t).

Is there a solution to this? One way to look at this would be for restaurants to centralize their reservations. I’m surprised no one has done it yet. You can have a website and a call centre from which you can take reservations for a large number of restaurants. The restaurants will pay for it since it will mean that they don’t need to have someone by the phone taking and managing reservations. And given that the same call centre manages bookings for multiple restaurants, they can identify duplicate bookings and overbook accordingly. Customers can be incentivized to use the same ID for booking for multiple restaurants by introducing a multi-restaurant loyalty card. And then – once there is a large number of restaurants that have moved their reservations to this call centre, they can start thinking of collectively moving towards a system of penalizing for unfulfilled reservations.

There – I’m giving a business idea away for free!