Thursday, 15 November 2007

Madrid - Theory of Diminishing Utility

Over the past weekend, I visited Madrid, the capital of Spain. Now, don't misinterpret me, Madrid is a great city, with a myriad of bars, monuments, cultures, and nightlife activities [after all, it is the capital city], but the trip somehow failed to meet expectations.

One reason for this diminished return, may be due to one of three [3] reasons [which will be elaborated subsequently]:
  1. A random coincidence [or the factor of time and unpredictable environmental variables]
  2. A result of poor [or absence of] strategic/logistic planning
  3. A result of diminishing marginal utility
A random coincidence [or the factor of time and unpredictable environmental variables]:
It may be such that the particular time that we chose to go to Madrid was not in concurrence with the occurrence of particular events and activities of interest. Perhaps factors such as the weather, time of year, political stability status all had subtle influences in the success/"unsuccess" of our visit

A result of poor [or absence of] strategic/logistic planning:
Of course the plan, the plan of action, the method of procedure, the order of visiting monuments, which monuments to visit, knowing what to visit, knowing the local "hotspots" [best bars, hot nightclubs] all have impacts on generation of good return [ROI]. Maybe this was one of our mistakes, on the next trip we definitely need to conduct the relevant research and and build a solid strategic/logistic plan: the method of action to ensure the achievement of goals [utility].

A result of diminishing marginal utility:
Finally, my most preferred theory or explanation of what happened, [and what is happening slowly and globally on our stay here in Europe] is such: We have been in France for almost four [4] months and have practically visited most of the southern cities, and some north [including Paris]. A lot of the architecture in Spain is super-similar to that of France [not the same but similar].

Now: "The "Law of Diminishing Marginal Utility states that for any good or service [in this case. our trip to Madrid, or a place of interest], the marginal utility of that good or service decreases as the quantity of the good increases, ceteris paribus. In other words, total utility increases more and more slowly as the quantity consumed increases. Another point is: The reason is that marginal utility for any good diminishes as the person consumes more of the good. Thus, if a good is scarce, the average person consumes only a little of it, and the marginal utility is (relatively) high. If the good is plentiful, the average person will have more of it, and so the marginal utility will be (relatively) low." -- [Drexel Institute of Art, Science and Industry]

Drug Addict: It is very comparable to utility of a drug. Initially [and typically], a person may indulge in cigarettes, eventually upgrading to marijuana, at this point, the utility gained from the drug increases at a fast rate, but as the addict continues use, rate of increase of utility decreases until a certain point where there is no longer additional utility gained from that drug [or the increase rate is slower]. At this point, the user [abuser] upgrades to cocaine, or another more powerful drug, and thus the cycle continues.

In the diagram, [figure B], one can replace "wealth" with "use of a drug"; thus, the more a drug is used, the more the increase rate of utility slows [and thus less utility is gained]. Similarly, "wealth" may be replaced by "number of trips that we have been on"; thus, the more trips we have been on, the less utility will be gained, and thus we will perpetually have to "upgrade" our trips, and the trips that gave us utility at the time when we have not been on much trips will no longer give the same utility at the time when we have been on many trips.

Enough! Why am i viewing my life in a managerial perspective? This is not the first time. I have previously been trying to reverse engineer and analyze the strategic plan of bars.

I need to get a life.

3 comments:

biljak said...

Hahahhah :)
I don't remember the last time I've read a post as good as this one!

Your style is fluent, grammar correct, theme well defined and researched in-depth,
your final grade is 20! :)

P.S. I sooooo feel the same way - my utility for traveling was so high; and now it is only decreasing! :( I just hope that Finland is going to be our 'cocaine'! ;)

Nunes Kris said...

the reason for the failure could be explained by the expression "two is company and three is a crowd" if you know what i mean,,,, ta, kris

Slavica said...

I would most certainly recommend more in depth SWOT and PEST analysis for future projects...
:) :P