Monday, July 19, 2010

Fractions and domains

One and a half big story in Estonia these days, of some interest, at least in a "what are these people thinking?" sense.

First, we finally got the final word on Euro accession, and the tinfoil hat brigade which refused to believe that the exchange rate will stick (it did, 15.6466 - no change since 1992) are now screaming about the inevitable price increase due to everyone rounding the prices up to the nearest full Euro amount.

The first relevant point is one that I've actually made in my standup comedy routine (to very few laughs): this may be true, but it's a stupid argument. Over the last, what, five years, Estonia's been through a boom, a bust, tax hikes, oil at $150 a barrel, and twenty-percent unemployment. Worrying to this degree about the rounding is about as useful as worrying about cancer when you live in Haiti. You're not wrong, but you've got far more immediate problems to worry about.

The second point is that this is as good an example of a self-fulfilling prophecy as you can have. Shops and restaurants are not stupid, at least not the successful ones. Prices will rise to the level that people are willing to pay for them. (I've talked about this as far back as 2007; probably earlier still, just can't find it right now.) Competition between big supermarkets may keep margins on food low (but won't, necessarily, see this Ekspress article for insight). Even then, any opportunity to raise prices will be seized upon. The only barrier to this is the consumer's inability or unwillingness to pay the asking price. Enough downward pressure can result in prices being lowered - that's how we ended up with actual deflation in 2009 - but if the consumer is expecting the shops to raise prices, and is prepared for this mentally, then naturally the shops will do just that. They'd be fools not to. Especially in a case like this, when the blame and the bad will is not actually directed at the shops, but at the government.

Don't like that Vapiano raised prices from 60 to 62 kroons? Don't eat there. Don't like that the loaf of Rimi bread which cost 15 kroons yesterday is 15.65 now? I'm quite sure Säästumarket would greatly appreciate your patronage. (Wait, Säästumarket is owned by the same company as Rimi. Try Konsum or Prisma, they're at least roughly based on Estonian capital.)

Now, the reason why so many Estonians are so convinced of the inevitable rounding-up is because they are entirely unused to the value of currency fractions. The smallest Estonian bill is 2 EEK, and that one actually sees a lot of use. Fractal prices exist, but you either pay by card and don't notice, or you get a small number of sent coins. Which you either recycle quickly without ending up with a big pile of metal, or you just dump into a jar at home. (For an interesting analogy look at Sweden, which has a small-value currency and prices roughly numerically the same as ours, but the smallest coin they have is half a kronor. Even that one you'll almost never see if you're a tourist.)

Estonians don't expect europennies to be worthwhile, but they are, and the Eurozone gets away with fractal prices quite nicely. Just today I paid 5.90 EUR to get from downtown Helsinki to the airport. Hell, look at Latvians: their currency is denominated at about a Euro and a half (originally priced at parity to GBP, but pegged to the Euro), and the smallest paper bill they have is 5 Ls - about 130 EEK. You talk to Latvians about rounding all the prices up to the nearest Lat and see how fast you can run.

OK, second story: Estonia has recently liberated what is known as a ccTLD - Country Code Top Level Domain. The right to have your website named, essentially. Previously only legal entities, companies, could get a .ee address, for free, and only one. Individuals could get a address, which was supposed to be the equivalent of, but never caught on. Now .ee domains are available to anyone (I just registered and, so don't even think about it, you bastards), but at a price. 20 Euro or so per year. This has gotten a lot of people so riled up that they actually started a petition.

Now, to be fair, a lot of their gripes are with the way the domain reform was conducted. Apparently there was a lot of incompetence and impropriety involved, and I have no cause to doubt them on this part. What does surprise me is the amount of piss and vinegar being spewed about, on the count of the domain's price.

Yes, 20 Euro per year is higher than any other ccTLD in Europe, and the price has not been meaningfully justified. But this is still a trivial sum for any project being pursued by anyone, even an individual, with any vigor. I suspect has gotten me more free pints than 20 Euros' worth per year, and I don't even own!
Now excuse me while I go drink red wine and stare at the Bosphorus.


deemoowoor said...

Nice article!

Flasher T said...

Thanks. Feel free to repost/share/spread the word.

ESeufert said...
This comment has been removed by the author.
ESeufert said...

I think the inflationary effect might be more dramatic than you think. Right now, one A. Le Coq Premium costs me 35 EEK at M:oku (2.23 EUR). In January 2011, it'll probably cost me 2.5 EUR. That's more than a 12% price increase.

Flasher T said...

So don't pay.


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