The "Wash my Ferrari" Problem: A Meditation on Risk

Post by Dylan16807 » Wed, Sep 12, 2012, 4:07 AM UTC

brandoncapecci wrote: post #50

Dylan16807 wrote: post #47

Earlier quoted context omitted.

Because you said the article was 'wrong' and that you stopped reading, without actually doing anything to counter the point in the article. That's a bad way to contribute to a discussion. I didn't even realize your point was solely about the example. I thought you were objecting to the entire argument. Bad examples are more common than termites in a snowstorm and you should focus on the meat of the article.

I somewhat misspoke. I lost interest after when I read enough to deem the article too artificial an example and lost interest. I wanted to give honest feedback and see if other people perhaps thought the example was I contrived as I did - not berate the article or the author. If I was writing myself, I would want the same sort of feedback. Do you think I'm being unfair by giving that sort of criticism? To me not fini…

Well they can't change your mind if they don't know what it is. You never commented on the meat of the article, so someone downvoted because of that. It's easy to think of better examples, and the way to debate for learning as opposed to winning is to either ignore non-critical flaws in arguments or even fix them for your opponent.

Post by brandoncapecci » Wed, Sep 12, 2012, 5:38 AM UTC

its_so_on wrote: post #44

brandoncapecci wrote: post #43

Earlier quoted context omitted.

Why am I getting downvoted for this? I am not making any commentary on price discrimination but instead, saying that the artificially created scenario could at least be more approachable for readers.

Brandon, a couple of technical questions. First, you talk about the "probability" of any car getting damaged. But surely a car wash is not qualified to act as an actuary (if it was it should immediately shut down all operations and do acturial consulting work instead). So a car wash company isn't faced with a "probability" of a car being damaged - it's faced with a "price" for being insured. Clearly if the amount of…

This was an good explanation and it made me consider some things that hadn't occurred to me so thanks :)

I figured the probability isn't handled by the car wash itself but instead essential to derive the price of the quote. Surely they must give an insurer the volume of cars coming through, yes? What seemed unlikely to me is that the car wash must also show the types of cars getting washed. This would be something handled by the insurance company after making certain assumptions that factor into the risk.

Assuming that each car wash did pay damages (which as you mentioned they don't), do you think they would charge premiums for washing all luxury cars? The price to insure against damages seems like it should be fixed per car (even if based off volume). One month might be oversaturated with $30,000 cars and another month might have more $20,000 cars. Will the cost to insure the car wash against potential damages these months not be the same even when a higher saturation of more expensive cars incurs more risk for the insurer?

My answer to this forms my basis of why I didn't like the example, even artificially, which is that the price to insure every car is the same based on the likelihood of all cars getting damaged and the price to fix them (monthly insurance cost/amount of cars). The insurance cost has no respect to which cars go through the wash - probably because it's too much of a hassle for the insurer to police which cars are actually visiting and making a more accurate calculation of risk. Instead, they assume every wash has a certain amount of luxury cars - even if they don't. Obviously this wouldn't hurt margins if they accepted the cars that are covered but it doesn't stop them from raising margins, which they still might do.

Re: The "Wash my Ferrari" Problem: A Meditation on Risk

Re: The "Wash my Ferrari" Problem: A Meditation on Risk