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I would suggest that in addition to supply and demand, income and utility are part of the explanation. I would be surprised if dropping out of university was as common for Chinese students in Canada as it is for Canadian students; they may simply value academic success or a paper credential more. Second, I once lived in a building near Carleton with a lot of Chinese students-some driving BMWs-and while I wouldn't say that these students all came from wealthy households, I wouldn't be surprised if their household disposable income wasn't comparable to the average Canadian student's.

Vladimir - if the market is competitive, the income of the consumers doesn't matter. It's common for groceries to cost more in low-income neighbourhoods than in higher-income neighbourhoods. Even though the wealthy can afford to pay more for groceries, they choose not to - if a grocery story in a high income neighbourhood tries to sell limp lettuce at outrageous prices, people will just hop in their BMWs are drive someplace else. This is a really important point, and one that people often miss.

Income only comes into play if it forms part of the explanation as to why the the demand for Chinese-English essay services might be less elastic than the demand for English-only essay services. To think about elasticity, the question to ask is "what are the alternatives"? The alternative to searching for a low-price essay might be going out with friends and enjoying life - which is why people might be willing to pay a high price for a service they know, as opposed to searching around for the lowest price.

"What are the alternatives" is also where is where your academic success story comes into play. If a student's parents will be distraught by any grade lower than a B, and if a student faces serious penalties in the form of withdrawal of parental support for low grades, then the student will have no alternatives but to try to get a passing grade by any means.

That's the typical story in academic integrity cases - people who are desperate, and can't think of any alternative to downloading or buying or cut-and-pasting an essay.

I'm not actually sure the market is competitive, even for the English-fluent. The customer is frequently not in a position to assess the quality of the product (of course, this just gets even worse for the non-fluent). The proliferation of competitors might not be indicative - this is, after all, the Internet; it costs less to put up a website than the $20.99 you can abscond with when you deceive your first customer. You can buy alleged medicines everywhere on the Internet for really cheap, but that's not a competitive market for medicines, it's a competitive market for Akerlof's lemons.

The "Shadow Scholar" essay is famous, but I like this earlier one too, which goes into more detail about the term papers that would surely make up the bulk of the trade, rather than the occasional student who is somehow buying her way through a doctorate.

Term paper work is also extremely easy, once you get the hang of it. It's like an old dance routine buried in one's muscle memory. You hear the tune — say, "Unlike the ancient Greek tragic playwrights, Shakespeare likes to insert humor in his tragedies" — and your body does the rest automatically. I'd just scan Google or databases like Questia.com for a few quotes from primary and secondary sources, create an argument based on whatever popped up from my search, write the introduction and underline the thesis statement, then fill in the empty spaces between quotes with whatever came to mind.

Getting the hang of it is tricky, though. Over the years, several of my friends wanted in on the term paper racket, and most of them couldn't handle it. They generally made the same fundamental error — they tried to write term papers. In the paper mill biz, the paper isn't important. The deadline, page count, and number of sources are. DUMB CLIENTS make up much of the trade. They have no idea whether or not Ophelia committed suicide or was secretly offed by Gertrude, but they know how to count to seven if they ordered seven pages.

I had a girlfriend who had been an attorney and a journalist, and she wanted to try a paper. I gave her a five-page job on leash laws in dog parks, and she came home that evening with over 50 pages of print outs, all articles and citations. She sat down to write. Three hours later she was rolling on the floor and crying. She tried to write a paper, instead of filling five pages. Another friend of mine spent hours trying to put together an eight-page paper on magical realism in Latin American fiction. At midnight she declared that it was impossible to write that many pages on books she had never read. She was still weeping, chain-smoking cigarettes, and shouting at me at 2 a.m. I took 20 minutes and finished the paper, mostly by extending sentences until all the paragraphs ended with an orphaned word on a line of its own.

David, I don't think the market is perfectly competitive, either - if I had to put my money on an explanation, I'd pick the second one, not the first.

On the shadowy internet operations.... Interestingly, this company - which has an actual store front (conveniently located right by Ryerson and U of T)), http://www.customessay.com/ - also charges pretty high rates. Unlike most companies, it doesn't have a steeply escalating scale for 24 hour service. So there definitely do seem to be different companies serving different market niches. Interestingly, customessay.com says clearly "the essays are to be used for research purposes only." I guess if the student wants to use them for something other than the intended purpose, that's none of the company's business.

I'd pick asymmetric information over a non-horizontal individual firm demand curve, myself, if only because barriers to entry are not obvious.

An actual storefront - startling! I suppose it may not have a fixed staff and instead contracts out the work to underpaid TAs nearby.

Asymmetric information is a barrier to entry. No one knows how good you are, which makes it hard to enter the market.

I ll guess,

the point is, that the english paper of a chinese student still has to look like coming from a chinese student, in order to not raise obvious suspicion.

Something one has to keep in mind as well with a seasoned physics PhD helping folks trying to get some low level social studies degree : - )

There is no reason to think that market failure is at play here.

The idea that information asymmetry creates a barrier to entry is musing without thinking. By the same logic used cars businesses should not exist. In fact, there is no reason to think that there are any substantial barriers to entry in this market at all.

As you point out, the alternative explanation is a skills premium and we can't get any further to resolving this issue without data and analysis. And if, as you say, you had to put money on it you would choose your second explanation and not the first, then you were inaccurate in your earlier statement in which you claimed that you had “no idea which of the two explanations is the correct one”.

If you are serious about understanding this issue, look for the effect in other languages and how it changes (or doesn't).

On a more serious note, as someone who lectures at university, I find plagiarism - especially of the online variety discussed in your post - a serious threat to scholarship. That is why I am in favour of 100% final exams in all disciplines, including the humanities. Unfortunately, university today is so mollycoddled that any suggestion of a 100% would send the millennial generation into fits.

Avon - a barrier to entry is not an absolute "no new firms allowed." It is anything that makes it costly for a new firm to establish a presence in the industry. The need to establish a reputation for reliable service in order to attract clients makes it harder for firms to enter the industry, so is a barrier to entry.

"you were inaccurate in your earlier statement". The first rule of WCI is: No complaints about the free pizza.

Not convinced that 100% finals are the way to go, but I do agree that placing more weight on exams is one solution.

What I'm doing in my course this term is getting people to download data, analyze it using Stata, and write up the analysis. It would be very hard to outsource this, because the essay writer would have to have access to expensive econometric software and hard-to-obtain data.

Your definition of a barrier to entry is a bit much. When we talk about free entry, we are not talking about the absence of any budget constraints – inputs have costs. While your example is illustrative and interesting, I think it would serve as a better educational example if you focused the entire discussion on how the two explanations give observationally equivalent answers. This point is missed by students of economics so often, especially when it comes to the endless misunderstandings concerning the efficient market hypothesis. (Are people irrationally exuberant or is there a time varying risk premium connected to the business cycle? Observationally equivalent. Passionate debates get nowhere - go to the data and go to work.) As for 100% final exams, that is how I did it in the UK and it certainly separates the wheat from the chaff.

While I understand the desire to expose students to software and analysis early in their economic education, I find it can be a touched misplaced. The problem is “black box” syndrome. Instead of getting students to genuflect through a bunch of (usually GUI) software routines, have the students implement their own routines in R, Python, or Matlab. These are the skills economists of the future are going to need. In physics, by the end of second year, students understand (complex) vector spaces, Hilbert spaces, linear algebra, real analysis (complex analysis usually comes in third year), multivariate calculus (with Lagrange multipliers), differential equations (and partial differential equations at least to the level of separable problems), and they usually have had exposure to special functions, elementary Fourier analysis, basic statistics and probability, and numerical analysis. They also can all write code. Physics students need all this material to tackle quantum mechanics, electromagnetism, and advanced classical mechanics in third and fourth year. If students of economics had that kind of exposure by the end of second year, they would be able to tackle all of Hamilton's Time Series Analysis by the end of their undergraduate education and really get a handle on econometrics. In my work as a quant, when we get undergraduate summer students from economics, I tell them, if you are really interested in economics and not in becoming a quant, then get up to speed on your math, start writing code in something, forget the mollycoddling curriculum and just read as much as you can from Mas-Colell Whinston and Green, and then Sargent and Ljungqvist with a healthy dose of Hamilton (and Cochrane if you're interested in financial economics) - and most of all, stop wasting time. You will fill in the rest during graduate school. Drink from a fire hose or you're not going to make it. Welcome to the competitive market.

Avon "Your definition of a barrier to entry is a bit much"

I defined a barrier to entry as: "It is anything that makes it costly for a new firm to establish a presence in the industry." I guess one could say "a cost born by a firm trying to enter the industry that is not born by existing firms".

How would you define a barrier to entry? How does the cost of establishing a reputation not fit with that definition?

I'm glad that you found the example illustrative and interesting.

The claim that a business reputation creates monopoly power is a stretch. A good reputation is valuable because consumers have a taste for it. If a new entrant can offer the same service at a lower price (by offering a price between marginal revenue and marginal cost), that firm will have a chance to build a reputation. And if one firm can do that, so can another and another and so on until the monopoly power is exhausted. Common knowledge enters, and monopoly power disappears on the first move. We have to know something more about the industry's average cost curve to establish the conditions for a natural monopoly. Thus, if reputation matters, we will see a price difference between a firm with a reputation vs one without, not because of market failure, but because the two firms do not offer the same product to the market. Tastes matter. We can still have a competitive market in the presence of reputation as an input. (At the absurd limit, you might suppose that consumers are completely inelastic to even otherwise identical substitutes, but that would make for an strange theory of consumer choice.)

Reputation in and of itself is not necessary or sufficient condition to establish a natural monopoly.

The real question is of course, why do people with that kind of skills have to work for such wages ( 16 $ per 6 pages is 100, subtract services, broker, leaves may 60 $ for the guy)

A short comment on exam regulations for a physicist in Germany 30 years ago:

In the first lecture in the first semester, for 500, the prof told us:

take a look to the left, take a look to the right, after Vordiplom only one of you three will be still here, who will it be. And it was meant that way.

Lectures for mechanical engineers started in auditoriums with 800 seats for 1300 students, based on the experience, that until Xmas, 2 month later, there were no more students coming than seats available.

In the first exam of the 440 then, I ll got 50 out of 100 points, the 2nd best 42, the third 38 and the Profs left no doubt that beatings will continue until morale improves.

To forge quality steel, you have to hammer the ashes of the chaff into the hot iron.

After > 10 exams in person and on the clock, you could be very sure that scientists and engineers of the TU Munich have a certain quality

Avon: "Reputation in and of itself is not necessary or sufficient condition to establish a natural monopoly."

Of course it's not. The situation being described here is not one of natural monopoly, but one of monopolistic competition - one firm is offering a slightly differentiated product, in a market that other firms can't just simply step into, and that gives it enough market power to raise its prices above the level charged by other firms.

A natural monopoly will only exist on those relatively rare occasions where the barriers to entry are very large relative to the size of the market.

Genauer - "why do people with that kind of skills have to work for such wages"

At $10 per page and 2 pages per hour, it's $20 per hour, which might well be better than the alternatives for someone with a low value degree. It's like tree planting (Canadian analogy - people go up north in the spring/summer and plant trees for some amount per tree). Most people can't make much money at it, but if you've got a knack for getting those trees in the ground, you can do really well.

Another possibility is that quite a lot of these websites outsource to India. I suspect that's highly likely. $10 per page is really good money in Indian terms.

Stretched to its limit, everything is monopolistic competition. Very few items are perfect substitutes modulo sets of measure zero. Furthermore, there are few barriers to entry in monopolistic competition, so many firms can easily enter to offer their "unique" product. Market power rests largely in the closeness of substitutes. Of course there is no such thing as a perfectly competitive, transaction cost free, market. After all, an infinite number of suppliers and consumers is a mathematical fiction. The point of thinking about monopoly power is to understand issues of degree. If all we can do is point to the lack of an infinite number of people and lack of absolutely perfect substitutes as reasons to worry about market failure, then economics would shed no insight into incentives or behaviour. We still use Newton's Laws to build bridges even though we know it's an approximation. (Quantum mechanical diffraction of a car going under an overpass is ignored completely.) In the problem you talked about in you post, there is no sense in which we should expect ESL essay writing firms to be any more "unique" among themselves than anything else. (There are many Chinese restaurants in Toronto, and they are all slightly differentiated. But for all intents and purposes, it's a competitive market - and if you don't believe that, just ask an owner!) It is far more reasonable to expect the ESL component of the product to demand a skills premium and hence a higher marginal cost.

@genauer: When I was an undergrad in physics, one of my profs refused to assign homework. When one of the students asked what he should do, the prof picked up one of the several reference texts that he suggested for the course and he said:

"On the back of this book it says there are 900 problem in here. Do them."

If you don't have the motivation to work 90+ hours per week in your undergrad, you are taking up space. Oh well, today university is considered a human right. Gotta find yourself somehow!

Avon: "Stretched to its limit, everything is monopolistic competition."

Yup, that's how we view the world here on WCI. Or at least Nick and I do.

"It is far more reasonable to expect the ESL component of the product to demand a skills premium and hence a higher marginal cost."

Well, I was talking about the custom essay operation with last week's seminar speaker - who is based in Toronto - and he figured the higher marginal cost explanation is the right one. It's certainly plausible - especially if the English language essays are in fact outsourced to India. I see two major objections to it (a) relatively lousy job market opportunities lots of young Canadians, and especially lots of recent immigrants, eroding the skills premium. (b) I've hypothesized that the essays produced by this service are written in "Chinglish", but I don't actually know, and have some doubts about the ethics of launching a sting operation.

It would be more useful to think about how limiting cases guide you to the correct understanding of the phenomena, and not use the limiting case as a straw-man. Ultimately everything - including economics - is described by the standard model of particle physics, but that won't get you very far in understanding asset pricing.

Interesting post, though.


we got assigned homework for about 20 hours, but also got encouraged to learn and work on it in groups of 3 - 4, allowing the weekly homework to be handed in with 4, in exceptions 5 names on it. Exams, testing the resulting abilities, were strictly personal.


if those term papers can be written at 2 pages an hour by somebody with just a general ability and no specific knowledge, what kind of test of what knowledge / ability is this then ? Should this practice then not be abandoned as useless?

if those term papers can be written at 2 pages an hour by somebody with just a general ability and no specific knowledge, what kind of test of what knowledge / ability is this then ? Should this practice then not be abandoned as useless?

The bit quoted by david above suggests that it's not just a general ability, but a special talent/mentality to do well in this business. Or at least one that a certain possibly non-trivial minority of people have.

I think it's hard to do a lot of humanities education without making people write essays. The alternative is to abandon the teaching of disciplines (ie, all the classical ones that were part of the original curricula) where informal knowledge is a major component. The better solution is to build a less competitive society, where people's future well-being is less staked on grades and people learn as a part of their right to leisure.

"if a grocery story in a high income neighbourhood tries to sell limp lettuce at outrageous prices,"

then we call it Whole Foods. ;)

That is most likely to happen. They can demand such price when it is needed right away. The is most normally how the business run - I have searched through the internet and found something that is very much useful information about An Overview of the Custom Essay Writing Industry http://www.masterscoursework.co.uk/an-overview-of-the-custom-essay-writing-industry.html

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