Tipping theory, though not new, is in the news lately, in reference to our \"rec

Question

Tipping theory, though not new, is in the news lately, in reference to our "recession" (some say "depression"), and how we can get ourselves out of it, whatever we call it.

What is tipping theory? If you've never heard of it, you may research the topic. Then, how would you apply it to any part of our economy? Most important, where does it start? For instance, if you apply the theory to the auto industry, then what would tip new car purchases? Would it be the availability of credit? The number of people employed? Fear, or the lack of it, on the part of consumers?

Explanation / Answer

Tipping theory has its origin in 1970s to describe the flight to the suburbs of whites living in the older cities of the American Northwest. When the number of incoming African Americans in a particular neighbourhood reached a certain point (say 20%) sociologists observed that the community would “tip” and most of the remaining whites would leave almost immediately.

Malcolm Gladwell has wrote a book"The Tipping Point: How Little Things Can Make a Big Difference" first published by Little Brown in 2000. Gladwell describes this theory by coining a term, tipping point. He defines a tipping point as "the moment of critical mass, the threshold, the boiling point". This ismply implies that there are small forces behind big changes.

There are three laws of this theory:

The “Law of the Few” says that if a few exceptional people find out about a trend, and through their social connections, energy, enthusiasm and personality spread the word

“The Stickiness Factor” implies there are specific ways of making a contagious message memorable: relatively simple changes in the presentation and structuring of information can make a huge difference to its impact.

“The Power of Context” says that human beings are a lot more sensitive to the condition of their environment than they may seem.

If we apply this theory in economics it would be very much suitable in oligopoly where market concentration is high. That is market is driven by few large firms than the whole market. Automobile sector is a good example here. AS we know Quality revolution was first introduced by Toyota. This firm specifically focused on the quality of its product such as a cycle of zero error, zero error in production, selling, receving and applying fedback etc. TQM has perfectly applied by this firm and hence Toyota has seen skies after this in the indsutry. With this change, other competitors also started focusing on quality of automobiles than other factors because of increased need and demnd of quality automobiles developed by Toyota only.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.