Timeline for Consumer behavior with constrained demand
Current License: CC BY-SA 3.0
9 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Nov 27, 2017 at 21:41 | vote | accept | Giskard | ||
| Nov 26, 2017 at 13:11 | answer | added | Alecos Papadopoulos | timeline score: 4 | |
| Nov 26, 2017 at 10:55 | comment | added | Giskard | @FrankSwanton I like your comment about alternate transportation, but I am unsure if this information is not represented already in the demand function. E.g. if there are substites the demand function will be much more price sensitive than if there are none. If you can write up a rigorous (numerical example based) answer where given everything the demand function is truly just a function of price and yet the optimal constrained choice in some sense is not my $D(p) + \epsilon$ I would be happy to accept. | |
| Nov 26, 2017 at 3:46 | answer | added | Alecos Papadopoulos | timeline score: 3 | |
| Nov 26, 2017 at 3:11 | comment | added | Frank Swanton | As to whether a similar example maximizes her CS would follow a similar line of reasoning. How do you define max CS? Making the gap between the willing to price and what u actually pay the biggest? Then, assuming you have to air travel, under your q constraint, in my example, both CS and u-max problem would yield the minimum possible strictly positive quantity optimal. | |
| Nov 26, 2017 at 3:07 | comment | added | Frank Swanton | But if she has an alternate transportation means, buying 0 coerced e-plus tix as opposed to renting a car or train or waiting another day (flexible date reservation) may yield a higher payoff. | |
| Nov 26, 2017 at 3:06 | comment | added | Frank Swanton | Now if you buy 0 tix, you don’t get to go where u wanna go, so you might be significantly worse off, thus in this case, you might be forced to buy a strictly positive amount of tix regardless. | |
| Nov 26, 2017 at 3:04 | comment | added | Frank Swanton | It is not clear what the consumer’s objective is: max u(.) or CS. If max u(.), I can think it is possible the consumer finds buying 0 quantity making her better off. Consider airline industry. Suppose you are an economy class person but your airline insists that you buy an economy+plus seat which is $125 more expensive. If you are a utility maximizer and find it distasteful that the airline is exploiting you by forcing you to have that extra leg room when you don’t need it, you might be worse off by buying the that e-plus tix. | |
| Nov 25, 2017 at 23:31 | history | asked | Giskard | CC BY-SA 3.0 |