Questions tagged [price-theory]
The price-theory tag has no usage guidance.
51
questions
2
votes
0answers
11 views
What were the historical theories of price formation before demand-supply relationship was well understood?
Markets have existed for thousands of years. People must had ideas about where prices came from.
Before the clear formulation of demand/supply-based theory of prices, what were the historical theories ...
0
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0answers
26 views
What combination will reduce consumption? Inferior/Normal good -- Rebate/ No Rebate? All of the above?
I am having trouble with this course question:
The government wants to decrease consumption of alcohol, so they apply an alcohol tax. Which condition will lead to a decrease in consumption?
a. ...
4
votes
1answer
91 views
Should Prices (or Price Indices) be modelled with deterministic trend?
I always face a dilemma on whether to assume prices to have a time trend or not while modelling. It is also partly a statistics problem. Let me explain. Assume I have time series, $y_t$ of price of a ...
0
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0answers
31 views
Interpretation of market condition given by relation between elasticities
The total market demand is given by the sum of the two destinations ($e$ and $f$) given to the product.
Given these conditions:
Demand: $d(p) = e(p) + f(p)$ where:
$d(p) > 0$, $d'(p) \leq 0$;
$e(...
0
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0answers
26 views
Can someone help me prove that the CES function is also a Cobb-Douglass function [duplicate]
I would like some assistance with a problem that I have showing a CES function is also a Cobb-Douglass utility function.
Question: we have a CES function: $Y=A[\alpha K^{((1-\sigma)/\sigma))}+(1-\...
4
votes
1answer
154 views
Question on the Definition of A Numeraire
I'm familiar with the idea of a numeraire when prices come in the form $\frac{p_x}{p_y}$, but I'm still trying to figure out what the more general notion of a numeraire is. For instance, if all that I'...
0
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0answers
39 views
How can I represent this observation regarding options in a formula?
By observing how an option's expiration P/L changes as its underlying asset price changes, we can discover the following system of equations:
$\begin{cases}S_{Long} = C_{Long} + P_{Short} \\ S_{Short} ...
13
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7answers
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Does a store suffering increased theft generally cause higher prices?
If a store suffers an increase in theft, will it generally lead to higher prices at that store?
My answer is that prices should have already been set to maximize the trade off between profit-per-sale ...
1
vote
2answers
56 views
CAPM and beta for individual stocks
Why do we just assume that the β is symmetric for a stock? Could it not very well be the case that the β has a larger leverage (covariance with the market) for example 1.2 in a bear (baisse) market ...
2
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0answers
53 views
The envelope theorem and Viner's draftsman
In 1931 Viner wrote the paper "Cost Curves and Supply Curves" that famously contained the following mistake: Viner had asked the draftsman to draw the long run average cost curve so that it was ...
-2
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1answer
43 views
How do you calculate the price of a good or service adjusted for scarcity?
For example, Widget A is worth \$100 when there are 50 of them available in the market, but the price goes up to $110 when there are only 40 of them left.
Widget B is worth \$100 when there are 50 ...
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4answers
192 views
What does economics say about "price gouging" during an emergency?
Many states have laws against "price gouging" during an emergency.
Are these laws counterproductive?
Take the current situation with toilet paper and water. When someone sees rolls of toilet paper ...
0
votes
1answer
22 views
Renewal of multiple notions of value in contemporary (green, public good) economy and are there general game theories?
https://en.wikipedia.org/wiki/Exchange_value mentions 4 notions of value: economic value, exchange value, use value, price. But this article also mentions that these are Marxian concepts and the ...
1
vote
1answer
651 views
In Smith's theory, what is the difference between the "nominal price" vs. "market price" and "real price" vs. "natural price"?
In Adam's Fallacy, Foley writes:
"Smith distinguishes what he calls the nominal price of a commodity (the amount of money for which it exchanges) from the real price of the commodity, the amount of ...
0
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2answers
57 views
Do all prices just reflect absence of information?
In information economics, information has economic value because it allows an agent to make better decisions. For example if an agent needs to buy some good, he will benefit from knowing about the ...
0
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0answers
30 views
In this price model, employment grows with higher wages. Makes no sense
Using a Sraffian price model we have that, $p=(1+r)(pA+wl)$ where w (nominal wage rate), r (average profit rate) are scalars; p (market prices), l (labor input coefficients) are vectors; A (producers' ...
1
vote
2answers
38 views
Why do non-binding price ceilings have no effect?
My question seems trivial but I have a particular issue I don't understand. If there's a price ceiling above the price equilibrium, the customers can still use the ceiling as leverage when negotiating,...
3
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4answers
786 views
Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?
I see this to be a prevalent trend - companies too often launch products at much higher prices than they know is gonna lead to good sales numbers, only to reduce the price drastically after a few ...
2
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3answers
135 views
Is the price-quantity diagram fundamentally wrong?
I have wondered about the following diagram:
which shows a relationship between Price (Preis) and quantity (Menge). The supply (Angebot) curve is rising with the amount; the demand (Nachfrage) is ...
0
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2answers
79 views
What if price were a function of buyer's income?
If everyone's income were public information, would purely profit-seeking sellers benefit from charging different prices to people based on their different incomes? My intuition says yes because a ...
1
vote
2answers
69 views
Labor time and the exchange value (Marx). What about the quality of the raw materials?
Karl Marx writes in his book "capital", that the exchange value of a commodity is determined by the necessary average labor required to produce the commodity. The labor is measured in time.
Here's my ...
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0answers
33 views
Government efforts in tackling the food crisis
I am a student taking H2 economics at the 'A' levels. Recently, in one of our case study questions in one of the tutorials on the price mechanism and its applications, we covered the food crisis. As I ...
2
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1answer
118 views
Phenomenon of equal prices without price collusion
Some time ago, I came across a term describing a specific phenomenon observed in free markets. I'm now looking for this term.
When comparing prices of certain staples in some countries, one quickly ...
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votes
2answers
60 views
How much of an assets price change is due to speculators and functional buys/sellers
If (for example) a heavily traded asset like crude oil has a price move of x, how much of that is influenced by functional buyers/sellers and how much by speculators?
Let's say x is +100, there are 8 ...
3
votes
1answer
107 views
Why does bond price tend to 100?
For example: if a bond got a 1% coupon, and tomorrow is the maturity date, so tomorrow I will have 101.
So, in my opinion a bond price should tend to notional+coupon, because today I want this amount ...
5
votes
1answer
845 views
Simple model to predict oil prices
Back when Hugo Chavez was still alive (former leader of Venezuela), he said they made "simulations" to predict how much oil prices will increase if they retire the supply of oil they were giving to ...
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vote
2answers
2k views
How to maximize revenue by changing price?
I run a SaaS and I have the following data from it:
Number of trials (A), number of subscribers (B), subscribe cost (C) and total revenue (D) for every type of service my SaaS provide.
If I increase (...
1
vote
1answer
620 views
Help with CES Utility Function exercise
I am attempting to solve the following CES Utility Function problem:
However, I am running into issues when I get to 3).
For 1) I have $K = \left(\frac{\omega p_1}{p_2}\right)^{\frac{1}{p+1}}$
...
2
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0answers
34 views
Currency Denominations Affecting Prices
My question regards how currency denominations might artificially affect prices. For example, a baseball game that determines a good pricing scheme for parking would be charging 7 dollars per person. ...
2
votes
1answer
208 views
Decision to make one side of a multisided platform the subsidy side
I'm reading Matchmakers: The New Economics of Multisided Platforms by economists David S. Evans and Richard Schmalensee.
They describe how businesses often make a rational choice to allow one side of ...
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1answer
187 views
How can 1 BTC gain value in USD if inflation is happening?
So, right now, 1 BTC (bitcoin) is worth ≈ 578.25 USD. But, with the inflation of the USD, how can 1 BTC still hold its value at 578.25? Why doesn't it decrease?
Let's set this example:
1 BTC = 1 USD....
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1answer
23 views
Best formula for price depending on amount [closed]
What is the best formula of price of the product depending on amount. I mean "best" in psychological, marketing, stock rotation, profit maximizing, etc sense (any of them or all together, if possible)....
1
vote
1answer
770 views
Price elasticity when relationship between sales, price and other factors is not linear
For commercial deployment, price elasticity is calculated through linear regression which assumes that there is a linear relationship between price and sales. I have a)price and b)social media ratings ...
0
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1answer
30 views
If petrol/gas prices were locked down, how would normal consumers and the producers be affected?
Hey economics stack exchange! Congrats on getting to beta! I wanted to ask a question that was running through my head on a road trip earlier today.
Let's say a magic fairy grants a person his wish, ...
2
votes
2answers
120 views
Pay What You Want Pricing; Micro Foundations
One of those things that makes intuitive sense to me, but not economic sense is the "pay what you want" (PWYW) scheme of pricing. When thinking of traditional micro theory, the effective price of a ...
2
votes
1answer
375 views
Change in price and income using the Slutsky equation
Quantity bought is given by
$$
q(m,p) = 0.02 m - 2 p
$$
where $q$ is number of bottles bought, $m$ is income and $p$ is price per bottle.
If income is $m = 7500$ and price is $p = 30$, the number of ...
1
vote
1answer
849 views
How to calculate price function from demand curve when marginal cost is given?
This example is in a oligopoly market with two firms. The demand curve is given and also two firms' MC is given. How would one calculate price function in this scenario?
I found the slope using the ...
2
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0answers
47 views
Are there any models which allow to calculate a discount?
I want to progressively calculate a discount based on the amount of product sold. Are there any models which allow to take into account different type of products and can calculate the discounts based ...
2
votes
1answer
43 views
Is there a term for an externality in which prices for a good go up due to consumers being subsidized to purchase or consume that good?
Is there a term for an externality in which prices for a good go up due to consumers being subsidized to purchase or consume that good?
So for example, let us say that the government covers part of ...
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votes
2answers
1k views
What determines the outcome of a price war, and why isn't that outcome reached instantaneously?
Mary is making a hefty profit manufacturing and selling widgets. Jim has some money laying around and he is trying to figure out if he shouldn't start manufacturing some widgets too.
In this example ...
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vote
1answer
25 views
Newly discovered (by mainstream investors) asset chart/theory
I was reading an article about bitcoin in which a description was given of a chart/theory related to investor hype when an investment is first discovered by the mainstream. I've been unable to locate ...
4
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1answer
75 views
How long are consumers willing to wait in order to find a bargain?
I have (what I believe to be) a microeconomics question that I'd like to explore:
How long are consumers willing to wait to find a bargain on an item they'd like to purchase?
I believe the ...
5
votes
1answer
78 views
Do assets without rental income streams appreciate relative to assets with rental income streams?
In his book "The Armchair Economist", economist Steve Landsburg critiques an op-ed concerning the relative value of stocks and real estate:
James K. Glassman wrote a piece in The New Republic to ...
3
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1answer
196 views
What are some books for pricing theory with heavy math?
What are some books for pricing theory with heavy math?
I've finish reading pricing theory by Hirshleifer and another by Lansburg but both are not math intense.
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1answer
53 views
Price distribution: Negative values?
In their equation (5), Kaplan and Menzio claim that the price distribution in their Burdett-Judd market is given by
$$ F(p, u) = \{u \cdot A_1 \left[1 - \left(1 - B_1(u)\right)\frac{(r-c)p}{(p-c)r}...
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2answers
38 views
Why do prices of consumer products seem to rise independent of their supply?
For example, in my country, the price of coconuts steadily rises, despite the fact that we still have plenty of coconuts. The same with vegetables.
Is this caused primarily by an increase in the cost ...
3
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2answers
114 views
What does economics say about “starting from” pricing?
I was wondering what economics says about what I would call the “starting from” pricing pattern in advertising. My first question would be whether there’s a more properly defined term for it.
It’s a ...
2
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1answer
450 views
Price difference of substitute goods when the supply increases?
In a competitive market, there are 3 types of goods: X, Y and money (m). X and Y are substitute goods, and the utility functions are quasi-linear with respect to money, i.e:
$$U(x,y,m) = u(x,y) + m$$
...
4
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3answers
643 views
Book Recommendation: Price Theory
Can someone please recommend a book or a chapter from a book which provides a good and clear explanation of price theory. How prices are determined what they reflect and how they serve as allocaters ...
2
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1answer
25 views
Setting prices in mobile telephony
Can someone please explain or provide some useful link on factors affecting setting prices of mobile telephony services?
