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Questions tagged [price-theory]

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2 votes
1 answer
111 views

Empirical relation between interest rate and stock market performance

Disclaimer: Originally I asked this question on the personal finance site (see here) where it was (rightfully) closed since it does not directly relate to personal finance but is rather a general ...
2 votes
1 answer
54 views

How price is determined in the following monopoly model question?

I am studying microeconomics, and got stuck on the following question, specifically, part (b) and part (c): A monopoly-owned retail store is located next to a monopoly-owned parking lot. (The store ...
1 vote
0 answers
56 views

What stops the pay-what-you-want pricing strategy from being more popular?

The challenges or weaknesses that this strategy faces From Pay what you want - Wikipedia: Pay what you want (or PWYW, also referred to as value-for-value model is a pricing strategy where buyers pay ...
0 votes
1 answer
48 views

Finding the market portfolio in a two-asset market under CAPM

I'm working on an unassessed course problem, Consider a market with risk-free return $5\%$ and two risky investment $A$ and $B$. We are given the following data: \begin{matrix} \text{Investment} &...
5 votes
5 answers
825 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 ...
1 vote
1 answer
26 views

Precious Metal Mining During Periods of Increasing Prices

I am trying to understand the following argument from Earl J. Hamilton's "The History of Prices Before 1750": Obviously the "rise in prices" usually resulting from "economic ...
6 votes
1 answer
181 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 votes
0 answers
9 views

How best to model firm and market price and quantity adjustment in an evolutionary microsimulation setting?

I am trying to create simulation of a simple industry micoeconomic market structure with a lot of nearly identical firms. They face an almost common production function except that 8 introduce small ...
1 vote
1 answer
346 views

Water more expensive in the desert. Why?

Let be two cities with the same population, one in the desert and the other one not in the desert. Both are going to need water infrastructure to supply water to the inhabitants. The cost to build ...
2 votes
1 answer
140 views

Algorithmic pricing

Many sellers operating in digital platforms (like Amazon) nowadays rely on artificial intelligence algorithms to set their prices and adjust them over time. I wonder whether there is a sense in the ...
1 vote
1 answer
86 views

New Business - How do I set a price for my product?

This is my first question here, but since I am used to the Stack Exchange format I will give as much detail about my problem without giving an overload of details. In a nutshell I work with US weather ...
1 vote
1 answer
105 views

Binary choices in consumer theory

Back when I was a teaching assistant, we were teaching utility theory and how it relates to price determination. So we were looking at continuous goods (e.g. "food") so as to get marginal ...
2 votes
0 answers
17 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 ...
14 votes
7 answers
7k views

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
2 answers
68 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 ...
0 votes
0 answers
32 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 votes
0 answers
39 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-\...
5 votes
1 answer
1k 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'...
1 vote
0 answers
37 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 votes
0 answers
77 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 votes
1 answer
162 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 ...
6 votes
4 answers
272 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
2 answers
84 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 ...
0 votes
2 answers
65 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 votes
1 answer
32 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
1 answer
2k 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 ...
1 vote
2 answers
167 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 votes
4 answers
2k 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 votes
3 answers
188 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 ...
1 vote
2 answers
146 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 ...
2 votes
1 answer
134 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 ...
-1 votes
2 answers
66 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 ...
2 votes
2 answers
146 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 ...
3 votes
1 answer
261 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
1 answer
914 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 ...
1 vote
2 answers
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
1 answer
810 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 votes
0 answers
35 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. ...
3 votes
2 answers
132 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 votes
1 answer
270 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 ...
1 vote
1 answer
193 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....
1 vote
1 answer
1k 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 ...
3 votes
1 answer
438 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 ...
0 votes
1 answer
26 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
1 answer
1k 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 votes
1 answer
31 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
0 answers
52 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
1 answer
51 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 ...
7 votes
2 answers
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 ...
2 votes
1 answer
26 views

Setting prices in mobile telephony

Can someone please explain or provide some useful link on factors affecting setting prices of mobile telephony services?