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Is it simply for saving warehouse costs? Probably yes, holding onto inventory is very expensive. You have to pay for warehousing of the good, it takes the spot of some other inventory that might be in high demand. Food is also perishable so it cannot be stored indefinitely. Stores have to always guess what demand for their products will be, sometimes they ...

14

It's not about saving warehousing cost. They can't sell 12 months old Christmas chocolate next year, so they have to sell it in the next few months. Their options are to either sell it to customers, sell it to a business, or pay to throw it away. The price indicates that they think selling it very cheaply to customers is the most profitable option, all ...

2

I believe the money pump works like this: At $T=0$ borrow a hundred dollars from Henry the hyperbolic discounter for the full time period $t$. The interest rate should be zero because their discount rate over loans of that period is $1$. For simplicity, make it a zero coupon loan, with the payment due at maturity and assume you both agree their is no credit ...

2

As Kitsune rightly points out the usual reason for the inclusion of the time preferences for money into the discount formula (or Ramsey fomula) is that we observe this kind of behaviour in people. Given that many economists take a positive approach towards the study of economics, that is a logical stance. That being said the last word is not spoken on this, ...

2

In my experience, it's mainly just for cleanliness for results. Consider an infinite horizon repeated game, with discounted payoff representation (where I use $\delta = (1-\lambda)$ in your notation) $$(1-\delta)\sum_{t=0}^{\infty}\delta^t R_t$$ where $0 < \delta < 1$. Suppose I play a strategy that gives me the same payoff, say $a$, for each ...

1

Suppose that the wholesale cost of the product is 40USD, and the maximum price that most customers are prepared to pay for the product is 50USD, but a few customers are prepared to pay 100USD for the product. Suppose also that the few customers who are prepared to pay more for the product will put less effort into waiting for discounts. Suppose also that ...

1

Note: The story behind the problem is still confusing, but I will merely focus on your utility functions. Edit In the problem, it seems that both are minimizing costs: $A$ is doing so via $c$, and $B$ via $\alpha$. I assume you want a functional form that yields a closed-form solution (and not corner solutions). In that case, you may want $U$'s to be ...

1

The reason of this difference is that you do not fully understand what Compound interest is. Actually, if you want to get the same amount as the site, while using your monthly payment, which is almost correct (more about this "almost" thereafter), what you must do is less straightforward than simply multiplying it by $120$ (calculation which would return ...

1

$$\displaystyle 1-\prod_i(1-d_i)$$ should give you the answer, with the discounts treated as fractions, so for example $10\%$ being $0.1$

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