29 votes

Does a store suffering increased theft generally cause higher prices?

prices should have already been set to maximize the trade off between profit-per-sale and volume sold But profit-per-sale depends on costs, which depends on the theft numbers, so if theft increases, ...
Giskard's user avatar
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19 votes

Does a store suffering increased theft generally cause higher prices?

What you're describing is retail shrink. It is taken into consideration when setting prices. A business will typically have consultants come in, measure their shrink to be X percent, and prices will ...
Aww_Geez's user avatar
  • 291
9 votes

Does a store suffering increased theft generally cause higher prices?

Price is set by the competition In general, the prices are set by the supply and demand for the whole market. If a merchant sells the same goods for a higher price than competitors without a ...
Peteris's user avatar
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5 votes
Accepted

Simple model to predict oil prices

The most comprehensive survey of estimating oil prices is here. There you fund from very complicated models to very simple ones. As the article shows, the ultimate answer depends on whether you are ...
luchonacho's user avatar
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5 votes
Accepted

Is the price-quantity diagram fundamentally wrong?

The graph you've depicted is just very generic supply and demand intersection, under the generic/introductory assumption that an equilibrium price exists. Even at this level of abstraction, the ...
Dolphin 613 Motorboat's user avatar
4 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

Two very general reasons are: 1) High prices at the beginning target "early adopters" - people that have a higher "willingness to pay" for a new product just to have it first. Early adopters know ...
Alecos Papadopoulos's user avatar
4 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

I want to flesh out the answers from Alecos Papadopoulos and Bill Clark to make sure it's clear why a firm might want to reduce prices over time—known as intertemporal price discrimination. Suppose ...
Ubiquitous's user avatar
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4 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

In addition to (intertemporal) price discrimination, there's a parallel process of ramping up production. Especially with tech products, they can have bugs at the beginning, even with all the ...
Dolphin 613 Motorboat's user avatar
4 votes

Labor time and the exchange value (Marx). What about the quality of the raw materials?

The example you've picked is slightly complicated, because I think there are two possible reasons for the difference in price. Both could contribute at the same time, depending on your view of how ...
Dan's user avatar
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4 votes
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What does economics say about "price gouging" during an emergency?

Actually economics does not even officially use term price gouging. Your analysis is right, actually economists dislike anti-price gauging legislation for this reason. For example, when the IGM ...
1muflon1's user avatar
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3 votes

What does economics say about "price gouging" during an emergency?

There are no laws against "price gouging" where I live, at least the price of medical masks has increased 3-10 fold in the recent weeks, due to the coronavirus outbreak. Yet there is still a shortage ...
Giskard's user avatar
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3 votes

Why does bond price tend to 100?

There’s two prices for a bond: Invoice or dirty price: what you actually pay; and the clean price, which is the dirty price less accrued interest. In market convention, the clean price is the quoted ...
Brian Romanchuk's user avatar
3 votes
Accepted

Decision to make one side of a multisided platform the subsidy side

Yes. For example, in Armstrong (2006), a monopoly platform sets the price for side 1, $p_1$, such that $$\frac{p_1-f_1+n_2\alpha_2}{p_1}=\frac{1}{\eta_1}$$ where $f_1$ is the unit cost on side 1, $...
Ubiquitous's user avatar
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3 votes

Question on the Definition of A Numeraire

numeraire is by definition some unit of measure by which we measure all other units. In your case, let us say that we would decide to use $x$ as a numeraire. In that case we would divide all prices by ...
1muflon1's user avatar
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3 votes
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Water more expensive in the desert. Why?

The cities won't have the same supply. Supply is the relationship between the price and the quantity supplied to the market (you should not confuse quantity supplied with supply). Higher costs mean ...
1muflon1's user avatar
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3 votes

How price is determined in the following monopoly model question?

So far so good for part (a). The basic idea for part (b), is that if the parking lot goes first to set the price first, the store is going to have to allow the costumers to get at least enough ...
Whis's user avatar
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2 votes
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How can 1 BTC gain value in USD if inflation is happening?

I'll try to fit this in an answer. I think you are confusing nominal and relative value. Inflation means that the 'value' of your money depreciates relative to other things. For example, in the year ...
tibo's user avatar
  • 328
2 votes

Best formula for price depending on amount

I think your expectation that a "best" formula exists is very unreasonable. There is no "best" car design, there isn't a formula to design the fastest airplane with total weight $x$ and there is no ...
Giskard's user avatar
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2 votes
Accepted

Pay What You Want Pricing; Micro Foundations

It seems that some consumers get utility from paying for the good. This isn't always true, and it does seem counter-intuitive at times. In fact, it often seems that consumers get utility from ...
JTL's user avatar
  • 144
2 votes

Phenomenon of equal prices without price collusion

I know you are at pains to say you are not looking for 'collusion' as an answer, but what you describe sounds very much like tacit collusion. Here's a quote from Competition Policy by Massimo Motta (...
Ubiquitous's user avatar
  • 16.9k
2 votes

Why do companies launch products at much higher prices, only to reduce the price drastically after a few months?

It’s a form of price discrimination. Early adopters are willing to pay more, and so the product is launched at a higher price to capture that value. If they launched at the lower price, then early ...
Bill Clark's user avatar
2 votes

Renewal of multiple notions of value in contemporary (green, public good) economy and are there general game theories?

The current mainstream theory of value is the subjective theory of value: goods or services have value that people subjectively believe that they have. Rembrandt paintings cost millions because ...
1muflon1's user avatar
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2 votes
Accepted

CAPM and beta for individual stocks

I would say that we don't generally speaking assume that stock betas are constant. For example the paper Explanations for the Instability of Equity Beta: Risk-Free Rate Changes and Leverage Effects, ...
BKay's user avatar
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2 votes

How do you calculate the price of a good or service adjusted for scarcity?

There is no such thing as "intrinsic value", at least not in modern microeconomics, and your question cannot be answered. Let's for simplicity imagine a market where all consumers have unit demand. ...
VARulle's user avatar
  • 6,735
2 votes

Should Prices (or Price Indices) be modelled with deterministic trend?

Should Prices (or Price Indices) be modelled with deterministic trend? Often yes. Prices could have time trend for various reasons. For example, the most obvious one is inflation. While inflation is ...
1muflon1's user avatar
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2 votes
Accepted

Binary choices in consumer theory

Yes, it is. First, what you describe is not as much binary choice, but situation where you have discrete quantities where any quantity higher than 1 does not bring any benefits (a person can have 2 ...
1muflon1's user avatar
  • 55.6k
1 vote

Does a store suffering increased theft generally cause higher prices?

I see your point. However, theft in effect increases the cost of purchase, which changes everything. The easiest way to get to the bottom of the answer is thinking of a simple scenario but in extremes....
SW_Cali's user avatar
  • 111
1 vote

What does economics say about "price gouging" during an emergency?

There is a behavioral literature that warns against `price gouging'. Two Nobel Prize winners, Richard Thaler and Daniel Kahneman, conducted surveys with Jack Knetsch. They report that 82% of survey ...
emeryville's user avatar
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1 vote

Do all prices just reflect absence of information?

It's a deeper discussion, but you could argue that profits reflect information disparities between agents. However, in the most idealized circumstance, prices themselves arise from scarcity resulting ...
heh's user avatar
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