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17 votes

What is the likely result of rent control in Berlin?

Rent control will over time decrease the supply of housing while increasing demand causing a housing shortage. Moreover, there are also studies that show that under rent control there are not just ...
1muflon1's user avatar
  • 55.6k
13 votes

Why doesn't Barnes and Noble just lower its prices?

Kling's maxim: Price Discrimination Explains Everything Who are the sorts of people that purchase at Barnes & Noble? Less price elastic buyers, like those that are purchasing a gift, those less ...
BKay's user avatar
  • 16.3k
10 votes

What is the likely result of rent control in Berlin?

This answer is based on Mowzer's comments. Property development companies will not invest in existing apartments in Berlin, because they can achieve a higher return in other cities. Property ...
8 votes

What is the likely result of rent control in Berlin?

As someone asked in a comment why would this lead fewer new houses being built; the logic of the developers is rather simple, e.g.: Deutsche Wohnen CFO Philip Grosse said in an interview with ...
Dolphin 613 Motorboat's user avatar
5 votes
Accepted

If rent control "doesn't work" and supply induces demand, how can cities improve affordability?

Disclaimer: this answer was significantly rewritten to spell out explicitly how it answers OPs question and to add some sources (thanks to @Fizz). The gist remains the same. The only case I know ...
quarague's user avatar
  • 557
5 votes

Do 'liquidity pools' effectively determine market price?

I've never heard of this before so I have no idea if this works well. However, In some sense I think the concept is quite interesting. Let $B$ be the amount of rice in the pool and $A$ the amount of ...
tdm's user avatar
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4 votes
Accepted

Distance transported used to price goods in Marxism

Quantities of products are not increased by transportation. Nor, with a few exceptions, is the possible alteration of their natural qualities, brought about by transportation, an intentional ...
koita_pisw_sou's user avatar
4 votes

Why doesn't Barnes and Noble just lower its prices?

Answer above assumes every buyer gets the same price on a given product. Amazon doesn't work that way. You price check over time, and Amazon isn't stable. Hard to do that in a store. Amazon also knows ...
Charlie's user avatar
  • 41
4 votes
Accepted

What's the name of this pairwise price-setting scheme?

This is known as the "split-the-difference" mechanism, originally due to Samuelson (1985). See Section 6 of Gibbons et al. (1987) for a discussion of this rule. In particular, this kind of rule only ...
Ubiquitous's user avatar
  • 16.9k
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?

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

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
  • 16.9k
4 votes

Why do some businesses choose scarcity as their business model instead of raising the price to meet the demand?

Your question is somewhat ill-posed as stated, because none of your examples are good instances of businesses creating artificial scarcity. Each of them are businesses that face real capacity ...
heh's user avatar
  • 1,808
4 votes

What is the likely result of rent control in Berlin?

West Berlin had a very restrictive rent control policy in effect until 1988. The result was an exceptionally low price level of rental apartments, while modernization was decades behind other cities. ...
Peter - Reinstate Monica's user avatar
4 votes
Accepted

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
  • 55.6k
4 votes

Externality and Output

In principle in both positive and negative externality scenario government could just set price to the socially efficient price. However, outside of static textbook example this is non-starter. The ...
1muflon1's user avatar
  • 55.6k
4 votes

Externality and Output

For a government to address a positive externality by setting the price of a good to its socially efficient price would raise several difficulties. The diagram below relates to the case of a good ...
Adam Bailey's user avatar
  • 8,346
4 votes
Accepted

Does the Labor Theory of Value hold in the long term in competitive markets?

No it does not for several reasons. Labor theory of value (LTV) central tenant is that there is some intrinsic component to value determined objectively by labor (see Brue and Grant History of ...
1muflon1's user avatar
  • 55.6k
3 votes
Accepted

Data on average/typical retail markups

I recommend the Comp-Net database. It is a firm-level data for European countries. It includes a large range of variables, including mark-ups: Check the documentation for more details. Many ...
luchonacho's user avatar
  • 8,591
3 votes
Accepted

Can an overall improvement in technology make the owners of one factor worse off?

1x2 model Consider a mode where production of a single good is given by a constant returns to scale CES production function: $$Y=A(\alpha L^\rho +(1-\alpha)K^\rho)^{\frac{1}{\rho}}$$ where the ...
luchonacho's user avatar
  • 8,591
3 votes

Should the government regulate the price of bananas?

(source: dineshbakshi.com) As you can see in the graph, price controls policies create excess demand, therefore you will end up with shortage or you will import more bananas. I'm not a banana ...
Commissar Vasili Karlovic's user avatar
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

Why do some businesses choose scarcity as their business model instead of raising the price to meet the demand?

I think it's more about customer's perception. If they were to raise their prices, they might be perceived as blood-thirsty artists/restaurants/etc. who take advantage of their customers. Instead, by ...
Art's user avatar
  • 2,784
3 votes

What is the likely result of rent control in Berlin?

With rent controls and the resulting excess of demand over supply, middle-class white people with stable jobs do very well, and other people find it impossible to find housing. Where landlords can’t ...
Mike Scott's user avatar
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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2 votes
Accepted

How to estimate empirically a demand curve

A demand curve relates Quantity demanded to Price. If ice creams are always $2 then your data won't help you estimate a demand curve. Try offering some daily specials to create some price variation. ...
Ed Rigdon's user avatar
2 votes

How to estimate empirically a demand curve

I think You will have to account for various factors other than price. What is your purpose in estimating the demand curve? This link will give you a good explanation on how to estimate demand ...
london's user avatar
  • 1,990
2 votes

Why did the price level of government consumption increase in the United States?

The price level of government consumption (education, parts of health care, police etc.) consists mainly of wages. Since the productivity (as we measure it) of government production often does not ...
Merijn Knibbe's user avatar
2 votes

Block pricing for different products

I am not exactly sure what you mean by "block price" and I don't know the bucket buddy. However, I feel like you are talking about what microeconomists term bundling, the practice of selling two (or ...
Bayesian's user avatar
  • 5,280
2 votes

Issues if insurance is not compulsory for population

If insurance is not compulsory for all drivers there can be a case where the affected parties are unable to be compensated when an accident happens. In that case those affected by the accident wont ...
EconJohn's user avatar
  • 8,305

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