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Guys, this isn't about Elasticity Curves. This is about Just Prices [0]. In tight-knit communities, it was evolutionarily advantageous for customers to throw a

Guys, this isn't about Elasticity Curves. This is about Just Prices [0]. In tight-knit communities, it was evolutionarily advantageous for customers to throw a hissy fit if a vendor hiked their prices. It's a Game Theory thing that relies on information asymmetry. [0] http://daviddfriedman.com/Academic/econ_and_evol_psych/economics_and_evol_psych.html http://daviddfriedman.com/Academic/econ_and_evol_psych/econo...

snowwrestler 10y ago
Price elasticity is an observed correlation. "Just Prices" seems like an interesting way to help explain why it happens, but I doubt business owners need to grok Just Prices in order to anticipate price elasticity.
- Double_Cast 10y ago
  Just Prices is not an explanation of Elasticity. In fact, it attempts to explain cases which Elasticity cannot account for. E.g. (from the paper) the queues at restaurants. Our understanding of Price Elasticity suggests that the optimal arrangement (for both parties) is for restaurants to apply a surcharge in order to reduce queue times. The ubiquity of queues and rarity of surcharges suggests that something beyond Supply & Demand is occurring. Another example. Areas affected by natural disasters often experience a fuel shortage. The price of gasoline may sell at several times the usual rate. The price hike simply reflects the diminished supply. But customers often behave unreasonably hostile toward the fuel vendors and refuse to buy, even if the purchase is still to their net benefit. The hostility occurs because the customers feel they're being taken advantage of. Such a sentiment may not be rational in today's global market. But it was a rational response in the ancestral environment (where monopolies and monopsonies were more common) because price hikes set a precedent of exploitation (like how politicians use emergencies as an excuse to pass legislation, which mysteriously stays in effect even after the emergency has passed). The commentariat may not grok the Evo Psych behind Just Prices. What they do grok is an intuition that a small community might get mad at the local bee-keeper if he hikes his prices out of the blue, Predicted Elasticity be damned.

snowwrestler 10y ago

Price elasticity is an observed correlation. "Just Prices" seems like an interesting way to help explain why it happens, but I doubt business owners need to grok Just Prices in order to anticipate price elasticity.

Double_Cast 10y ago
Just Prices is not an explanation of Elasticity. In fact, it attempts to explain cases which Elasticity cannot account for. E.g. (from the paper) the queues at restaurants. Our understanding of Price Elasticity suggests that the optimal arrangement (for both parties) is for restaurants to apply a surcharge in order to reduce queue times. The ubiquity of queues and rarity of surcharges suggests that something beyond Supply & Demand is occurring. Another example. Areas affected by natural disasters often experience a fuel shortage. The price of gasoline may sell at several times the usual rate. The price hike simply reflects the diminished supply. But customers often behave unreasonably hostile toward the fuel vendors and refuse to buy, even if the purchase is still to their net benefit. The hostility occurs because the customers feel they're being taken advantage of. Such a sentiment may not be rational in today's global market. But it was a rational response in the ancestral environment (where monopolies and monopsonies were more common) because price hikes set a precedent of exploitation (like how politicians use emergencies as an excuse to pass legislation, which mysteriously stays in effect even after the emergency has passed). The commentariat may not grok the Evo Psych behind Just Prices. What they do grok is an intuition that a small community might get mad at the local bee-keeper if he hikes his prices out of the blue, Predicted Elasticity be damned.