• How Prices Matter rices are ubiquitous, so much so that their importance to the smooth operation of a market economy (even one constrained by extensive polit- P ical controls as is the case in China) can go unnoticed and unheralded. Prices are what all trades, whether at the local mall or across the globe, are built around. Tey facilitate trades among buyers and sellers who don’t know each other, meaning they make less costly, or more socially benefcial, the allocation and redistribution of the planet’s scarce resources. Indeed, as the late Friedrich Hayek is renowned for having observed, prices summarize a vast amount of – formation on the relative scarcity and, hence, the relative cost of resources (with much of the information subjective in nature) that can be known only by ind-i viduals scattered across markets and cannot be collected in centralized loc- tions, except through market-determined prices. 1 Because they summarize, and largely hide from view of buyers, so much i- formation spread among people throughout the world, prices can be puzzling. Why prices are what they are, and change for reasons that are obscured by a multitude of economic events that can extend backward in time and forward into the future, can be mysterious. Explaining many puzzling prices can be – tective work that the modern-day Sherlock Holmes would surely fnd challenging.
Table of Content
Price and the “Law of Unintended Consequences”.- Pricing Lemons, Views, and University Housing.- Why Sales.- Why Popcorn Costs So Much at the Movies.- Why So Many Coupons.- Why Some Goods Are Free.- Free Printers and Pricey Ink Cartridges.- Why Movie Ticket Prices Are All the Same.- Why So Many Prices End with “9”.- The Economics of Manufacturers’ Rebates.- The Psychology and Evolutionary Biology of Manufacturers’ Rebates.- The Question of Queues.- Why Men Earn More on Average than Women—And Always Will.
About the author
Richard Mc Kenzie is the Walter B. Gerken Professor of Enterprise and Society in the Paul Merage School of Business at the University of California, Irvine. He has written a number of books on economic policy, most notably the Microsoft antitrust case in the United States. His latest book, In Defense of Monopoly: How Market Power Fosters Creative Production (University of Michigan Press, 2008) challenges the theoretical foundations of antitrust law and enforcement. His commentaries have appeared in national and major regional newspapers in the United States, and he produced an award-winning documentary film, Homecoming: The Forgotten World of America’s Orphanages, that has aired across the country on public television. Richard Mc Kenzie is a frequent columnist for Wall Street Journal.
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