Open thread, Jan. 26 - Feb. 1, 2015

Gondolinian

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this reduces the total gains, but any seller who does it would outcompete sellers who don't

Why would the dynamic-price seller outcompete other sellers who are making more money?

Besides, he would have the classic takeoff problem -- this first items would be (relatively) very expensive and nobody will buy them (the flat-price sellers are selling the same thing much cheaper).

Because the parasite is drawing less blood from the host. While various pressures make seller go near the tipping point of economical viability usually the sales are a little past that. Ie there is some amount of the price could have been lower and the total amount of sales would have been the same. If customers would be offered this price they would prefer it to the original price. However such a venture will make 0 profit. In economic lecture i saw this pharsed in the way that there is some X amount of profit the company wants to make if it's profits wil... (read more)

0Plasmon11y

I imagine the following: Suppose 2 movies have been produced, movie A by company A and movie B by company B. Suppose further that these movies target the same audience and are fungible, at least according to a large fraction of the audience. Both movies cost 500 000 dollars to make. Company A sells tickets for 10 dollars each, and hopes to get at least 100 000 customers in the first week, thereby getting 1000 000 dollars, thus making a net gain of 500 000 dollars. Company B precommits to selling tickets priced as 10 f(n) dollars, with f(n) defined as 1 / ( 1 + (n-1)/150000 ) , a slowly decreasing function. If they manage to sell 100 000 tickets, they get 766 240 dollars. Note that the first ticket also costs 10 dollars, the same as for company A. 200 000 undecided customers hear about this. If both movies had been 10 dollars, 100 000 would have gone to see movie A and 100 000 would have seen movie B. However, now, thanks to B's sublinear pricing, they all decide to see movie B. B gets 1270 000 dollars, A gets nothing. Wolfram alpha can actually plot this! neat!