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Earlier quoted context omitted.
That's not the reverse effect, that's supply and demand, and people forgetting opportunity cost of time. Newsstands sell plenty of junk like US Weekly.
It is literally the opposite of the effect described in the article.
Similar to an even exchange in chess. If you’re behind it’s a good deal, if you’re ahead it’s bad. Of course evaluating value taking into account positions (and thus determining whether an exchange is really “even”) is not straightforward.
I don't consider myself a good chess player at all, but I always thought the opposite way: When I'm ahead, I'm willing to whittle down both sides with even trades until they are left with no options and can be checkmated. When I'm behind, an even trade feels scary - I'm looking for a way to catch up. Am I missing some reason why it would be the opposite?
Similar to an even exchange in chess. If you’re behind it’s a good deal, if you’re ahead it’s bad. Of course evaluating value taking into account positions (and thus determining whether an exchange is really “even”) is not straightforward.
This seems wrong: an even exchange does not change absolute balance but magnifies relative balance, which you do not want if you're behind. Let's say your "strength" is simply the sum of the value of your pieces. The losing side has a strength of l and the winning side has a strength of L. The losing side loses by l-L in absolute terms, or (l-L)/(l+L) in relative terms. An even exchange of value k makes it go to (l-k…
> The effect has been studied as it applies to illegal drugs and it has been shown that the potency of marijuana increased in response to higher enforcement budgets... If the price of all marijuana goes up, then I bet overall usage of it goes down even if the individual potency goes up.
>If the price of all marijuana goes up, then I bet overall usage of it goes down
in high margin (and supply limited) goods i think it works in the opposite direction - the price goes up in response to the demand going up.
I didn't realize they had a name for it... it seems so obvious.
> it seems so obvious. I'm not sure the effect is logically sound -- before the price hikes you weren't willing to pay a dollar more for name brand (or premium drugs etc), but after the price hike you are? I'm not sure if the authors have a mathematical model supporting the decision, or are just observing illegal drug markets and generalizing.
Now, imagine that someone puts a tariff in place so that the low quality product now costs ten dollars, and the higher quality product costs eleven dollars. Sure, you might still buy the lower cost product, but if you are going to buy the product at all, the incremental cost of spending eleven dollars instead of ten dollars seems much more worth it. As long as you have to spend ten bucks anyway, might as well spend eleven and get a higher quality good.
So that's why I go broke on vacations... I want to eat somewhere cheap and the wife says, "No, let's go to the expensive joint... we've already spent $x getting here, so an extra $50 won't make a difference!" Now I have a name for the phenomena.
[1]: https://en.wikipedia.org/wiki/Sunk_cost#Loss_aversion_and_th...
The reverse effect works too. When an overhead cost drops, people consume crappier versions. Free online news is a striking example. If you walked down to the news stand and paid $0.75 for a physical newspaper and the content was all Clickhole listicles you'd never buy it again. But people consume plenty for free.
There was and still is plenty of Clickhole-level crap on newsstands next to the newspapers. People buy it.
Earlier quoted context omitted.
there is some basic arithmetic in the article. imagine the cost was raised by $100, then prices of beans would be $101.5 and $103, i.e. pretty much everyone would go for higher quality. gradually decrease the premium, and you will gradually decrease the number of people who prefer the higher grade product in favor of lower price. this is pretty much it. quite simple and neat observation, actually. "the harder the pun…
> quite simple and neat observation, actually. Did you read my comment? That's exactly what I wrote. This is not a "theorem". Theorems live inside theories, they're logically implied by axioms of the theories. That basic arithmetic proves nothing of the sort.
Since the whole theory won't fit in one wikipedia article, I suggest you read the first chapters or either a) Mas-Collel, Whinston and Green or b) Kreps, Microeconomic Foundations I (not the old undergrad book from him)
This would provide you with the theory to understand this result in a more mathematical correct way.