John Perich wrote: "Well, I made the comment originally because, in the neoclassical framework, would one have any reason to assume that any given cost WASN'T included in the final price?"
Your question seems straight forward, yet I'm not sure I understand. Assuming the problem is at my end, let me try again and you can tell me where I'm going wrong. That I may poorly articulate what I'm thinking is a given, so please bear with me. I face a certain state of the world and I optimize. Suppose that the government then levies a lump-sum tax. Since it doesn't affect any marginal values, it is non-distortionary, so I don't change my opitimizing behavior--I just suffer a loss of utility from the taxation (I have to enjoy less across the board). Analogously, the firm with the free bathroom experiences the cost of maintenance as just a lump-sum expense. It may be spread out, but it affects no marginal values. Since it affects no marginal values, it doesn't affect the firm's optimizing behavior--the firm just suffers lower profits as a result. The prices the firm charges for goods are the same with and without the free bathroom. Hence toilet maintenance is not a part of the prices. That's what I was thinking originally. As I mentioned before my assumptions may be wrong. I'm also neglecting "secondary" effects, e.g. pee for free = repeat business, etc. Anyway, let me know if I make no sense or if my reasoning is totally out of whack. I don't want to go through life with a head full of bad economics! Best to you, jsh --- John Perich <[EMAIL PROTECTED]> wrote: > Well, I made the comment originally because, in the > neoclassical framework, > would one have any reason to assume that any given > cost WASN'T included in > the final price? > > -JP > > > >From: john hull <[EMAIL PROTECTED]> > >Reply-To: [EMAIL PROTECTED] > >To: [EMAIL PROTECTED] > >Subject: Re: In Praise of Pay Toilets > >Date: Tue, 28 May 2002 17:20:34 -0700 (PDT) > > > >John Perich wrote: > > > >"Why do you assume the cost of bathroom maintenance > >isn't already included in the price charged?" > > > >I hadn't thought about it. I guess I had assumed, > >perhaps incorrectly, that bathroom maintenance > costs > >would be idependent of the prices charged for goods > at > >the establishment. Thus bathroom maintenance costs > >would not bear on optimizing decisions, in much the > >same way that lump-sum taxes are non-disortionary. > > > >On reflection it has occured to me that prices may > >affect bathroom maintenance costs: if Mc.D's > charges > >less for burgers and obtains more customers, then > they > >may have more bathroom use which may require more > >bathroom cleaning, i.e. an increase in bathroom > >maintenance costs. If such were the case (it seems > >reasonable), then maintenance costs would enter > into > >the profit max. problem and would therefore affect > the > >price, right? That's not a rhetorical question; if > >I'm wrong please tell me. > > > >Well--I think that was what I was thinking anyway: > >that bathroom use would be independent of the > price. > >Of course Michael Etchison may be right as well (if > I > >read him correctly), in that firms engage in > hueristic > >pricing and just toss bathroom maintenance into the > >mix. (If I read you wrong, Mr. Etchison, I > apologize > >for that.) That possibility just never crossed my > >mind. > > > >-jsh > > > > > >===== > >"...for no one admits that he incurs an obligation > to another merely > >because that other has done him no wrong." > >-Machiavelli, Discourses on Livy, Discourse 16. > > > >__________________________________________________ > >Do You Yahoo!? > >Yahoo! - Official partner of 2002 FIFA World Cup > >http://fifaworldcup.yahoo.com > > > > > _________________________________________________________________ > Send and receive Hotmail on your mobile device: > http://mobile.msn.com > > __________________________________________________ Do You Yahoo!? Yahoo! - Official partner of 2002 FIFA World Cup http://fifaworldcup.yahoo.com
