Arnold Kling  

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Taking Consumer Surplus Seriou... Clarification on Consumer Surp...

This MIT symposium. In the first session, Jerry Hausman winds up talking about a paper he did on the demand for energy-efficient air conditioners. For what it's worth, I was the research assistant for that paper. He found that consumers buying durable goods act as if they have very high discount rates. He says in the talk that this finding led him to advise cell phone companies to offer very low initial prices for phones and make up the loss with higher monthly rates.

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COMMENTS (5 to date)
Silas Barta writes:

I'd be a lot less upset at Hausman if he hadn't also advised them to categorically shut out the opposite kind of pricing >:-[

Rich writes:

Liquidity constraints can lead to high discount rates: I can't afford to pay a high up-front fee, so I buy the less energy efficient model, which I *can* afford.

So then we must ask: does poverty cause high discount rates, or do high discount rates cause poverty?

liberty writes:

If I were him I'd keep that information as private as possible, lest a mob of angry consumers track him down and yell nasty things at him. Cell phone pricing is very frustrating.

liberty writes:

On the other hand, pricing in the UK is far superior (in my opinion) for mobile phones, while it is incredibly frustrating for landlines (dominated by BT). For mobile phones, there are many good options for pay-as-you-go, which are cheap and offer a variety of choices and flexibility (e.g., one can pay almost nothing and get unlimited texts, and then the next month choose cheaper voice calls but fewer texts, etc).

Demaratus writes:

Given Moore's law, or rather more specifically the expectation by consumers of the continuation of Moore's law into the future, isn't this obvious, for electronics at least?

I think it would be useful to study several more types of goods to see if this holds for all types of goods or if it varies due to, say consumer expecations of future product quality / $ spent like with electronics?

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