Robinson's always good to read.
It's not just IPOs that deny the "law" of supply and demand, but the whole luxury goods sector. People buy Phillipe Patek watches _because_ they cost $20K, likewise Rolls Royce, fancy pens, or the $2200 bottles of wine I saw at a restaurant recently. (We had the $12 per "glass" -- half glass really -- house wine. Dinner for two was still $300+, with tip. Well, it was our anniversary. ANd the food was really, really good. Les Nomades on Ontario St. in Chicago, in case you come to town and feel like blowing your bankroll on fancy nouvellle cuisine. I can recommend cheaper places too.)
And services. In big time corporate law, where I have worked as an associate attorney, you cannot compete with the big boys by attempting to offer the same services at cut rate prices. (I briefly worked at a firm that did this, disasterous place in every way imaginable.) The clients will think there's something wrong with you if you aren't charging them $500+ per billable hour, even if they scream over every paperclip and refuse to pay until subtly threatened with lawsuits themselves.
--- Jason McCullough <lbo-talk at hronk.com> wrote:
> Interesting feedback, thanks everyone. I guess I'll
> have to getting around
> to reading Joan Robinson on the foundations of
> theory to get into the things
> Daniel identified.....
>
> Is there work out there on pre-minimum wage
> employment levels? I'm sure the
> professionals would just explain it away as the
> natural structural rate, of
> course.
>
> Any blazes of amateur sociology on why business and
> economic types are such
> assholes about this specific area? You'd think it
> involved their mothers.
>
> -----Original Message-----
> From: lbo-talk-bounces at lbo-talk.org
> [mailto:lbo-talk-bounces at lbo-talk.org]
> On Behalf Of Tayssir John Gabbour
> Sent: Thursday, January 18, 2007 8:53 PM
> To: lbo-talk at lbo-talk.org
> Subject: Re: [lbo-talk] What's the deal with
> conservatives, economists,and
> the minimum wage?
>
> On 1/19/07, Doug Henwood <dhenwood at panix.com> wrote:
> > On Jan 18, 2007, at 7:25 PM, Jordan Hayes wrote:
> > > My favorite counter-example of this "well known
> truth" is the pre-
> > > listing action in hot IPOs. Raise the price?
> BIG increase in demand.
> >
> > Yup. After I sent that, regretted not including a
> PS on asset prices:
> > a glaring exception to the rule. Rising stock
> prices stimulate
> > demand; real estate too. And vice versa.
>
> Yeah, my understanding is that when people take
> prices to be signals,
> there goes the conventional supply/demand "laws"...
> A household good
> which has been rising in price might cause you to
> stock up on it, even
> if just to sell it later. Sometimes, the perceived
> benefit of
> something even turns out to increase with price.
>
> I hear mainstream textbooks like to pass it off as
> the supply/demand
> curves SHIFTING due to changes in expectations.
>
>
> It's funny to see how serious pricing books (like
> Nagle and Holden's)
> treat mainstream theory:
>
> "Both business practitioners and academics labor
> under the economic
> assumption of a 'demand curve' to which the
> effective pricer must
> optimally adapt. Demand curves are useful concepts
> for understanding
> how markets work, but they can be very misleading as
> a guide to
> pricing. Why? Because they are based on the
> assumption that prices are
> set, and by implication should be set, while holding
> 'all other things
> equal.' The essence of effective pricing strategy,
> however, is the
> coordinated management of those 'other things.'"
>
>
> The book even starts with this quote:
> "Pricing is the moment of truth -- all of marketing
> comes to focus in
> the pricing decision."
>
>
> Tayssir
> ___________________________________
>
http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk
>
> ___________________________________
>
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>
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