IIMA-Why I Am Paying More

Y Deodhar Satish

Description

Why is it that airline tickets booked well in advance are always cheaper?How would Phoolan Devi and Veerappan react to a case of Prisoners' Dilemma?Professor Satish Y. Deodhar explains the dynamics of pricing with respect to demand and supply, and the various market structures like perfect competition, monopoly, monopolistic competition and oligarchy through everyday examples and case studies.

Sujets

• Marketing et communication

Informations

• Publié par: Random House Publishers India Pvt. Ltd.
• Date de parution: 25 octobre 2016
• Nombre de lectures: 0
• EAN13: 9788184005110
• Langue: English

Extrait

Dear Reader,
Satish Deodhar s second book in the IIMA Business Books series, published in collaboration with Random House, is informative and stimulating.
The book begins with a clear discussion of basic microeconomic concepts, such as utility, cost, supply and demand curve, price determination, producer and customer surplus, and dead weight loss. Satish next moves to a crisp exposition of various forms of market competition-perfect competition, monopoly, monopolistic competition, and oligopoly. He highlights various mechanisms that producers might use to extract consumer surplus and provides a lucid exposition of game theory, made all the clearer with examples such as Phoolan Devi and Veerappan facing prisoners dilemma . The book proceeds to a description of various forms of market failure and the role of regulation in addressing them. The last chapter provides retrospection through the topics covered and ends with an intriguing crossword. At the end of each chapter, references afford interested readers the opportunity to explore topics in further depth, and ready reckoners provide descriptions of key terms.
In a deceptively simple manner, the book offers practitioners a thorough and in-depth perspective on a broad swathe of microeconomics topics. Throughout, Satish explains these concepts in a straightforward manner, clarified with the help of simple and intuitive charts and peppered with rich instances from business and daily life.
Why I am Paying More is one of a series of books authored by IIMA professors who are not only academically proficient but also have rich experience in consulting and teaching executives. These books are intended to disseminate knowledge in relevant topics in management to practicing executives. Written in conversational style with illustrations from the world of practice, the books are eminently readable and applicable in daily life.
I am confident you will enjoy Why I am Paying More , as you will other books in the series. Please do let us know if there are particular topics that you would like covered in the books published in this series.
Ashish Nanda
Director
IIM Ahmedabad

Also by Satish Y. Deodhar
Day to Day Economics
SATISH Y. DEODHAR
Published by Random House India in 2013
Copyright Satish Y. Deodhar 2013
Random House Publishers India Private Limited Windsor IT Park, 7th Floor, Tower-B A-1, Sector-125, Noida-201301, UP
Random House Group Limited 20 Vauxhall Bridge Road London SW1V 2SA United Kingdom
This eBook is copyright material and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased or as strictly permitted by applicable copyright law.Any unauthorised distribution or use of this text may be a direct infringement of the author s and publisher s rights and those responsible may be liable in law accordingly.
EPUB ISBN 9788184005110
To Deepali, partner-in-life I met a score years ago and to Sylee (17) and Yash (13), the most formidable domestic teen cartel!
CONTENTS
Preface
Acknowledgements
0. Introduction
1. Utility and Market Demand
2. Cost Concepts and Market Supply
3. Societal Welfare, Free Enterprise, and Market Price
4. Price Ceiling, Price Floor, and the New Support Paradigm
5. Perfect Competition
6. Monopoly
7. Pricing to Extract Consumers Surplus
8. Monopolistic Competition
9. Oligopoly
10. Market Failure and the Government
11. Retrospection
A Note on the Author
A Note on the IIMA Business Books
PREFACE
This book may be considered as a sequel to my first book, Day to Day Economics . When Day to Day Economics was published, I was quite apprehensive about the acceptance of the book by readers. However, there was a pleasant surprise in (book) store! Readers were very kind to me and they turned out to be quite an extrovert lot. They would send sporadic emails or post reviews on blogs and online bookstores expressing their liking for the book. Students and participants from various management programmes at IIMA also complimented me for making economics accessible and relevant. While this was a humbling experience for me, readers discerningly pointed out that the book had focussed mostly on macroeconomic issues.
It was suggested that I should also write a similar book on microeconomic issues-issues which would describe why in most cases economists vouch for free enterprise system, how prices are set in different market structures, and what are the circumstances that justify government s role in free enterprise system. These suggestions sounded almost like the Sanskrit aphorism, Atha to Brahma Jidnyasa -an inquisitiveness to know the ultimate reality! Writing a textbook on microeconomics would not have served the purpose, for the market for textbooks has already become overcrowded. The challenging task was to write a book that will appeal to the intuition of non-economists and non-academicians. Hence this modest effort-a sequel to Day to Day Economics .
ACKNOWLEDGEMENTS
This book being a sequel to my earlier book in the IIMA Business Book Series, I must admit my continuing debt to my family members. As in the past, they endured an inescapable distraction from the comforts of a family of four. I also wish to thank many readers of Day to Day Economics who suggested to me to write a book on economic issues relating to microeconomics. When I was half way through this book, Random House and Penguin came together to form a new entity, Penguin Random House. Of course, while the publication of this book is being concluded under the banner of Random House, I could now cite a live example of business mergers in the chapter on Oligopoly. If Penguin Random House has retained the maiden name of Random House, Radhika and Milee have continued to practice business culture of their sanguine Random House! Thanks to both of them for stoically yielding to somewhat moving deadlines.
The book you are about to read was not penned by me alone, for I have been greatly influenced by my economics teachers as also by my colleagues at IIMA. I have been fortunate to assimilate information from diverse sources such as academic journals, textbooks, newspapers, government documents and the internet. Unabashedly, I have relied on all of them to help me connect the dots and further our understanding of pricing and market structures. And, of course, in the absence of the proofreaders, designers, and reviewers from Random House, the book could not have seen the light of the day. I wish to thank them all.
CHAPTER 0
INTRODUCTION
The basic problems of economics are simple; the hard part is to recognize simplicity when you see it. The next hardest part is to present simplicity as common sense rather than ivory tower insensitivity. Theory needs to teach more of both.
-H ARRY G. J OHNSON
Ever since independence, the prime ministers have been addressing the nation from the ramparts of the Red Fort every 15th August. Perhaps with the exception of the euphoria of a few initial years, most people give the speech a miss every year. Closer home, amongst our acquaintances, most of us do encounter a few persons who have a habit of talking quite a lot. Our usual response is to either avoid such persons or reluctantly endure their presence. The purport of this is that such talk gets perceived as being cheap because its supply seems to exceed demand. Of course, there is no rupee price attached to that talk, for it is a non-market activity. However, the intuition we apply in such a deduction is no different than the one usually employed in the marketplace.
Consider a somewhat similar situation in the marketplace. A worried client who meets up with his lawyer for consultation behaves differently. The client listens to the lawyer with rapt attention and knows that he has to pay the fees, perhaps handsome amount of rupees per hour. The lawyer s talk is not free. The lawyer offers a service in the market which may or may not be cheap but there is a positive rupee price attached to it. Like the lawyer s service, practically zillions of goods and services-from abacus and apples to zucchini and zyloscope-are produced, traded, and consumed in the market. And, each one has a positive price attached to it at any given point in time. What is the process through which this price discovery occurs? Are the prices unilaterally decided by individual firms? Do households have any say in setting the prices? These are some of the questions one would like to get answers to. In fact, come to think of it, it is almost a mystery as to how customers choose from among zillions of products available in the market. Given their preferences for various products, household income, and the prices prevailing in the market, some activity must be taking place in the minds of the customers that guides them to make particular consumption choices. It will be worth fathoming what goes on in the minds of customers.
Price determination gets much more interesting depending upon different market structures. Why is it that saree emporiums and apparel shops offer heavy discounts on a few occasions during the year? Why is it that airline tickets booked well in advance are always cheaper? Why is it that many amusement parks and fairs in town and cities charge an entry fee at the gate and once again charge separate tickets for different rides inside? And then, of course, there are many prices such as electricity tariffs and minimum wages that are fixed by government intervention. Are such price interventions by government justified and on what grounds? Such and many similar economic issues are quite relevant to customers and producers alike. It is for this reason that one of the most influential economists of the late nineteenth and early twentieth century, Alfred Marshall, described economics as the study of