In the article, “Why Surge Prices Make Us So Mad: What Springsteen, Home Depot, and a Nobel Winner Know.” Neil Irwin discusses the interesting, yet successful, methods used by such well known entities as Bruce Springsteen, Home Depot, toll roads, and Uber. Their business approaches seem to defy the basic principles of economics, and yet they each benefit from their economic practices.
Springsteen is an American singer/songwriter who recently released tickets to his Broadway tour. Even with limited seating (around 1,000 seats), he only allowed tickets to be sold in a price range of $75 to $850. This limitation on ticket price (as on any good or service) is known as a price ceiling. Price ceilings upset the balancing point between how the amount …show more content…
It turns out that underpricing tickets is a very old and long-standing tradition in the entertainment industry that follows another important economic law: aligning self-interest with social interests. Nobel prize winner, Richard H. Thaler, best known for his work in defining what constitutes fairness in markets, states that following the basic principle of supply and demand- where the supplier raises prices to meet the demand- doesn’t always work. Sometimes raising prices to meet demand contradicts social interest, which, in the case of artists, can be extremely detrimental to their income. Most of an artist’s income is based on popularity. Therefore, the greater number of fans that buy their music, concert tickets, and merchandise, the more money the artist makes. Because of this, it’s important for an artist to keep the public’s favor. If fans feel like they are being price gouged, they will not want to buy tickets from that artist in the future, essentially stopping an artist’s income. Therefore, in the long run, artists receive more money from the lower prices by aligning their business interests with social interests. They sacrifice a portion of their immediate income potential in order to build long-term relationships …show more content…
When hurricane Irma hit earlier this year, about 150 home depot officials gathered together to come up with an economic plan to benefit both victims and their company. The first thing they did was to freeze prices. When the demand for Home Depot’s products increased, shifting the demand curve, Home Depot increased their supply of needed products to ensure that the equilibrium price stayed fixed. They wanted to ensure that the victims affected by the storm wouldn’t have to pay ridiculous prices in competition with other consumers demanding the same products. This resulted in a 41-truck convoy rolling into the storm-affected area stocked full of generators, chainsaws, plywood, and other products useful to rebuild and recover from a natural disaster, and a huge public relations win for Home
Springsteen is an American singer/songwriter who recently released tickets to his Broadway tour. Even with limited seating (around 1,000 seats), he only allowed tickets to be sold in a price range of $75 to $850. This limitation on ticket price (as on any good or service) is known as a price ceiling. Price ceilings upset the balancing point between how the amount …show more content…
It turns out that underpricing tickets is a very old and long-standing tradition in the entertainment industry that follows another important economic law: aligning self-interest with social interests. Nobel prize winner, Richard H. Thaler, best known for his work in defining what constitutes fairness in markets, states that following the basic principle of supply and demand- where the supplier raises prices to meet the demand- doesn’t always work. Sometimes raising prices to meet demand contradicts social interest, which, in the case of artists, can be extremely detrimental to their income. Most of an artist’s income is based on popularity. Therefore, the greater number of fans that buy their music, concert tickets, and merchandise, the more money the artist makes. Because of this, it’s important for an artist to keep the public’s favor. If fans feel like they are being price gouged, they will not want to buy tickets from that artist in the future, essentially stopping an artist’s income. Therefore, in the long run, artists receive more money from the lower prices by aligning their business interests with social interests. They sacrifice a portion of their immediate income potential in order to build long-term relationships …show more content…
When hurricane Irma hit earlier this year, about 150 home depot officials gathered together to come up with an economic plan to benefit both victims and their company. The first thing they did was to freeze prices. When the demand for Home Depot’s products increased, shifting the demand curve, Home Depot increased their supply of needed products to ensure that the equilibrium price stayed fixed. They wanted to ensure that the victims affected by the storm wouldn’t have to pay ridiculous prices in competition with other consumers demanding the same products. This resulted in a 41-truck convoy rolling into the storm-affected area stocked full of generators, chainsaws, plywood, and other products useful to rebuild and recover from a natural disaster, and a huge public relations win for Home