Friday, July 25, 2008

Why economics should be mandatory in all schools.

You have a small business. Your product is so amazingly popular that every new batch you post on your website sells out in minutes and crashes your server. If you accepted all the requests for custom orders, the wait would be over a year long. Your product is so sought-after that people wait in line to subscribe to book-of-the-month-style clubs that force them to pay for products that they don't even want just so they have a guarantee of getting something. Do you:

A) Raise your prices on your site, potentially angering your customer base but making a bundle?

B) Post your product on Ebay, confident that your increased profits will more than cover the extra couple of dollars in fees and that the price increase will be seen as a product of demand and not your arbitrary decision?

C) Keep your price the same as comparable product that has nowhere near the same demand, discontinue notifications for all new product postings, and just rely on customers' ability to check your website at the right time to allocate your product?

The whole idea that it's somehow better for the customer if prices remain low is paternalistic and offensive. First, it isn't best for the people who want to buy your product and cannot because your sales logistics suck. It's rationing by time and not by money. I guess if you want to reward people with whose time is extremely low in value and who can thus spend hours monitoring availability of your product, fine, but I believe in all that rot about the Protestant work ethic and think that if someone wants your stuff you should encourage them to work and save for it rather than to sit on their butts hitting refresh.

If someone wants to run something as a vanity project, that's fine, but then I don't want to hear any moaning about the wintry economic climate or the travails of running a small business. Businesses exist to make money. You are not "selling out" by charging people what they are willing to pay for your product. You are acknowledging the value of your own labor.
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