Economists have traditionally assumed that consumers are rational: they use their incomes and time to make...

Economists have traditionally assumed that consumers are rational: they use their incomes and time to make themselves as well off as they can. But recent research shows that consumers also want to be treated fairly. Surveys have found that many consumers believe it is unfair for firms to raise the prices of some goods after a sharp increase in demand (for example, following a tropical storm) while the same increase in price following a decrease in supply is deemed to be fair. How can this research explain why Walmart and Amazon have limited the sale of some items they sell and penalize price gouging by online sellers?

If required draw any graphs or cite references to substantiate your points.

Expert Solution

The mentioned research explains the intricacies of the consumers' buying behaving and how consumer thinks before buying any good or services. It has helped the companies Walmart and Amazon in a way that, they contain their sellers who go for the price gouging or they can limit the sale of some goods, so that consumers do not make any negative proposition about these retailers and they protect their own brand perspective.

For example, Walmart goes with everyday low price (EDPL) where the consumers get while label standard quality products at low price. It helps company sell products in volume and earn profit. If they put higher price, while customers are in difficult time, then higher price as price gouging is going to build negative perception among the customers and they do not come back when the difficult time is over. Hence, they make limited supply of goods, rather increase in supply, so that there is no negative perception developed amon the consumers.

On a similar note, Amazon strictly prohibits its sellers from raising prices to be excessively high, as Amazon starts its planning with consumers at the center. Hence, the focus is to help customers, rather working to put higher price and develop negative perception among the consumers regarding the company brand. So, they punish those sellers also who go for the price gouging.

Rahul Sunny answered 2 years ago

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means:...

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means: that consumers seek to get the best value for money from the goods they buy. Select one: True False “A person earns a wage per hour working at a fast-food restaurant”. This transaction involves a. The market for factors of production b. The financial market c. The market for goods and services Deadweight loss is the reduction in consumer surplus that results from a...

Economists once based most of their theories on the assumption that humans would make rational economic...

Economists once based most of their theories on the assumption that humans would make rational economic decisions. Three recent Nobel prizes have shown those assumptions to be incorrect. They have identified several common types of irrational behavior. Match the type of the behavior to the description. 1, Confirmation Bias--------------- A) if it is easy to imagine than it must be common! You have seen news stories on shark attacks (or terrorists) so you think they must be common. They are...

Two consumers A and B have incomes of $30,000 and $100,000, respectively. A and B consume...

Two consumers A and B have incomes of $30,000 and $100,000, respectively. A and B consume the same bundle of goods with a cost (including tax) of $24,000. The only tax in the economy is a commodity tax levied uniformly on all gods at a rate of 20 percent. What proportion of income is paid in tax by A and B?   What implications does such a tax have in terms of equity?   Is there any way the commodity tax can...

why and when consumers make purchase decisions, how does the rational self, emotional self, instinctual self...

why and when consumers make purchase decisions, how does the rational self, emotional self, instinctual self impact purchasing decisions? Furthermore, how can marketing managers utilize the findings of research related to neuroscience and purchasing behaviors to develop and implement marketing initiatives?

The shorter the period of time that consumers have to adjust to a change in the...

The shorter the period of time that consumers have to adjust to a change in the price of a good, the less elastic will be demand. True or False

6.The time of arrivals between two successive cars to a gas station is assumed to have...

6.The time of arrivals between two successive cars to a gas station is assumed to have an exponential distribution with mean 8 minutes. A maintenance operation is started on the road. A random sample of 36 arrival times are recorded to determine the effect of maintenance operation, and average time between arrivals is found as 10 minutes. a) Test the hypothesis that the mean arrival time has changed. Use =0.05. b) Discuss what practical conclusions you would draw in part...

From time to time governments impose price controls. Some economists have argued that price controls are...

From time to time governments impose price controls. Some economists have argued that price controls are an inefficient policy. Why then do governments implement price controls? Discuss two types of price controls that you are familiar with? Under what circumstances would these types of policy be considered an efficient/inefficient policy?

From time to time governments impose price controls. Some economists have argued that price controls are...

From time to time governments impose price controls. Some economists have argued that price controls are an inefficient policy. Why then do governments implement price controls? Discuss two types of price controls that you are familiar with? Under what circumstances would these types of policy be considered an efficient/inefficient policy?[20 marks]

Q1. Have you used the rational decision-making model to make a decision? What was the context?...

Q1. Have you used the rational decision-making model to make a decision? What was the context? How well did the model work? Give example of your work place. (You need to provide a convincing and relevant justification for the points, and it would be better if you can provide real life workplace examples to support the justification of the points)

How have you used the rational decision-making model to make a decision? What was the context?...

How have you used the rational decision-making model to make a decision? What was the context? How well did the model work? Please explain in at least 120 words.

Question

Economists have traditionally assumed that consumers are rational: they use their incomes and time to make...

Solutions

Expert Solution

Related Solutions

Economists assume that economic decisions are made rationally. In the case of consumers, rational decision-making means:...

Economists once based most of their theories on the assumption that humans would make rational economic...

Two consumers A and B have incomes of $30,000 and $100,000, respectively. A and B consume...

why and when consumers make purchase decisions, how does the rational self, emotional self, instinctual self...

The shorter the period of time that consumers have to adjust to a change in the...

6.The time of arrivals between two successive cars to a gas station is assumed to have...

From time to time governments impose price controls. Some economists have argued that price controls are...

From time to time governments impose price controls. Some economists have argued that price controls are...

Q1. Have you used the rational decision-making model to make a decision? What was the context?...

How have you used the rational decision-making model to make a decision? What was the context?...