Tom Dalton <tom_s_dalton@yahoo.com> writes:
>"The supply and demand economic models will still
>apply...just not yet."
>Don't all economic models assume a perfectly
>knowledgeable consumer?
No, though that's the simplest case, so it's the one that most intro econ courses use. Modern economics does admit that information has a cost, both in money and in time, though this does make modeling economic behavior much more expensive.
It is economically reasonable for me to pay $100 for an item even if I know that I could find that item for $75 elsewhere, *if* the cost to me of finding that item elsewhere for $75 is $25 or more. That $25 doesn't have to be a monetary cost, it could be the value of my hours if I'm working on the clock, or my personal value for whatever other activity I forego if I'm off the clock.
That's what keeps many broad-line retailers in business. If I
want a piece of hardware and I don't want to spend lots of time
finding it, I'll check with McMaster Carr first. There's a very
good chance they'll have it, though it's certainly going to cost
more there than through another supplier if I knew who that other
supplier was.
>And doesn't the internet
>bring the consumer substantially closer to perfect
>knowledge? Aren't prices faster to normalize under
>these conditions?
The internet allows faster research of some things, but only things that someone has taken the time to put on line, for love or for money. Nothing you find on-line is going to tell you how easily you could find an item at a yard sale or thrift store.
And there's still the time value of doing the research on-line -- I've sold things on eBay for above retail on items that were in-stock at on-line retailers, mostly photographic items. I can only assume the buyer valued the immediate availability more than the time to do research. Time is scarcer than money, after all.