Comment by Edman274
2 hours ago
Is it completely insane and incoherent to imagine a situation where ice cream has two equilibrium prices, one higher and one lower, and the market just settles on the higher one? Like, imagine a case where Jeni's would start losing money on every pint if they reduced the price by a dollar, but they'd make the same amount of money overall if they reduced it by 3. But they're in a local optimum, the "price reduced by 3" is identical for revenue purposes, and they choose their current local optimum. Then ice cream could still be priced too high and be "appropriately priced". Is this impossible?
> Is it completely insane and incoherent to imagine a situation where ice cream has two equilibrium prices, one higher and one lower, and the market just settles on the higher one?
It it completely insane? No. But draw a set of supply and demand curves that supports it, and then try to come up with a narrative that explains them. In the static, same time, all other things being equal case, it is hard to do.