Some Friday afternoon thorts, on the "Manski Bounds", a really useful piece of maths which tells you how surprisngly little information you can extract from prices (long boring thread ...). Here's a toy model >
I go to the store and find Ivory soap going for a half dollar, Dove for a dollar. What else? I also notice he Ivory bin is almost twice the size of the Dove bin. How do I choose? I don't value soap, I buy the cheap stuff, and that is almost always the big bin. If a store gets expensive, I change my shopping pattern. But I am stuck on the large bin, it matches my home inventory.
Price happened ex post. The accountants been watching me, they know my pattern and they know how much inventory space I am willing to pay for. Everything is setup via queue adjustments, price is the last thing set, and it is set to cover inventory equivalent interest charges. If the product is not moving, they get another product, the bins and queues are constrained to fit tight trade space.
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