Sunday, February 12, 2006
As some of you may know...I toyed with the idea of being a funeral director as my chosen profession for awhile. This got me involved in "necronomics" as it is sometimes called. Death and death services are fertile grounds for interesting study and I'm always suprised that they don't get more attention. In any case, this paper "State Casket Sales and Restrictions: A Pointless Undertaking?" goes to a fundamental point of pricing services. If somone is buying an end output or service, the relevant price is the total price and not the component price. I remember back when I was taking Antitrust classes arguing vigorously for extending monopoly power to secondary product lines if possible for some services and products. The reason is simple...the demand for the end product or service is whatever it is and thus the price that they are willing to pay is not determined by the pricing of the various components since most customers don't really care about the inputs into the good and only the output that they are receiving. If a company has monopoly in one input area but not another, it doesn't change the price that they can ultimately charge the consumer, but it might change the allocation of inputs by distorting the true rate of technical substitution and thus create inefficiencies in the production of the product. In any case...I think the paper is pretty interesting so I thought I'd share.