Did I say higher quality doesn't lead to a rise in price (or cost)? I don't think that's what I was intending...
> There is apparently no way for the market to transmit information about consumer's quality preferences.
Then what's market research for? There's also no DIRECT way for the market to communicate what consumers are willing to pay - all those curves are very nice, but they don't predict the actual dollar values. This information is gained via feedback - you raise the price, your number of items sold reduces. You estimate where to go next. Lather, rinse, repeat.
Why not the same feedback for quality? Keep the price (not cost) constant, increase quality... see what happens? Or even price not constant - multiple-dimensioned ANOVAs are common statistical practice.
I don't think this is a good argument.
Greedy algorithms: so are you saying that the only reason economists adopt them is because they're assuming their simplistic models actually represent the real market? That sounds like something I'd say...
FK |