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Showing posts with the label vertical supply curve

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Economic Tidbits of Sporting Events

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Sporting events attract fans and fan loyalty. As a matter of fact, across countries and provinces and towns sports can be great unifier and great divider. It is a paradox of sorts yet a fact. There is a loyalty towards a team and as the two teams or two individuals compete for a prize in their sporting event at different layers, the loyalty translates into an emotional outpouring of support which in itself is competitive. The emotions that come out from the rival supporters create divisions often difficult to heal at times. Each sporting event is a competition for a trophy. The trophy is inelastic conceivably to a large degree. There is just one prize on offer and just because many compete, the number of winners on offer doesn’t increase. The winner gets the rewards disproportionate to the others and thus most sought for. This operates at every layer. Even in the schools, the inter-school competition within the city or the sub-district or the district are the most sought after.
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A Primer on Real Life Action and Economics -II

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The post ‘ Primer on Real Life Action and Economics-I discussed how real life instances are theorized through the conceptual prism of economics. The current post continues the discussion applying the concept of economics to more areas. Like in the previous post, one column highlights the real life phenomenon what we observe, while the second column builds up the theoretical linkage to economics. Real Life Practice/ phenomenon Economics Linkage Live events Humans enjoy live action. They love going to stadiums to watch sports events, visit theatre to enjoy live theatre performance, visit musical shows preferring their genre and likes. An interesting pointer would be an analysis of these live events through the economics angle. There is obviously the angle of utility maximization. People prefer entertainment and leisure and these activities offer the same to the consumers. Therefore they seek to maximise their utility by at
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Formula 1 Constructors, Champions and Elasticity of Supply

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Formula 1 World Constructors’ Championship is won every year based on the points system determined through the Grand Prix results. It is calculated by adding the drivers points in each Grand Prix. In more than half century of championships only 14 constructors have been successful. Further these constructors have come only from four different nations. The most successful is the Scuderia Ferrari which won it 16 times.   Only 12 teams compete in this race from all across the globe of which one wins the top position. The victory in the championship yields tremendous dividends. As we know, participation is limited implying FIA which runs the races is operating in monopsony market. Demand for slots is high with highly inelastic supply.   Why would firms spend billions of dollars to gain that FIA constructors crown.   In fact in recent years, thanks to increasing expenditure on technological improvements, firms have gone bankrupt. Adding to this cost is the astronomical fee of 4
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