This won't change the math, but private individuals are unlikely to buy 
typical "builder grade" (read: shoddy) appliances at Home Depot.  Perhaps we 
should also consider the relative quality of the appliances.


>===== Original Message From [EMAIL PROTECTED] =====
>Here's a puzzle of much practical interest to me.
>Suppose you have two ways of buying an appliance.
>1.  Buy it outright from Home Depot. (sticker price is cheaper)
>2.  Have the home builder do it for you and include it in the price of
>your home. (home mortgage  is deductible)
>The most natural way for me to attack this problem is to convert
>everything into real monthly payments.
>So then I figure that the monthly payment to Home Depot is essentially
>the foregone return on stock:
>Home Depot Price *
>{(Nominal Stock ROR * [1-cap gains tax rate])-inflation}
>And I figure the monthly payment on the mortgage is:
>Builder Price *
>{(Mortgage Interest * [1-family marginal rate])-inflation}
>Does this look internally consistent to you?  Is there anything this
>approximation is ignoring (risk aversion aside)?
>OK, suppose that:
>Nominal Stock ROR=13%
>Cap Gains Tax Rate=20%
>Mortgage Interest=8%
>Family Marginal Rate=40%
>Find the critical price ratio that leaves you indifferent between Home
>Depot and the Builder.
>            Prof. Bryan Caplan               [EMAIL PROTECTED]
>  "What a lot of trouble to prove in political economy that two and
>   two make four; and if you succeed in doing so, people cry, 'It is
>   so clear that it is boring.'  Then they vote as if you had never
>   proved anything at all."
>          --Frederic Bastiat, "What Is Seen and What is Not Seen"

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