--- Bryan Caplan <[EMAIL PROTECTED]> wrote: "The same goes for mail order vs. brick-and-mortar stores. The Internet crash makes it seem like mail order can't afford to discount 40% below brick-and-mortar. But why not? It sure seems like a website must be vastly cheaper to run than a physical store, especially when one website can do the work of thousands of local stores."
This prompts another question from me--simliar perhaps to a previous dumb question. Firms price where marginal revenue equals marginal cost, right? So does the physical existence of a brick-and-mortar store, and it's logical consequences (e.g. rent paid, or lost rent received), add to the marginal cost of a book, let's say? For example, to sell an additional book, a physical store would need about 1 minute of additional cashier time, which at $10/hour would be about $0.17. So there's seventeen cents that the mail order firm can save, minus what it costs for them to make a sale. Or consider rent. Rent is constant up to a certain number of books when the bookstore becomes packed and can no longer hold any more. So should rent increase the price of the marginal book by the amount it would cost to rent an additional 8 & 1/2 square-inches of retail space? How would rent affect the price given the mr=mc assumption? Alternatively, is the predicted price differential "really coming from" how the brick-and-mortar vs. mail order question affects the demand side of the equation? Have I made my confusion clear? I'd really enjoy it if someone could set me straight on this: mail order should be cheaper, but I don't understand why. Curiously yours, jsh ===== "...for no one admits that he incurs an obligation to another merely because that other has done him no wrong." -Machiavelli, Discourses on Livy, Discourse 16. __________________________________________________ Do You Yahoo!? Yahoo! Health - Feel better, live better http://health.yahoo.com
