Tuesday, January 12, 2010

Smart Readers

So I do have readers, and not all my comments are spam. Milton provides an excellent comment to my previous post on Pizza Hut gift cards. As Milton notes, paying extra is not at all irrational in this case because shipping is included in the ebay auction whereas it is not if you buy directly from Pizza Hut online. You could drive to a Pizza Hut but depending on where you are and how much you value your time that transaction cost is easily larger than the 2.50 extra the gift card costs. Of course to an economist this is still inefficient. After all you could just give the gift of 25.00 in cash. That way there is no loss in the transfer.  But then you might call me a scrooge. I wouldn't be the first economist to embrace that label.

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