WHY ARE BETTER SEATS “UNDERPRICED”? |
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| Authors: | STEVEN N S CHEUNG |
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| Institution: | *Professor of Economics, University of Washington. This paper is part of a larger body of research in the general area of contracts, financially supported by the National Science Foundation and the Liberty Fund, Inc. |
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| Abstract: | Faced with competition, one's behavior often depends on that of his competitors. The determination of price is one response to competition, and an important one indeed. But it is not the only one. All contracting parties may gain, if price can be reduced to encourage restraints on behavior. This paper shows that "behavior which restrains behavior" may be effectively induced by the simple expedient of a reduction in price. |
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