![]() ‘An investigation of novels and models…may help us better understand how the public thinks about economic issues.’ ![]() On our return to reality, we are in possession of some sound advice or a relevant argument that can be used in the real world.”Īriel Rubinstein (Econometrica, 2006, p. In this unencumbered state, we can clearly discern what cannot always be seen in the real world. Being something between fantasy and reality, a fable is free of extraneous details and annoying diversions. Any fable can be dismissed as being unrealistic or simplistic, but this is also the fable’s advantage. The fable is an imaginary situation that is somewhere between fantasy and reality. He has some moral he wishes to impart to the reader. The author of a fable draws a parallel to a situation in real life. The word “model” sounds more scientific than “fable” or “fairy tale” although I do not see much difference between them. ‘As economic theorists, we organize our thoughts using what we call models. ‘With all due respect to Richard Posner, Cass Sunstein, or Peter Schuck, no book released in 2005 will have more influence on what kids and adults around the world think about government than The Half-Blood Prince.’īenjamin Barton (Michigan Law Review, 2006, p. Gary Becker (New York Times, August 21, 2011, p. It’s not always easy to convey it to grown-ups.’ ‘I think the writers are not particularly sympathetic to or don’t understand how a market works. We conclude that Potterian economics can teach us about the formation and dissemination of folk economics-the intuitive notions of naïve individuals who see market transactions as a zero-sum game, who care about distribution but fail to understand incentives and efficiency and who think of prices as allocating wealth but not resources or their efficient use. Many other principles, however, are distorted and contain numerous inaccuracies, contradicting professional economists’ views and insights. We find that some of the principles of Potterian economics are consistent with economists’ models. We explore the Potterian economic model and compare it to professional economic models to assess the consistency of the Potterian economic principles with the existing economic models. These extraordinary figures underscore the importance of the messages the books convey. conservative estimate suggests that more than 7.3% of the world’s population has read the Harry Potter books, and millions more have seen their movie adaptations. Building on these findings, we study ‘Potterian economics’, the economic ideas, insights and structure, found in Harry Potter books, to assess how the books might affect economic literacy. Recent studies in psychology and neuroscience offer systematic evidence that fictional works exert a surprisingly strong influence on readers and have the power to shape their opinions and worldviews. Consequently, there is an asymmetry in the rigidity of 9-ending prices: they are more rigid than non 9-ending prices upward but not downward. 9-ending prices, therefore, usually increase only if the new prices are also 9-ending. ![]() We also find that retailers respond strategically to this consumer bias by setting 9-ending prices more often after price increases than after price decreases. Consequently, consumers are less likely to notice a bigger price when it ends with 9, or a price increase when the new price ends with 9, in comparison to a situation where the prices end with some other digit. We find that consumers use 9-endings as a signal for low prices, and that this signal interferes with price information processing. We use data from three sources: a laboratory experiment, a field study, and a large US supermarket chain, to study the cognitive underpinning and the ensuing asymmetry in rigidity associated with 9-ending prices. ![]() There is evidence that 9-ending prices are more common and more rigid than other prices.
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