CHAPTER ONE Candy Bars, Used Cars, and Superstars Patterns and Practices in Markets and Prices Let’s return to that weekend yard sale where you traded your old TV to your neighbor for a set of four books. As you ­ will recall, we used this as an exam- ple of what might be the purest of market transactions. We assumed that the trade you made was quickly and simply done, but now let’s make it a ­ little more complicated. Let’s say your neighbor only offers you two of the books for your TV and you tell her you ­ won’t make the trade for anything other than the ­whole collection. In other words, you start to haggle over the price. What is haggling about? ­There is actually quite a bit ­going on ­here. By look- ing at bargaining over a price we can start to get a sense of how markets can differ in in­ter­est­ing ways. The first point is that markets are not purely and simply about trading goods and money. They are, ­after all, interactions between ­ people, and ­ people get a lot out of their relations with ­ others. For some ­ people bargaining can be an impor­tant form of social interaction and entertainment quite in­de­pen­dent of the good and the price. If that’s the case, then the final outcome about the price may be less impor­tant than the pro­cess of the bar- gaining itself. As we found ­earlier, both sides gain from voluntary trade. If the pro­cess of haggling is valued in itself, it can add to the gains that both sides make from the trade and may help to overcome any hesitation the par- ticipants have in coming to a deal. It could well be the case, of course, that the focus in haggling is solely on the price. In that case, then the bargaining is about who is ­going to gain the most from the trade. If your neighbor ­ really wants your old TV and would gain
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