Power of Prices (Ch 8)
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Last updated 11:16 PM on 3/22/26
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4 Terms
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Prices as Signals
Price is a signal to potential suppliers how buyers value a good and reveal their marginal benefit (MB). Price is a signal to potential buyers how expensive it is for sellers to produce more product.
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Price as Incentives
High price is an incentive for sellers to produce more (new profit), buyers to buy less (consider alternatives), and strangers to coordinate (buying & selling plans balance out)
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Prices Aggregate Information
The process of buying and selling aggregates information about an event
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Prediction Market
markets whose payoffs are linked to whether an uncertain event occurs
