Wednesday, March 24, 2021

Look ahead and reason back

Tractor manufacturers are trying to lock farmers into getting repairs from their dealers. (WSJ, March 2021) One question is, "Were the manufacturers hoping to use Barbie doll pricing?"

  1. Consumers may lose because manufacturers increase the price of the tractor when the link between tractor sales and revenues from repairs decreases. 
  2. Producers may lose because the increase in the price of tractors fails to offset the lose of revenue from repairs. 
  3. The environment may also lose.

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