Pricing.

Tang or Thursday Tang day is a Portuguese celebration that takes place on the Thursday of the Ascension with a morning walk, which is harvested ears of various cereals, wild flowers and olive twigs to form a branch, which It is called a spike. According to tradition the branch should be placed behind the front door, and should only be replaced with a new one on the ear of the following year. It is an expectation of plenty and abundance. The religious and the profane hand in hand.

Today, Thursday cob, scoured a part of town and found that the price of each spike branch was the same in various sales locations. The saleswomen charge in the morning, € 2.00 per spike branch.

Why is this pricing mechanism that table all the same, identical branches and not the same in different parts of town and where they spend many types of potential customers? Does the emphasis should be placed only in the fact that the industry could (or should) only be purchased today (an existing time of 365 days) and in the morning?

Let's look at a simplified manner.

There is a certain sense of consistency of pricing market in optical Walras (Marie-esprit-Leon Walras).

However, if we look to the sense of balance of the market I pray that forms the manner as Figure 1 shows.

 Indeed, Figure 1 represents the plan of the unit price and quantity per unit time of one asset. "OO" supply curve is and "DD" is the demand curve of the good. The balance, meeting both curves is indicated by the pair "p" and "q".

Looking to find a sense of consistency in the functioning of the pricing mechanism, we have:

 This market situation may be depicted how Figure 2 illustrates. Given the characteristics of the model (with only a small number of agents), both demand and supply must be submitted in the form of stairs.

As the agents are poorly informed and have limited rationality, can not ensure that their combined behavior is consistent with the market setting established by their plans. The current price may be above or below that which produces the market balance; the amount available to form the offer may be excessive or insufficient, so that the situation observed at a given moment may not correspond to equilibrium - a condition where the thread supply and demand no longer operate. If there is, however, out of balance transaction ceases to exist reason that the plans remain stable.

In view of the above, let us look at the asymmetrical perspective, transactions outside, called balance:

 Figure 3 is a time market. Suppose that the prices charged by producers are in "PF". In this case, there is excess demand, so that the price tends to rise. How the market works through bilateral meetings between sellers and buyers, there will necessarily be trade out of balance. As the transactions out of balance can alter the plans of the agents, nothing guarantees that the point A can remain as the momentary aggregator system.

On the other hand, we know that the producers of goods in the pursuit of maximum return on invested capital, not only grope the functioning of the market by regulating the rate of profit, but also do in order to minimize waste.

Thus, the quantity supplied of commodity "i" by the producer "k" at a certain stage is determined by the quantity supplied in the previous phase (in the previous year the price, also identical, was € 1.00 for each ear branch) and a delta (positive or negative) represents the difference between the average purchase price and natural price.

Being "?ik" (t-1) number of merchandise sales "i" in phase "t-1" made by producer "k" and being "?i" a positive number close to zero, has been formally :

From the above we can conclude that:

- Does not exist any stability and continuity of the daily production of "Tang branch on the ear";

- Given that the event lasts only one day, or rather one morning in a whole year;

- Does not exist any technological change and / or mechanical production (as much can exist in transport;

- The finished product storage has little hand labor (is going to the field, catching the ears and wild flowers and put it all together on branches);

- We are in the presence of pure seasonality;

So it seems that we can conclude by irrational criteria of price formation and expect pair to year the price is € 3.00 - another euro the price of this year, which, in turn, represents one more euro than He paid for the branch last year.