Hypernomics, Missing Dimensions, & Price Determination: 2nd in a Series

“Everything must be made as simple as possible. But not simpler.” ― Albert Einstein

In the last post, Paul Samuelson said equilibrium prices exist where supply meets demand.

While prices for simple products work that way, Value analyst Sheila (A) suspects markets for more complicated products behave differently.  She knows she can account for mountaintops using latitude, longitude, and altitude referencing the equator, prime meridian, and sea level, respectively (B).

With each of the 44 dots representing a unique flat screen tv’s features and price, she finds she can plot the model’s size (C) or cycles per second (D) against prices and get significant but mediocre R2s.  She works to improve her prediction.

In E, she discovers she can plot Price (Dim 3) against the tv’s refresh rate (Hz, Dim 1) and its size (Diag. “, Dim 2) as ordered triples, using an origin of (0,0,0) as a starting point.  With Hz and Diag. “ as Valued Features 1 and 2, respectively, she predicts flat-screen Value (as sustainable prices) with an R2 of 97.0% and a P-Value of 4.85E-32.  She accounts for other features as needed.

All multi-attribute markets have similar “lost dimensions.”

#markets #innovation #hypernomics #prices #dimensions #wsu

Hypernomics Observations: 1st In A Series

“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Josh Billings

Paul Samuelson (A) wrote, “the equilibrium price, i.e., the only price that can last, is that at which the amount willingly supplied and the amount willingly demanded are equal.  Competitive equilibrium must be at this intersection point of supply and demand curves (Economics, 9th Ed., p. 63).”  We see an example of this phenomenon in B, as iron mines with progressively more costs form an upward-sloping supply curve intersecting a Demand curve at a single point.  For single-feature markets such as this one, Samuelson’s argument makes sense.

But Hypernomics researcher twins Cristina (C) and Sheila (D) (both played by my daughter, Meagan Swanson) observe dozens of prices for scores of flat screen TV models (E).  Cristina, who studies Value, suspects their sustainable prices and costs rise with desired features.  Sister Sheila, a Demand analyst, has a hunch that as quantities sold go up, prices and attendant costs must fall.  They both agree that the markets’ multiple and frequently changing prices negate a single-point equilibrium.  What takes its place?

#hypernomics #innovation #markets #management #economy #wsu