We discuss globalization and the current recession in manufacturing and construction. We present a theoretical model of globalization, of two countries, X and Y, each with open-market systems domestically and internationally. We compare two pricing policies in each country: short-run marginal cost, SRMC, versus prices fixed, P , over the business cycle. We present a proposition and proof. We give a detailed numerical example with graphs for each country. The main result is that P over the business cycle increases the volatility of Q demand over the cycle and increases consumer surplus in both countries under certain conditions. The numerical example shows a drawback of SRMC pricing under demand fluctuations-that the required price in high-demand times to balance accounts becomes extremely high. Consumers are better off with P , paying a small increase over SRMC in the off-peak, 6/7 th of the time, to avoid the extremely large required price of SRMC in the peak times, because it's only 1/7 of the time. The surprising point is that though peak times are infrequent, the prices and quantities at peak times determine which pricing arrangement is better for consumers.
This paper proves mathematically in a defined model with restrictive assumptions that consumers are better off when they have more food for the Sabbath at the expense of having less food for the other six days of the week! Like the <em>manna</em> that fell from heaven for forty years in the desert—an <em>omer</em> to a person, Sunday through Friday with double portions on Friday—we assume that consumers buy standardized semi-perishable food baskets, one basket per person per day, Sunday through Friday with extra baskets for the Sabbath. We analyze benefits to consumers according to two alternative pricing schemes, whereby consumer expenditures and weekly food consumed are the same. We prove that consumers are better off according to the pricing scheme that allows for more food for the Sabbath day. This agrees with business cycle theories that urge social focus on increasing and prolonging cyclical peaks. This supports John M. Clark’s workable competition thesis and will surprise supporters of SR marginal-cost pricing
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