Price Indifference

Conversely, when RP < EFP, the marginal cost for the patient is likewise zero, so the totality of the saving (the distance between RP and EFP) becomes less cost for the insurer, and therefore demand will be more inelastic after the introduction of RP. In this case, the patient s and the doctor s demand is indifferent to a price rise, as long as it does not exceed RP. D2 represents demand after the introduction of RP under the assumption that doctors have perfect information on EFP and RP prices, and shows a kink at RP. Note that in a pure kinked demand model it will never be optimal to fix a price below RP. Thus, those companies that market products whose EFP was lower than RP prior to the introduction of RP may now have an incentive to raise EFP to the level of RP. 

In practice, however, for reasons not well understood, it seems to be more effective and more likely for research and production to be undertaken where the product will be sold and used. Perhaps familiarity with the local market produces a more subtle feel for local demand or local regulatory processes. It appears that high local volume materially assists local R D. But if this is not true, if a country is indifferent between invent-it-here or invent-it-there, then the preceding considerations do not apply, and global AWP will be a good price measure for small countries like country T. 

H is upward-sloping because an increase in safety, if it is to leave profits unaffected, must be accompanied by a corresponding increase in prices, and vice versa. It is convex (flatter in the low s region, steeper in high s region) because it can be assumed that it is increasingly costly to provide additional safety as more total safety is provided. Incidentally, the location of the cost curves rather than the indifference curves determines H, since firms are constrained to occupy those particular isocost curves by the zero-profit assumption, whereas the existence of consumer surplus means that the level of utility obtained by consumers may vary. 

Therefore, the break-even analysis allows to determine the spread that equals the price of a conventional bond to the one of an inflation-linked bond. This approach assumes a risk-neutral pricing by which an investor treats conventional and inflation-linked bonds the same. Under break-even hypothesis, both bonds have the same nominal yield. Note if the inflation breakeven is greater than expected inflation, for an investor is favorable to buy a conventional bond. Conversely, the inflation-linked bond is more attractive. If inflation breakeven and expectations are equal, the investor bond s choice will be then indifferent. Figure 6.2 shows the trend of UKGGBEIO and UKGGBE20 Index... 

In the case of (T2,y) G Qi f1 Q2, the retailer is indifferent between Options Vi and 2- For this reason, this study confines itself to a situation where the wholesaler does not use a discount pricing policy (T2,y) G Qi f1 Q2. 

Helton, A. C. (2002) The Price of Indifference Refugees and Humanitarian Action in the New Century. Oxford Oxford... 

During the substitution process the indifference curve is switched (from hago to Iiagi), because of an income effect that accompanies the substitution effect. The income effect means that the nominal decrease of the price of one good increases total utility, see Deaton, Muelbauser (1980, p. 35-36). 

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