Superfreakonomics Questions 1-5
Describe the evidence that suggests that Chicago prostitutes engage in price discrimination. In addition, explain why it is possible for this particular instance of price discrimination to be successful.
There is a couple of different things that directly show how Chicago prostitutes engage in price discrimination, the first is by skin color. The book directly says “Prostitutes do not charge all customers the same price. Black customers, for instance, pay on average about $9 less per trick than white customers, while Hispanic customers are in the middle” (p 35.) Another big one is giving police officers “freebies”. Some of the more high class prostitutes were able to …show more content…
All of this information leads to the conclusion that suicide bombers should buy life insurance because its number one purpose would be to insure that you don’t get caught, and allows you to carry out your plan with ease. Not buying life insurance is one big indicator you are a terrorist when compared to other characteristics, so buying it would instantly make you a lot harder to track down. Also it would bring more money back into the U.S. (in the form of payments for life insurance) and then when the terrorists commits suicide the insurance company doesn’t have to pay out (according to the book).
Levitt and Dubner describe two studies, which provided empirical support for Gary Becker’s prediction that even family members would engage in what might be termed strategic altruism. The first study showed that an elderly parent in a retirement home is more likely to be visited by his grown children if they are expecting a sizable inheritance. The second study produced evidence that the number of visits increases when there is competition between siblings for a parent’s estate. Use marginal benefit-marginal cost analysis to explain these observed outcomes.
The outcomes of these experiments are easily predicted, it all comes down to being a human and responding to incentive. In this case the incentive being a family inheritance. This is where the term “strategic altruism” can be