Abstract
The principles of classical economics assume that buyers and sellers act rationally. Suppliers try to maximize their profits, while buyers try to maximize their value, or their “utility” in the vernacular of the economist. Under these principles, all parties have complete information. The sellers know how the buyer will respond to different prices, which means that they know their demand curves. The buyers know all available alternatives and their prices, and can make qualified judgments on the utility that each alternative provides, independent of its price.
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Notes
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Simon, H. (2015). The Strange Psychology of Pricing. In: Confessions of the Pricing Man. Copernicus, Cham. https://doi.org/10.1007/978-3-319-20400-0_3
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