Saturday, October 31, 2009

Optimization Rule and Knowing When it's Over


Textbook Definition of Optimization Rule: From the consumer's perspective, to maximize total benefit/(total utility), consume until marginal benefit equals marginal cost. From the producer's perspective, produce until marginal revenue equals marginal cost.

She-conomic Definition: Keep dating someone until the marginal benefit (the extra happiness or satisfaction you feel for each additional date with "Bill") is equal to the marginal cost (the additional costs of time/money/anxiety you feel on each additional date.) Ignore sunk costs (e.g., all that money you "sunk" into taking him out to Chef's Table, the emotional trauma of meeting his parents, all those pictures on Facebook of you and he at Temple Square. . . .)

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