[brown9-2]

Let's say you are running a business which sells FooWidgets and you charge $100 for them.

Then for the holidays, you decide to only sell them for $50 each.

Doesn't the $50 in savings which you are passing on to your customers also represent $50 in potential revenue that you are not collecting, since you decided to be generous?

[jerf]

It's not that simple; you have to take into account the customers who would not have purchased at $100 but did at $50. Failing to account for price sensitivity is a major elementary economic mistake.

http://www.daviddfriedman.com/Academic/Price_Theory/PThy_Cha...

[eftpotrm]

Perhaps, but I doubt many choose to time their death to minimise estate taxes ;-)

[jerf]

I was only talking about how the metaphor is actually radically more complicated that the thing it is putatively explaining. People mostly aren't timing their deaths (though history has shown it isn't quite the zero you might expect: http://www.nber.org/papers/w8158), and government taxing simply occurs, there's no customer participation. The metaphor, by introducing those concepts, actually goes wrong.

[arethuza]

I am not an accountant - but that scenario sounds more like a decrease in revenue rather than an increase in costs.