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Cake day: June 11th, 2023

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  • Three thirsty people walk out of the desert, one at a time, and walk up to a water salesman. The first has $1, the second has $10, and the third has $100. What should the salesman charge in order to maximize profit while keeping all the customers happy?

    $1 sounds reasonable, if their are other water salesmen it would probably be the best price, but it leave a lot of money on the table.

    $10 sounds good, since 2/3s of the customers will get water and the saleman gets 600% more money.

    $100 is the price that gets the most money, but leaves 2/3s thirsty and is way above what you should charge for water.

    The answer, strangely, breaks the notion of “fair”. Let us pretend that these three bottles of water are the only sale this salesman will ever make, quitting the business right afterwards. Also, let us say that none of the three will ever see the other two people’s transactions. The answer then is to charge the first man $1, the second $10, and the third $100. Everyone gets water and the salesman gets the maximum amount of money. The problem is that we, subconsciously, feel that this is ‘unfair’ even though everyone got what they wanted. The ethical would set it at $1 while the businessmen would set it at $100 while trying to drive everyone else out of business. But what if the rich could be charged more than the poor? What if sales were based off of what each individual was willing to pay instead of which fixed price would garner the most profit?

    Would this be a better world or a worse one?