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asked ago in General Economics Questions by (150 points)
In traditional economics, free-riding is a bad thing while consumer surplus is a good thing.   Let's say that your true valuation of an article is $1 dollar.  If you spend $0 on the article, then your consumer surplus will be $1.  But if you pay $1, then your consumer surplus will be $0.  

How much *should* you spend on the article?  What is the optimal payment?  

This might help...

"... it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has..."  —  Paul Samuelson, The Pure Theory of Public Expenditure

Spending $0 on the article would be a false signal.  Spending $.50 would be a less false signal.  Spending $1 would be the least false signal.  

Is it always detrimental when people pretend to value something less than they truly do?  If so, then this would mean that consumer surplus is actually a bad thing.  

From my perspective, it's intuitive that consumers really don't benefit from misinforming producers.  If consumers don't accurately communicate their true preferences to producers, then the distribution of resources will be suboptimal.
commented ago by (1.1k points)
I think it always depends on the bargaing power of every consumer. When bargain is not possible, people usually spend without giving false signals. Spending is always attached to consumer's disposable wealth, so if a consumer surplus is possible through bargaining or buying a product with the same quality and less expensive, in the first option the false sigal is a good choice, in the second one it's only a matter of choice.

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