1. I distorted the market by skewing the price equilibrium. Or did I? Perhaps I just put a price on my consumer surplus and instinctively decided that Rs. 25 was not a bad deal at all.
2. So what does my consumer surplus consist of - obviously my time (this guy is just outside my office and I clearly do not have the time to hunt around for different suppliers of this commodity service and settle for the best, market clearing price) and also - here is where it gets tricky - an altruistic driver in me, which goaded me to give the extra money. Adam Smith in his 'Theory of Moral Sentiments' mentioned this very sense of altruism - see below for the opening lines from the book.
"How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it. Of this kind is pity or compassion, the emotion we feel for the misery of others, when we either see it, or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrows of others, is a matter of fact too obvious to require any instances to prove it; for this sentiment, like all the other original passions of human nature, is by no means confined to the virtuous or the humane, though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most hardened violator of the laws of society, is not altogether without it."
3. The extra Rs. 15 will obviously make a lot of difference to him (many times more than what it would to me), while I came away not unhappy either. In that sense, the collective utility of the two players (the cobbler and me) was at a higher level than before the transaction.
And of course, what would the Buddhist say is - this whole transaction only served to satisfy my ego and in that sense, it was not 'skilful' !
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