Is supply and demand a myth?

[RandFan]

I'm having a debate with Art Vandelay in this thread (http://forums.randi.org/showthread.php?t=45380) over in the Science forum. The OP takes Marilyn Vos Savant to task for declaring "the cost of a product has nothing to do with its selling price."

I conceded that profit is dependent on cost but that the price is determined by market forces.

RandFan
The price is determined by what the market will be bear.

Art Vandelay
No, not really. That's a common misconception. There are not many voices over there and I was wondering if anyone else has a POV. Hey, I could be wrong.

FWIW Art makes the following argument.

There are 10 million people in the world that like widgets, and all of them would get one if they were free. However, every increase of one dollar in the price reduces the customer base by one million. I have a monopoly on widgets, so if I sell them for price P, (10-P)million widgets will be bought. If each one costs me C to make, then I make (P-C) on each, for a total of (P-C)(10-P)million. Taking the derivative with respect to P, I get 10-P-P+C. Setting that to zero, P=(C+10)/2. So if my costs are 2, I should sell for 6. If my costs are 4, I should sell for 7. Assuming a rational monopoly, price will depend on cost. It seems counter intuitive to me to use a monopoly to prove that the concept of supply and demand is a misconception? Am I missing something here?

[Kevin_Lowe]

From what I can see, it looks like Marilyn's original statement was overly strong (if it was correctly reported, which is in doubt), and that Art made some blunders in an attempt to show off a limited knowledge of academic economic theory.

Art's quoted example is bogus because it assumes a monopoly, because it assumes no fixed or inelastic costs at all (both of which you pointed out), and because it assumes a smoothly downward sloping demand curve which is an economic fantasy.

The truth, which is stunningly obvious, is that the total cost of production can influence sale price but does not determine it.

[Kerberos]

I'm having a debate with Art Vandelay in this thread (http://forums.randi.org/showthread.php?t=45380) over in the Science forum. The OP takes Marilyn Vos Savant to task for declaring "the cost of a product has nothing to do with its selling price."

I conceded that profit is dependent on cost but that the price is determined by market forces.

There are not many voices over there and I was wondering if anyone else has a POV. Hey, I could be wrong.

FWIW Art makes the following argument.

It seems counter intuitive to me to use a monopoly to prove that the concept of supply and demand is a misconception? Am I missing something here?


Supply and demand sets the price. In theory at least the truth is as always more complicated, but not by much. This is true in both monopolies and oligopolies and under perfect competition. Of course in the long run the production price determines supply so it's really a false dilema.

[The Central Scrutinizer]

It seems counter intuitive to me to use a monopoly to prove that the concept of supply and demand is a misconception? Am I missing something here?

No, you are not. When you have a monopoly, the supply / demand curve goes out the window.

[Kerberos]

No, you are not. When you have a monopoly, the supply / demand curve goes out the window.
No it doesn't the suply curve just isn't identical to the marginal cost of production curve any more.

[Mid]

No it doesn't the suply curve just isn't identical to the marginal cost of production curve any more.

No in a monopoly the quantity supplied is determined by the marginal cost and marginal revenue, however the price you charge at is dependent on the demand curve. Given that it's perfectly possible to have 2 different demand curves that give marginal revenue curves that cut the marginal cost curve at the same point then you can't have a unique relationship between price and quantity supplied and therefore no supply curve.

Of course all this is in the short run, whether you can keep a monopoly in the long run is another matter.

[shanek]

I'm having a debate with Art Vandelay in this thread (http://forums.randi.org/showthread.php?t=45380) over in the Science forum. The OP takes Marilyn Vos Savant to task for declaring "the cost of a product has nothing to do with its selling price."

I'm gonna agree with Art here. The supply curve, while not driven solely by costs, is heavily influenced by them. If the cost of production increases, then manufacturers cannot provide as great a quantity at every price level, pushing the supply curve to the left. That has the effect of raising the equilibrium price while lowering the equilibrium quantity.

I conceded that profit is dependent on cost but that the price is determined by market forces.
But cost is one of those forces.

It seems counter intuitive to me to use a monopoly to prove that the concept of supply and demand is a misconception? Am I missing something here?


Supply and demand still works in a monopoly situation, yes.

[RandFan]

I'm gonna agree with Art here. The supply curve, while not driven solely by costs, is heavily influenced by them. If the cost of production increases, then manufacturers cannot provide as great a quantity at every price level, pushing the supply curve to the left. That has the effect of raising the equilibrium price while lowering the equilibrium quantity.

But cost is one of those forces. You are the last one I would have thought make this argument but that is fine. I have never said that cost is entirely irrelevant and conceded that it is a force the very start. Though to be sure I down played its importance. My only point has been that at the end of the day you can't sell a product for more than someone is willing to pay for it. Right? If oil is scarce and a lot of people want oil then the price of crude oil will go up independant of the cost to get the oil to market. If there is a glut of oil on the market and people are cutting back their consumption because the price of oil was high then the price of oil will fall regardless of cost, right? Further if no one wants my widgets at above cost then I will be willing to sell them for less to cut my costs (liquidation). And how much will I sell them for? As much as I can get. This is often refered to as "what the market will bear" which Art says is a misconception. Do you agree that "what the market will bear" is a misconception?

[shanek]

My only point has been that at the end of the day you can't sell a product for more than someone is willing to pay for it. Right?

Right, but some people are willing to pay more than others. If your costs go up, you can still sell the product, just not as many as you could at the lower price.

If oil is scarce and a lot of people want oil then the price of crude oil will go up independant of the cost to get the oil to market.

Also true. There are many other factors involved.

[CFLarsen]

No it doesn't the suply curve just isn't identical to the marginal cost of production curve any more.

In a monopoly, the supplier can determine the price. Right?

[Mid]

You are the last one I would have thought make this argument but that is fine. I have never said that cost is entirely irrelevant and conceded that it is a force the very start. Though to be sure I down played its importance. My only point has been that at the end of the day you can't sell a product for more than someone is willing to pay for it. Right? If oil is scarce and a lot of people want oil then the price of crude oil will go up independant of the cost to get the oil to market. If there is a glut of oil on the market and people are cutting back their consumption because the price of oil was high then the price of oil will fall regardless of cost, right? Further if no one wants my widgets at above cost then I will be willing to sell them for less to cut my costs (liquidation). And how much will I sell them for? As much as I can get. This is often refered to as "what the market will bear" which Art says is a misconception. Do you agree that "what the market will bear" is a misconception?

Whose right and whose wrong all depends on the type of assumptions you are making about the market, and the time line you're looking at. If we move away from the assumption of perfect competition then a number of different factors as well as cost comes into play, such as behaviour of your competitors etc.

[Kerberos]

No in a monopoly the quantity supplied is determined by the marginal cost and marginal revenue, however the price you charge at is dependent on the demand curve. Given that it's perfectly possible to have 2 different demand curves that give marginal revenue curves that cut the marginal cost curve at the same point then you can't have a unique relationship between price and quantity supplied and therefore no supply curve.

Of course all this is in the short run, whether you can keep a monopoly in the long run is another matter.
ETA: Nah you're right, no supply curve for a monopoly, I guess it's been to long since I took economics.

[Kerberos]

In a monopoly, the supplier can determine the price. Right?
Sure, but what has that got to do with anything, you can still calculate the price based on supply and demand and use that to determine the price the monopolist will set if he wishes to maximize his profit. presuming you have the right data of course.

[Mark]

Supply and demand still works in a monopoly situation, yes.

You have clearly never been involved with the operatons of a cable company in any given city.

This is changing now that satellite has provided competition, but until then cable companies could do anything they wanted within legal guidelines which had nothing to do with S&D.

[RandFan]

Supply and demand still works in a monopoly situation, yes. You are absolutely correct and my apologies to Art for suggesting otherwise.
However Art's suggestion that "what the market will bear" is a misconception is at odds with his own equation. Art emphatically demonstrates "what the market will bear" in his equation when he says:
There are 10 million people in the world that like widgets, and all of them would get one if they were free. However, every increase of one dollar in the price reduces the customer base by one million. 9,000,000 units sold at $1.00 per unit is "what the market will bear".
8,000,000 units sold at $2.00 per unit is "what the market will bear".
And so on.

ETA: The title of this thread obviously misstates Art's position and for that I apologize.

[BPSCG]

You have clearly never been involved with the operatons of a cable company in any given city. Ugh. George Will once wrote that football (US football, not the European variety) combines two of the worst characteristics of American culture: violence and committee meetings.

Cable companies combine two more: monopoly and government price regulation.

[shanek]

ETA: Nah you're right, no supply curve for a monopoly, I guess it's been to long since I took economics.

No, that's wrong; monopolies do have a supply curve as they'd still want to sell more of an item if its price is higher. The presence of competition changes the dynamic of it, of course.

[shanek]

You have clearly never been involved with the operatons of a cable company in any given city.

This is changing now that satellite has provided competition, but until then cable companies could do anything they wanted within legal guidelines which had nothing to do with S&D.

Cable companies most certainly found that there was a limit to the amount they could raise prices and still increase profits. That limit is way above what it would be with competition, but it still exists. As the price level rises, more people are going to decide they're just going to do without cable TV.

What if the cable companies had decided to charge $1,000,000 a month for their services? Do you really think they'd still have all of their subscribers?

[shanek]

You are absolutely correct and my apologies to Art for suggesting otherwise.
However Art's suggestion that "what the market will bear" is a misconception is at odds with his own equation. Art emphatically demonstrates "what the market will bear" in his equation when he says:
9,000,000 units sold at $1.00 per unit is "what the market will bear".
8,000,000 units sold at $2.00 per unit is "what the market will bear".
And so on.

ETA: The title of this thread obviously misstates Art's position and for that I apologize.
I agree. Thank you for clarifying.

[Mark]

Cable companies most certainly found that there was a limit to the amount they could raise prices and still increase profits. That limit is way above what it would be with competition, but it still exists. As the price level rises, more people are going to decide they're just going to do without cable TV.

What if the cable companies had decided to charge $1,000,000 a month for their services? Do you really think they'd still have all of their subscribers?

Of course not. But supply and demand was the least important aspect to what they were able to charge. Not non-existent, but very, very minor, since there was absolutely no competition. As evidenced by the fact that my own local cable company is now charging 1/2 of what they used to charge...and are offering $200 cash rebates to help buy people out of their satellite contracts.

Because now supply and demand can work fairly well, which they could NOT under a monopoly.

[Art Vandelay]

It seems counter intuitive to me to use a monopoly to prove that the concept of supply and demand is a misconception? Am I missing something here?Why, yes, you are. The original point of the thread was that cost is an important factor in price. While we were discussing that, you used the phrase "what the market will bear", which struck me as suggesting a misconception regarding economics. I presented a case as it applied to the latter, and then you asked how it would apply to the former. I then gave you an answer as to how it would apply to the former, and now you are complaining that it doesn't apply to the latter. Well, duh, of course not. You are confusing the two issues, and asking how an explanation of one position supports the other.

Furthermore, I never claimed that the concept of supply and demand is a misconception. I realize that my initial comment was rather vague and may have given that impression, but all I was saying was that "what the market will bear" is, in my opinion, a phrase that gives rise to a misleading mental image. It suggests that the final price is the place of maximum "stress" on the market, when in fact it is the opposite.

I have never said that cost is entirely irrelevant and conceded that it is a force the very start.You seem to have done your best to imply otherwise:
"The cost of a product has nothing to do with its selling price except that the selling price must be greater than cost."
"If costs to produce the product rise then the end price of the product will only rise if the market will bear the increased costs."
"If you look at the ratio of cost and selling price for a thousand arbitrary items you will find that there is no relationship to price."
"If cost were a function of price we would expect to see some uniformity in the price to cost ratio. But any analysis of any product will demonstrate that this simply is not true."
"If it were and the price of an item were based on cost then businesses would spend billions of dollars to retrieve rocks from the Himalayas and then sell them for billions of dollars because it cost so much to get them."
"It is a demonstrable fact that cost has little bearing on the end price of a product."
"No, the cost determines the minimum price. Aside from that there is NO relationship."
"The AMOUNT of the price does not depend on the cost."
"Your price had nothing what so ever to do with the cost."
"The price is based on your profit and NOT cost."
"No [, profit] wasn't [based on cost]. It was only based on what you were willing to accept."
"No kidding, and that profit was based on what you were willing to accept and not cost."

If there is a glut of oil on the market and people are cutting back their consumption because the price of oil was high then the price of oil will fall regardless of cost, right? Wrong. I will come back to this issue later, probably in the other thread.

Further if no one wants my widgets at above cost then I will be willing to sell them for less to cut my costs (liquidation).There's difference between sunk costs and marginal costs. I have already pointed that out.

As much as I can get. This is often refered to as "what the market will bear" which Art says is a misconception. Do you agree that "what the market will bear" is a misconception?If by "what the marker will bear", you mean "rational sellers sell at the highest possible price" then yes, that is a misperception. If you want to maximize the per widget price, then you should only sell some of them to keep them scarce. Furthermore, your use of "what the market will bear" implies that sellers control the price through how many they sell, but that is inaccurate. Sellers control only the price directly, and the amount sold follows from that.

RandFan9,000,000 units sold at $1.00 per unit is "what the market will bear".
8,000,000 units sold at $2.00 per unit is "what the market will bear".
So what is "what the market can bear"? Is it an amount, or a function? Is a price, or a quantity? In your previous use, you implied that it's an amount, and a price, but now you're implying that it's a quantity, and a function. If people sell something for "what the market will bear", then "what the market will bear" must be a price. But if 9,000,000 is "what the market will bear", then "what the market will bear" must be a quantity of units. If, for any product, there is a single amount of "what the market will bear", then it's an amount. If "what the market will bear" has different values depending on something else, then it's a function. So which of these is it? You now seem to be using "what the market will bear" as some sort of lay term in place of "the demand curve". If that's what you mean, why not just use "the demand curve"?

Kevin_LoweArt's quoted example is bogus because it assumes a monopoly, because it assumes no fixed or inelastic costs at all (both of which you pointed out), and because it assumes a smoothly downward sloping demand curve which is an economic fantasy.
1. It's rather ridiculous to say that a study of monopolies is bogus because it assumes a monopoly. Are you saying that any study of what would happen in a monopoly is bogus? Are monopolies not a valid field of economic study?!? RandFan claimed that, in my example, cost doesn't affect price. I showed that he's wrong. I don't see what the fact that it's a monopoly has to do with it. Seems like weaselling to me.
2. Once I've decided to sell widgets, fixed costs are irrelevant to my optimal pricing. Assuming continuity (which is of course a simplification), the optimal price will always have at least one of three properties: zero marginal profit, undefined marginal profit, or boundary condition. Fixed costs don't affect marginal profit, so that leaves undefined marginal profit/boundary conditions (i.e. not selling any).
Also, I am the one that pointed out that the cost model is a simplification.
3. I specifically invited RandFan to provide his own demand curve, which he ignored. If he believes that a different demand curve would be more realistic, he should have said so. I believe that this is a simplification which does not affect my central point. RandFan basically claimed that no matter what, cost is irrelevant. By showing just one situation in which it is relevant, I proved him wrong.

Mark But supply and demand was the least important aspect to what they were able to charge. Not non-existent, but very, very minor, since there was absolutely no competition.Just because there is no competition, that does not mean that supply and demand are unimportant. If cable companies are acting rationally, they will maximize profits. And the optimal price will change depending on demand.

[Kerberos]

No, that's wrong; monopolies do have a supply curve as they'd still want to sell more of an item if its price is higher. The presence of competition changes the dynamic of it, of course.
Monopolies will tend to produce more for a higher price, but you can't draw a supply curve like with a competitive market. As Mid says. there's no uniwue relationship between price and supply since it depends on the shape of the demand kurve.

[American]

While supply and demand holds once stability is reached, complexity arises when government/individuals/criminals/thieves/liberals/athiests/muslims/christians/jews can't tell the difference between a want and a need.

If one goes hungry while another buys luxury cars, any one of the above groups will claim the system to be broken - ignoring the fact that the hungry could well afford the drugs that made him hungry, and (in 2005) praising his drug-use as cool and enlightened, something to be emulated by wealthy suburban kids whose parents own luxury cars.

The state of Florida considered Viagra a need for sex offenders, entitled and paid for by taxpayers.

Refer to the above list of players for someone to blame.

[RandFan]

The original point of the thread was that cost is an important factor in price. While we were discussing that, you used the phrase "what the market will bear", which struck me as suggesting a misconception regarding economics. I presented a case as it applied to the latter, and then you asked how it would apply to the former. I then gave you an answer as to how it would apply to the former, and now you are complaining that it doesn't apply to the latter. Wrong, I never brought up monopolies. YOU were the one that introduced them here. Don't blame that on me.

Well, duh, of course not. You are confusing the two issues, and asking how an explanation of one position supports the other. I NEVER brought up monopolies!

...but all I was saying was that "what the market will bear" is, in my opinion, a phrase that gives rise to a misleading mental image. It suggests that the final price is the place of maximum "stress" on the market, when in fact it is the opposite. But this is proven wrong. You yourself state what the market will bear in your equation. Odd, don't ya think?


If by "what the marker will bear", you mean "rational sellers sell at the highest possible price" then yes, that is a misperception. What the market will bear is exactly what YOU say it is. What the market WILL BEAR (PLEASE SEE YOUR OWN EQUATION WHERE YOU STATE : There are 10 million people in the world that like widgets, and all of them would get one if they were free. However, every increase of one dollar in the price reduces the customer base by one million. )

I worked in advertising for 8 years and I have never seen a better example of "what the market will bear".

Art,

Please pay close attention.

Any debate is over. It was over the moment you gave us a text book example of what the market would bear. You gave us a hypothetical of 10 million people. Further you told us that the market would decrease for ever dollar increase in price.

THIS IS WHAT THE MARKET WILL BEAR!!!!!!!

Art, nothing that you can say will erase the fact that you defined perfectly an example based SOLELY on what THE MARKET WILL BEAR!

Look at your own hypothetical. The market will bear --

10,000,000 at $0.00 price.
9,000,000 at $1.00 price.

Yes? No?

The math is inescapable and no amount of dancing, rhetoric or BS will EVER change the fact that you demonstrate precisly WHAT THE MARKET WILL BEAR. You can argue that cost plays a part but then I NEVER denied that.

The ball is in your court to prove that you did NOT define what the market will bear in your hypothetical. YES OR NO?

I know it is tough. It was tough when I admitted that I was arguing from ignorance. It was tough when I apologized for claiming something that you didn't assert. Now, do you have the balls to admit the obvious that your equation was a textbook example of "what the market will bear" or will you weasel out and not respond or make up some BS that no one will buy?

The ball is in your court.

Oh, and one more thing, if you honestly thinK your example isn't an example of what the market will bear then WHAT THE SAM HELL DO YOU THINK WHAT THE MARKET WILL BEAR MEANS?

[Abdul Alhazred]

You have clearly never been involved with the operatons of a cable company in any given city.

This is changing now that satellite has provided competition, but until then cable companies could do anything they wanted within legal guidelines which had nothing to do with S&D.

Sure they could set any price they pleased, but you still always had the option of not buying cable service at all.

This affects what price they actually charged.

[Mark]

Sure they could set any price they pleased, but you still always had the option of not buying cable service at all.

This affects what price they actually charged.

You missed my follow up post. S&D had an effect, just not that much.

[shanek]

Of course not. But supply and demand was the least important aspect to what they were able to charge. Not non-existent, but very, very minor, since there was absolutely no competition.

I agree that supply and demand is very limited in a monopolistic environment, but what else could possibly factor in to what they charge? In either case, the company is going to charge as much as they can to maximize profits, and if they charge more than that, if they have any sense, then they'll drop their price. That's the essence of supply and demand.

The only other aspect I can think of, that takes place with a monopolistic environment but not a competitive one, is that there is a greater chance that the one and only company that exists for that service will not have any sense and charge way too much to their own detriment. In a competitive market, other competitors with good sense will undercut them and they'll lose business, forcing them to cut their price or go out of business.

But other than that, I don't see how anyone can say that supply and demand doesn't exist in a monopolistic market.

[Art Vandelay]

Any debate is over. It was over the moment you gave us a text book example of what the market would bear.No, the debate was over when you decided that you weren't going to listen to anything I say. You've made it quite clear that trying to reason with you is futile, and the only thing left is to show other readers that you are being unreasonable. But I think you've done quite well in that regard all by yourself.

MarkYou missed my follow up post. S&D had an effect, just not that much.I'm not clear on what you're saying here. Are you saying the when competition was introduced, it didn't change pricing much? Doesn't that suggest that even without competititon, S&D was already having an effect?

[RandFan]

No, the debate was over when you decided that you weren't going to listen to anything I say. Demonstrably untrue. And please note that when showed wrong I admitted that fact and apologized.

You've made it quite clear that trying to reason with you is futile, and the only thing left is to show other readers that you are being unreasonable. But I think you've done quite well in that regard all by yourself. I have twice admitted when I was wrong.


When you demonstrated that I was arguing from ignorance.
When I realized (on my own) that my thread title misstated your position.Odd way of being unreasonable.

You've made it quite clear that trying to reason with you is futile, and the only thing left is to show other readers that you are being unreasonable. Aside from personalizing this is disingenuous. Just because I disagree with you doesn't mean that you are making reasonable arguments. Further and more important it is clear that it is you that is refusing to listen to me.

From the start I agreed that cost was a factor. I have only had one point and that is that supply and demand is a greater factor. If what the market will bear is less than cost then the company will:

Sell at a loss (liquidate at below cost)
Destroy the products (typical in food production)
Donate to charity.

In each of these situations costs was a factor because it helped the seller make a decision but a price could not be set at greater than cost. Major factor? Supply and demand.

[Art Vandelay]

Demonstrably untrue.You really love that phrase, don't you? How about instead of claiming that something is demonstrably untrue, you actually demonstrate it to be untrue.

And please note that when showed wrong I admitted that fact and apologized.Twice. There are several dozen other issues on which you have refused to accept that you are wrong.

Odd way of being unreasonable. You know what I call someone who is sometimes unreasonable, and sometimes reasonable? Unreasonable.

Aside from personalizing this is disingenuous. Just because I disagree with you doesn't mean that you are making reasonable arguments. Just because you disagree with me and I say that you are being reasonable, that does not mean that I am basing my accusation on your disagreement. Implying otherwise is disgenuous, and just further proves my point.

Further and more important it is clear that it is you that is refusing to listen to me.If you're so reasonable, you can't look at that list I posted and claim that your position is clear.

From the start I agreed that cost was a factor. I have only had one point and that is that supply and demand is a greater factor. No, you didn't. In your second post, you claimed that there is NO RELATIONSHIP.

[RandFan]

You really love that phrase, don't you? How about instead of claiming that something is demonstrably untrue, you actually demonstrate it to be untrue. I can only post it. I have demonstrated it over and over again. There is not much more I can do.

Twice. There are several dozen other issues on which you have refused to accept that you are wrong. I am NOT wrong.

You know what I call someone who is sometimes unreasonable, and sometimes reasonable? Unreasonable. Just because I don't agree you with doesn't make me unreasonable.

Just because you disagree with me and I say that you are being reasonable, that does not mean that I am basing my accusation on your disagreement. Implying otherwise is disingenuous, and just further proves my point. Sophistry.

If you're so reasonable, you can't look at that list I posted and claim that your position is clear. This does not look like a logically valid statement. What do you mean? What list BTW?

No, you didn't. In your second post, you claimed that there is NO RELATIONSHIP. I was not clear. The point of that post was to demonstrate that there is no uniformity in the ratio of price to cost. I will concede that some of my statements have not been clear. I have tried to make them clear as time goes by.

Cost is only a factor in that cost determines profit and since businesses exist to make a profit then cost must be taken into account. I accepted your equation. However in the end supply and demand are the prime factors. Just because cost is a factor in profit doesn't mean you can charge a price commensurate to cost.

Facts that I have demonstrated:

There is no formula that would predict the cost of a product based on price.
There is no ratio of price to cost.
There is no minimum price based on cost (except one that would determine a profit) and companies set prices below cost all of the time.
There is no maximum price based on cost.Now, would you apologize and withdraw the bald face lies you told about me in this post (http://forums.randi.org/showthread.php?postid=1217036#post1217036)?

[Art Vandelay]

Just because I don't agree you with doesn't make me unreasonable.You say this, then I try to explain to that this is a strawman, and you post it AGAIN? It seems like every post you make is yet another piece of evidence of your unreasonableness. And you claim to be listening to me? Just because you quote my post, that doesn't mean you're responding to it.

Sophistry.What is sophist about it?

What list BTW?The list of all your different statements about the unimportance of cost.

Now, would you apologize and withdraw the bald face lies you told about me in this post (http://forums.randi.org/showthread.php?postid=1217036#post1217036)?Name one. (Oh, and that link goes to one of your posts, so clearly I made no statements, lies or otherwise there).

You should apologize for calling me a liar with nothing but your delusions to back it up.

[RandFan]

You say this, then I try to explain to that this is a strawman, and you post it AGAIN? How is it a strawman? It is a logical statement of fact. Calling it a strawman won't change anything.

It seems like every post you make is yet another piece of evidence of your unreasonableness. Only because you take yourself so seriously.

And you claim to be listening to me? Just because you quote my post, that doesn't mean you're responding to it. I don't just quote you I address what you say. You are just making empty claims. You have lied repetedly and when called on it you pretend as if I didn't call you on your lies. Who ISN'T listening to who?

What is sophist about it? Your argument assumes facts not in evidence. You simply make a claim, don't prove the claim, and then base a conclusion on that claim. Sophistry.

The list of all your different statements about the unimportance of cost. I remember some quotes you took out of context. I also remember some bald face lies you told about me.

Name one. This one. RandFan has already said that he isn't going to listen to anything I have to say This is a lie!

(Oh, and that link goes to one of your posts, so clearly I made no statements, lies or otherwise there). That "post" contains a statement by you that is a lie. Do you really think you are the one that is looking reasonable here?

You should apologize for calling me a liar with nothing but your delusions to back it up.

Ahhh... let me get this straight, you think that I am delusional (http://dictionary.reference.com/search?q=delusional) and you want me to appologize for it?

:hit:

[Art Vandelay]

How is it a strawman? It is a logical statement of fact. Calling it a strawman won't change anything.You implied that I was claiming that because you don't agree me, that makes you unreasonable. That is a strawman.

I don't just quote you I address what you say. No, you don't. I just showed that you didn't. A fact that you did not address. Further proving my point.

Who ISN'T listening to who?I'm listening to you, I just think you're full of crap.

Your argument assumes facts not in evidence. What facts?

You simply make a claim, don't prove the claim, and then base a conclusion on that claim. :rolleyes:
Pot, kettle.
What claim did I make?

This one. This is a lie!It's my interpretation of your declaration that the debate is over.

Ahhh... let me get this straight, you think that I am delusional (http://dictionary.reference.com/search?q=delusional) and you want me to appologize for it?
More dishonesty from you. I never said any such thing. I said that you should apologize for your accusations of lying. A bit hypocritical to accuse me of lying, then misrepresent my position, eh?

[Roboramma]

While supply and demand holds once stability is reached, complexity arises when government/individuals/criminals/thieves/liberals/athiests/muslims/christians/jews can't tell the difference between a want and a need.

Personally I blame everything on the individuals.

[RandFan]

You implied that I was claiming that because you don't agree me, that makes you unreasonable. That is what you said.

No, you don't. I just showed that you didn't. A fact that you did not address. Further proving my point. Yes I do, no you didn't.

I'm listening to you, I just think you're full of crap. Likewise.

It's my interpretation of your declaration that the debate is over. BS. That I think the debate is over does NOT mean that I won't listen to you. Never has, never will. Not once did I refuse to respond, not once. Saying that the debate is over does not translate into a refusal to listen.

More dishonesty from you. I never said any such thing. I said that you should apologize for your accusations of lying. ??? You are truly amazing to claim something that is so easy to prove.

Art
You should apologize for calling me a liar with nothing but your delusions to back it up.

RandFan
...you think that I am delusional (http://dictionary.reference.com/search?q=delusional) and you want me to appologize for it A person who has delusions is by definition delusional. Duh!

A bit hypocritical to accuse me of lying, then misrepresent my position, eh? You said "delusions", sorry dude but you have been caught lying again.

[Mark]

No, the debate was over when you decided that you weren't going to listen to anything I say. You've made it quite clear that trying to reason with you is futile, and the only thing left is to show other readers that you are being unreasonable. But I think you've done quite well in that regard all by yourself.

MarkI'm not clear on what you're saying here. Are you saying the when competition was introduced, it didn't change pricing much? Doesn't that suggest that even without competititon, S&D was already having an effect?

I am saying that when real competition was introduced, the price went down.

[Q-Source]

I'm having a debate with Art Vandelay in this thread (http://forums.randi.org/showthread.php?t=45380) over in the Science forum. The OP takes Marilyn Vos Savant to task for declaring "the cost of a product has nothing to do with its selling price."




In a way both of you are right when you defend your arguments but also are wrong in your reasons to attack your opponent’s point of view.

In perfect competition, the equilibrium price and quantity are set SIMULTANEOUSLY by the market force of supply and demand. In other words QS=QD at price P.

S and D are supply and demand functions, each of them depending on a price that maximises the producer’s profit and consumer’s utility. Let's concentrate only on the producers function since the contention here is whether or not they can affect prices, a simplified version of their function is:

Q= f( costs, p) This means that the quantity supplied by the producers depends on their production costs and a price given by the market. However if we clear for p, we can express this function as:

p= f( costs, Q) So, yes. Producers can affect prices through production costs and quantity supplied. For example, a change in production costs is going to shift the supplied curve up and down along the demand curve. Something like this, but up instead of down http://upload.wikimedia.org/wikipedia/en/8/8b/Supply_curve_shift.png

A real example is fuel, oil is an important component of total costs for many firms (let’s say airlines), a rise in oil prices is going to increase costs and reduce the quantity supplied. Obviously prices will have to go up.

So in this respect Art Vandelay is completely right. :)

But as I said before, RanFan is also right, why?, because the price can only move along the demand curve. Although the price is going to go up if costs increase, they will be constrained by the consumers demand. The final (equilibrium) price will be set simultaneously by both forces.

The reasoning works similar with imperfect competition. Although the price is decided by monopolists, this is also constrainted by demand.

[RandFan]

In a way both of you are right when you defend your arguments but also are wrong in your reasons to attack your opponent’s point of view.
In perfect competition, the equilibrium price and quantity are set SIMULTANEOUSLY by the market forces of supply and demand. In other words QS=QD at price P.

S and D are supply and demand functions, each of them depending on a price that maximises the producer’s profit and consumer’s utility. If we only concentrated on the producers function since the contention here is whether or not they can affect prices, a simplified version of this is:

Q= f( costs, p) This means that the quantity supplied by the producers depends on their production costs and a price given by the market. However if we clear for p, we can express this function as:

p= f( costs, Q) So, yes. Producers can affect prices through production costs and quantity supplied. For example, a change in production costs is going to shift the supplied curve up and down along the demand curve. Something like this, but up instead of down http://upload.wikimedia.org/wikipedia/en/8/8b/Supply_curve_shift.png

A real example is fuel, oil is an important component of total costs for many firms (let’s say airlines), a rise in oil prices is going to increase costs and reduce the quantity supplied. Obviously prices will have to go up. Depends on how high the prices go up. Depends on the market for those goods. If there is a product where the market will not bear an increase in price then the producer of that product or services then the producer will have to make cuts elsewhere or go bust. I'm an insurance inspector and auditor. My clients have told me that they will not increase payments to cover transportation costs because my competition is holding steady at this moment. If oil prices remain high or continue to rise then those prices will change OR the insurance companies might dertermine that it is not cost effective to audit many policies. But yes, I have always admitted that cost can influence price.

So in this respect Art Vandelay is completely right. :) I respectfully disagree only with the point noted.

But as I said before, RanFan is also right, why?, because the price can only move along the demand curve. Although the price is going to go up if costs increase, they will be constrained by the consumers demand. The final (equilibrium) price will be set simultaneously by both forces.

The reasoning works similar with imperfect competition, although the price is decided by monopolists, this is also constrainted by demand. Fair enough. I will stipulate to this. I wonder if we could get Art to agree?

[Art Vandelay]

That is what you said.Where? Quote me.

BS. That I think the debate is over does NOT mean that I won't listen to you. Never has, never will. Not once did I refuse to respond, not once. Saying that the debate is over does not translate into a refusal to listen. Responding isn't the same thing as listening. Your post made it quite clear that you would not be seriously entertaining the possibility that you are wrong, and anyone in their right mind would agree. A debate is when two people offer arguments on an issue. To say that the debate is over is to say that there are no more arguments to be made.

You said "delusions", sorry dude but you have been caught lying again.
So what you claim I said and what I actually said share a single word, therefore I'm lying? I did not say what you said. YOU LIED. Admit it.

[Melendwyr]

In a monopoly, the supplier can determine the price. Right? But if the supplier sets the price far beyond what anyone is willing to pay, no one will buy. The elimination of competition makes prices more responsive to pure demand.

"We know the worth of water when the well is dry." - Benjamin Franklin

[President Bush]

I am NOT wrong.

http://www.bradblog.com/Images/Debate3_BushSpittleA.jpg

Whoa! Somebody said it again. Write it down fast before I forget: "I am NOT wrong... I am NOT wrong." I kinda like "I am not WRONG." Or "I AM NOT wrong"... maybe just "I AM NOT WRONG!"

[RandFan]

Responding isn't the same thing as listening. I would NOT respond if I didn't listent. Otherwise what is the point?

Your post made it quite clear that you would not be seriously entertaining the possibility that you are wrong... No. Unlike you, when I'm shown wrong I admit it and I appologize. You simply ignore it.

So what you claim I said and what I actually said share a single word, therefore I'm lying? By definition to have delusions is to be delusional. It is a logical conclusion.

Stating that an argument is over is not by definition "saying" that I refuse to listen to you.

Not even a nice try.

[epepke]

From what I can see, it looks like Marilyn's original statement was overly strong (if it was correctly reported, which is in doubt), and that Art made some blunders in an attempt to show off a limited knowledge of academic economic theory.

If you read Marilyn's columns, you'll see that quite a lot of them are oversimplified to the point of fatuity.

[Q-Source]

Depends on how high the prices go up. Depends on the market for those goods. If there is a product where the market will not bear an increase in price then the producer of that product or services then the producer will have to make cuts elsewhere or go bust.

It does not matter how much the price goes up. It still goes up. Yes, you are right, the final price will depend on the elasticity of the demand for that product. Nevertheless, if costs increase, the final price still increases, that was my point.

I notice that you are confused about how the market forces work. You seem to imply that the price will have to decrease if there is no demand at higher levels. Well that is not correct. The demand has to adjust to the new equilibrium price, only those consumers who can afford a higher price will buy that product. This means that the demand also reduces, it does not stay constant as you think in your example.

Remember that producers are rational agents (they only sell products when they maximise their profits). The equilibrium price GUARANTEES this condition. This is a fact.

[Mark]

But if the supplier sets the price far beyond what anyone is willing to pay, no one will buy. The elimination of competition makes prices more responsive to pure demand.

"We know the worth of water when the well is dry." - Benjamin Franklin

That is absurd.

Please explain why, when satellite provided competetion, cable companies all lowered their prices to try and keep customers.

[Manny]

I think you're confusing his use of the term "more responsive to pure demand" with "better responsive to pure demand," Mark. You're example is separate from what he's saying, and actually kind of demonstrates it in a backwards kind of way. When cable was a monopoly, the supply curve didn't really shift all that much -- sure, ESPN would jack their rates and thus increase programming costs, but much of cable's costs are fixed. As a monopoly producer, they were free to set artificially high costs and get away with it. The only thing which would affect their pricing decision was a shift in the demand curve. People wanted more TV, cable raised its price. If there would have been a large decrease in demand, cable would have had to cut its price. In other words, price responded to demand changes, but not to supply changes as there really weren't any. (it's more complicated than that, of course, but that'll have to suffice for illustrative purposes)

Enter satellite (full disclosure: I've made a bundle off of satellite. I'm gonna name my first boat the Echostar I). Well, now you've got more than one supplier. From a monopoly to a duopoly (OK, more than that, but not a ton of competitors), and not some cozy duopoly where they work out market shares in some back room. No, DirectTV and Echostar hated cable and wanted to hurt them. So while demand for TV continues to increase, prices moderate or even come down in some cases. Which is to say, prices are responsive to both supply (which increased by a large amount) and demand (which increases along pretty much its same plodding path). Better outcome, but less "responsive to pure demand."

[Mark]

I think you're confusing his use of the term "more responsive to pure demand" with "better responsive to pure demand," Mark. You're example is separate from what he's saying, and actually kind of demonstrates it in a backwards kind of way. When cable was a monopoly, the supply curve didn't really shift all that much -- sure, ESPN would jack their rates and thus increase programming costs, but much of cable's costs are fixed. As a monopoly producer, they were free to set artificially high costs and get away with it. The only thing which would affect their pricing decision was a shift in the demand curve. People wanted more TV, cable raised its price. If there would have been a large decrease in demand, cable would have had to cut its price. In other words, price responded to demand changes, but not to supply changes as there really weren't any. (it's more complicated than that, of course, but that'll have to suffice for illustrative purposes)

Enter satellite (full disclosure: I've made a bundle off of satellite. I'm gonna name my first boat the Echostar I). Well, now you've got more than one supplier. From a monopoly to a duopoly (OK, more than that, but not a ton of competitors), and not some cozy duopoly where they work out market shares in some back room. No, DirectTV and Echostar hated cable and wanted to hurt them. So while demand for TV continues to increase, prices moderate or even come down in some cases. Which is to say, prices are responsive to both supply (which increased by a large amount) and demand (which increases along pretty much its same plodding path). Better outcome, but less "responsive to pure demand."


I agree with you...prices respond to both. I was responding to this sentence:

The elimination of competition makes prices more responsive to pure demand.

Which is absurd. It may apply if the product is something no one needs in any way, but mass media access is not one of those things in this modern world.

[RandFan]

It does not matter how much the price goes up. It still goes up. Yes, you are right, the final price will depend on the elasticity of the demand for that product. Nevertheless, if costs increase, the final price still increases, that was my point. Sometimes markets for some products just dry up when the price rises too high. Not enough people are interested at the product at the increased price and so the price must be lowered or the inventory must be eliminated.

I notice that you are confused about how the market forces work. You seem to imply that the price will have to decrease if there is no demand at higher levels. Well that is not correct. The demand has to adjust to the new equilibrium price, only those consumers who can afford a higher price will buy that product. This means that the demand also reduces, it does not stay constant as you think in your example. You are correct that often the market needs to adjust. But sometimes the price does need to be adjusted. I worked for a company that sold a magazine. In the mid 90's paper prices rose at unprecedented rates. To keep the price down we changed paper stocks and took other steps to keep the price down. When we eventually raised the price there was sever sticker shock and we could not move magazines. We lowered the price and were able to make a profit for a couple more years but eventually we discontinued the magazine.

My point is that there are examples where the price for a specific product must come down. However, the prices for magazines in general have increased in price since the rise in paper costs. This is the point that Art is trying to make. However there are exceptions. Some products even across the entire market just can't generate enough interest to continually raise prices. They have a name for these things, they are called "discontinued".

Remember that producers are rational agents (they only sell products when they maximize their profits). The equilibrium price GUARANTEES this condition. This is a fact. No question. You are absolutely correct. That is the point. If the price needs to be lowered because the producer raised the price too high then he can. There are no magical equations to determine price. When I was in sales working for an import export company we would conduct market surveys and test markets. We would market the same product using different prices in different ads. The price that would result in the most units sold is the price we would set that product at. In our test markets we would never set the price below cost because that would defeat the purpose. Cost is an issue but only as to the minimum that one can charge and still make a profit. In the end the price is still determined on what the market will bear which is a combination of what the buyer is willing to pay and what the producer will accept and yes, cost does indeed influence what the producer is willing to accept which is the point that you and Art are making. In which case I agree.

[Manny]

I agree with you...prices respond to both. I was responding to this sentence:

The elimination of competition makes prices more responsive to pure demand.

Which is absurd. It may apply if the product is something no one needs in any way, but mass media access is not one of those things in this modern world.Right, but it's not an absurd statement. It only seems that way because, I think, that you are reading too much into it.

In your example of cable, your analysis of the demand curve is exactly correct. Demand is high, increasing, and relatively inelastic. In a monopoly situation, that allows the provider to set a price not only above his marginal cost like other monopolists, but far above his marginal costs. But once set, it's changes in future demand which drive prices, not changes in future supply (because as a monopoly, there aren't any). That's all the guy is saying (I think).

Imagine a large demand shift downward. Say that we all got off our tucchuses and decided that a portion of our home entertainment budget would be reallocated to hiking boots and mountain bikes. Something like that would get even a monopolist's attention and move the price. In a competitive market, it might not move the price that much because the reduction in demand would be met with a reduction in supply as high-cost producers exited the market. So while in virtually all cases monopoly results in less efficiency, higher prices and less utility the statement that prices are more responsive to pure demand is true. It's true largely because there are excess profits in the system, all belonging to the one monopolist, to play with.

[Melendwyr]

That is absurd. No, it's not.

When the providers of a product or service aren't forced to compete with other providers of that product or service, they can charge whatever people are willing to pay for their goods. If people can only get something they want from a single source, they'll pay up to the maximum value of those goods to get them. If the price goes above their estimation of the goods' value, they won't buy.

Once there is more than one possible source for the goods, people will purchase them from whoever offers the best deal; if the goods offered are equivalent, people will go to the lowest price.

Please explain why, when satellite provided competetion, cable companies all lowered their prices to try and keep customers. What do you mean, 'explain'? That's a perfect example of my earlier statement. People were willing to pay a certain price for entertainment, but not an unlimited price. If the price were raised higher and higher, eventually fewer and fewer people would wish to purchase. The people who did purchase the service believed that what they were getting in return was worth at least what they were paying for it -- if they didn't, they wouldn't have bought it in the first place.

If there's competition, and one provider offers the same service for a lower price, people will get the same amount of value for less money, so they'll go to the cheaper equivalent service. Prices will tend to come down as the providers fight to attract customers - thus, the prices people pay are no longer directly tied to their desire for the product.

If I were dying of thirst, and there was only one person I could buy water from, I'd be willing to pay $100 for a gallon. If there were two people, and one charged $100 for a gallon and the other charged $1, I'd go to the guy selling for $1. My estimation of the water's value wouldn't have changed - I need it to live! - but I would go to the source with the lowest price. The guy selling for $100 would have to lower his price if he wanted to stay in business - thus, the price of water is no longer tied to the estimation of its value by the consumers.

[Art Vandelay]

By definition to have delusions is to be delusional. It is a logical conclusion.That is a complete non sequitur. Mind defending the claim I am actually disputing rather than some strawman?

Stating that an argument is over is not by definition "saying" that I refuse to listen to you.So if someone tells you that the debate is over and you have no choice to agree with them, you would in no way think this is indicative of a refusal to listen to opposing points of view?

When I was in sales working for an import export company we would conduct market surveys and test markets. We would market the same product using different prices in different ads. The price that would result in the most units sold is the price we would set that product at. In our test markets we would never set the price below cost because that would defeat the purpose. Cost is an issue but only as to the minimum that one can charge and still make a profit.If this was your practice, then you were acting irrationally. The most important factor is maximizing profit, not maximizing units sold. And when calculating profit, you need to take cost into account.

I notice that you are confused about how the market forces work. You seem to imply that the price will have to decrease if there is no demand at higher levels. Well that is not correct. The demand has to adjust to the new equilibrium price, only those consumers who can afford a higher price will buy that product. This means that the demand also reduces, it does not stay constant as you think in your example.While I don't want to quibble with someone who basically agrees with me, I think that it is important to note that economists draw a distinction between "demand" and "quantitiy demanded". The former is a function, while the latter is an amount. A higher price results in a lower amount demanded, but the demand stays the same.

[CapelDodger]

Which is absurd. It may apply if the product is something no one needs in any way, but mass media access is not one of those things in this modern world.Mass media access is only necessary because the modern world is a result of lots of it, for many decades. There's a critical mass. Populist programmes have to be aimed at enough people that not knowing about them becomes a social handicap. (One I flaunt, but most people aren't like us).

There are, in general, two ideal prices for a monopoly product. One is absurdly high, but sells to the absurdly rich as a status-symbol. The other is lower but has a larger demand. Sometimes the higher solution involves i. :) Sky was never going to sell to the absurdly rich as a status-symbol.

[RandFan]

So if someone tells you that the debate is over and you have no choice to agree with them, you would in no way think this is indicative of a refusal to listen to opposing points of view? But I didn't say that I had no choice to agree. I was talking smak that the debate was over. Evidence by the fact that the debate is still going on... at least it was. See my post in the other forum.

[Q-Source]

But sometimes the price does need to be adjusted. I worked for a company that sold a magazine. In the mid 90's paper prices rose at unprecedented rates. To keep the price down we changed paper stocks and took other steps to keep the price down. When we eventually raised the price there was sever sticker shock and we could not move magazines. We lowered the price and were able to make a profit for a couple more years but eventually we discontinued the magazine.

I understand your point but you are mixing what happens at the individual level to what happens at the general level. Yes, a single producer has to "adjust" his price up and down in order to stay in the market because as an individual he has to take market prices as given, by this I mean that the demand curve that he faces is horizontal (he cannot influence prices, unless he is a monopolist). Therefore, either he reduces his price or he is out of business.

However, at the aggregate level (which is what I've been talking about), the industry faces a downward demand, so the equilibrium price is simultaneously determined by the market force. This means that, at this level, the producers are NOT going to adjust their price up and down in order to satisfy the demand. The reason is that when supply and demand meet, the price is simultaneously determined by both forces. In other words, there is an equilibrium price where quantity demanded equals quantity supplied.


This is the equilibrium price set by the market. Individual firms for which you have worked have to take this price as given and then adjust their costs or margin of profits in order to sell. And I suppose this is the point that you are defending, but if you generalise this behaviour to the whole then you are wrong.

[Q-Source]

While I don't want to quibble with someone who basically agrees with me, I think that it is important to note that economists draw a distinction between "demand" and "quantitiy demanded". The former is a function, while the latter is an amount. A higher price results in a lower amount demanded, but the demand stays the same.

Of course, the supply curve moves along the demand function.

[Bodhi Dharma Zen]

No, the debate was over when you decided that you weren't going to listen to anything I say. You've made it quite clear that trying to reason with you is futile, and the only thing left is to show other readers that you are being unreasonable. But I think you've done quite well in that regard all by yourself.

Nope. I see that you are the unreasonable one.

[drkitten]

If this was your practice, then you were acting irrationally. The most important factor is maximizing profit, not maximizing units sold.


Not if the company's goals include long-term as well as short-term profit. By establishing a dominant market position now (which includes maximizing units sold), the company may be able to establish a much more profitable long-term revenue stream, by raising the barrier to entry for other companies.

Think of the old Gilette strategy, before disposible safety razors became popular. The razors themselves were often priced at below cost, specifically to create a market for the Gillette blades that fit them. "Give them the razor, sell them the blades." Microsoft is using a close variation of this strategy today in their marketing of the XBox, trying to maximize the number of units sold and pre-establish a market for XBox game cartridges.

One more way in which theoretical economics fails to match the real world.

[RandFan]

I understand your point but you are mixing what happens at the individual level to what happens at the general level. No, I went out of my way to distinguish between the two. I really do understand your point. I'm sorry I'm not communicating that to you. This is precisely why I said

However, the prices for magazines in general have increased in price since the rise in paper costs." Please note the emphasised word "general".

However, at the aggregate level (which is what I've been talking about), the industry faces a downward demand, so the equilibrium price is simultaneously determined by the market force. This means that, at this level, the producers are NOT going to adjust their price up and down in order to satisfy the demand. The reason is that when supply and demand meet, the price is simultaneously determined by both forces. In other words, there is an equilibrium price where quantity demanded equals quantity supplied. No argument whatsoever. I think perhaps you are focusing on the semantics of what I'm saying and missing my point.

This is the equilibrium price set by the market. Individual firms for which you have worked have to take this price as given and then adjust their costs or margin of profits in order to sell. And I suppose this is the point that you are defending, but if you generalise this behaviour to the whole then you are wrong. The "whole" is but a collection of individual businesses who constantly monitor the market and adjust price to meet the needs and desires of the market. When you say the price is set by the market how does one know what the price is? There is no kelly blue book for Tylenol.

[Art Vandelay]

Wrong, I never brought up monopolies. YOU were the one that introduced them here. Don't blame that on me.I never claimed that you DID bring up monopolies. Most of the times you've "proved" me wrong, you've either attacked a strawman, or simply posted non sequitors and claimed victory.

But this is proven wrong. My opinion is proved wrong? Kinda contradicts the definition of "opinion", doesn't it?

What the market will bear is exactly what YOU say it is.Funny, I don't recall giving a definition.

I worked in advertising for 8 years and I have never seen a better example of "what the market will bear".An example is quite different from a definition.

Any debate is over. It was over the moment you gave us a text book example of what the market would bear. So I say that it's a misleading term, you say that I've presented an example in which you would use the term, therefore all debate is over? WTF?

The ball is in your court to prove that you did NOT define what the market will bear in your hypothetical. YES OR NO?You ask the question, but you also make it clear that you've made up your mind. Why bother asking a question when you already think you know the answer? You haven't done anything to prove that I defined "what the market will bear", the ball is still in your court. Have I provided an example of what you consider "what the market will bear"? Probably. But it's rather silly to ask me that, as only you can answer it.

Now, do you have the balls to admit the obvious that your equation was a textbook example of "what the market will bear" or will you weasel out and not respond or make up some BS that no one will buy?This is known as "poisoning the well", and indicates that the poster isn't planning on listening to anything the other person says. You present three option: agree with what you say, not respond, or post "BS". The clear implication is that you consider those the only possibilities, and you will dismiss anything I say as "BS" if I don't agree with you. It doesn't take much intelligence to read between the lines and see that what you're saying is "I've made up my mind, at I'm not going to listen to anything you have to say contrary to that".

Oh, and one more thing, if you honestly thinK your example isn't an example of what the market will bear then WHAT THE SAM HELL DO YOU THINK WHAT THE MARKET WILL BEAR MEANS?I've been trying to get you to answer that, and your failure to answer supports my contention that the term does not aid clarity.

[Art Vandelay]

Nope. I see that you are the unreasonable one.How so?

Not if the company's goals include long-term as well as short-term profit. By establishing a dominant market position now (which includes maximizing units sold), the company may be able to establish a much more profitable long-term revenue stream, by raising the barrier to entry for other companies.But the goal still is not maximizing units sold; that is merely a means to an end. The end is profit. Yes, they are giving up current profit, but only to get more future profit. The end goal is still profit.

[CapelDodger]

Not if the company's goals include long-term as well as short-term profit. By establishing a dominant market position now (which includes maximizing units sold), the company may be able to establish a much more profitable long-term revenue stream, by raising the barrier to entry for other companies.On what does that increased long-term revenue stream depend? On a dominant market position, established in the early hair-shirt days and then exploited later on when competition is limited. Who can come from mass-retail ambition and break through like WalMaArt did, when WalMart already did? Who can break through MicroSoft, like they did, or Cisco, like they did? Free markets inevitably lead to oligarchy, if not monopoly (which, in its ideal form, is rare).

[CapelDodger]

Of course, the supply curve moves along the demand function.The problem with the supply curve is that it assumes a multiplicity of points. When it comes to such subjects as refining capacity, the curve becomes a more stepped, discontinuous feature. Demand keeps the curve, because it depends on many consumers making choices. Supply is not always so malleable.

[RandFan]

{snip} Snore... My last response was 11 days ago. Sorry you missed it. See this link (http://forums.randi.org/showthread.php?postid=1221547#post1221547).