Re: Cause and Effect Reversed?

At 10:24 10/02/2000, Leif Svalgaard wrote:

>I think we are converging here. My real gripe was with Pete's statement
>that the pricing formula determines the size of your production run, I think
>this is backwards at least when applied to the AS/400. I don't think
>the argument can be made that:  "I'm not going to sell you one, because
>doing so does not maximize my profit".

That's not my point at all. If you have the correct price function, you 
will run out of customers at precisely the same time you run out of 
product. The price point determines the number of units that you will sell 
because it determines how many customers will want it, and you will have 
employed the algorithm to determine what that price point should be in 
order to maximize your profit. If you run out of product while there is 
still demand, or you end up with excess inventory, then you do not have the 
correct price/sales-volume correlation.


Pete Hall
pbhall@execpc.com
http://www.execpc.com/~pbhall/

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