RE: Cause and Effect Reversed?

["Shaw, David" <dshaw@xxxxxxxxxxx>]

Leif,

Pete is clearly stating the classical price-setting algorithm that marketing
folks in any industry are taught to use.  What you are describing, customers
requesting the product after the planned production run is used up, is not a
consequence of the algorithm itself, but a consequence of underestimating
the demand for the product.  That doesn't invalidate the algorithm.  In
fact, from an economic perspective a prediction of micro-economic theory is
that even if this algorithm isn't used explicitly in a market, prices and
unit quantities sold will still tend to approach the values suggested by the
algorithm - that's the effect of entities which seek to maximize their
profits competing in a market.

Dave Shaw
Spartan International, Inc.
Spartanburg, SC

-----Original Message-----
From: Leif Svalgaard [mailto:leif@leif.org]

From: Pete Hall <pbhall@execpc.com>
> At 10:10 09/28/2000 , Leif Svalgaard wrote:
> >the potential market depends on the final price, so you have an infinite
> >regress here.
> >Anyway, that is NOT how mass-market software is priced.
>
> It's not really all that mysterious, although it does intuitively seem
backward
<snip>
> IOW, there is a finite price that will yield a maximum profit, and that
determines
> the size of your production run.

so when you have sold the number of units that maximizes your profit, i.e.
when your production run is exhausted, you stop selling your product,
even if you have customers begging for more.

get real.
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