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Market theory of pricing

Should manufacturers be allowed to force the retailers that carry their products to sell the manufacturers' products at the prices specified by the manufacturers?



Consider this question from the Manufacturer, Retailer, and Buyer viewpoint

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Price is the only element in the marketing mix that produces revenue and the other element produces costs. Price is a measure of value in exchange (strictly speaking, nothing really has a price until it is offered in exchange). Price may be expressed in monetary terms (a sale) or in non-monetary terms (e.g., barter). There are two principal theories of price that should be of concern to us in the context of customer right to fair price, the cost theory and the market theory.

The market theory of prices i.e. prices should reflect the value that consumers are willing to pay.
A price is fair, then, when its value is determined in an exchange in which three conditions are met:

First, the buyer and seller must negotiate the terms of the exchange voluntarily. If either buyer or seller has no choice to make about some relevant term of the exchange, we cannot be sure the price is fair.

Second, both buyer and seller must agree to the exchange without unusual constraints. If either buyer or seller is under unusual pressure to buy or sell, we cannot be sure the price is fair.

Third, both buyer and seller must have adequate information about the things to be exchanged. This means, for example, that buyers must receive from sellers, or be able to get, adequate information about the thing they propose to buy. They do not have a right to know everything, perhaps, but sellers who deceive or mislead buyers about relevant details, or who conceal important information, ...

Solution Summary

This explains the market theory of pricing