# The cost of production verses what the market will bare.

**URL:** <https://boards.straightdope.com/t/the-cost-of-production-verses-what-the-market-will-bare/244750>\
**Category:** Factual Questions\
**Created:** [May 12, 2004, 6:49am UTC](https://boards.straightdope.com/t/the-cost-of-production-verses-what-the-market-will-bare/244750 "2004-05-12T06:49:44Z")\
**Posts on this page:** 3\
**Page:** 2

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**Author:** ![Kent\_Clark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/kent_clark/32/105_2.png) [@Kent\_Clark](https://boards.straightdope.com/u/Kent_Clark)\
**Post date:** [May 13, 2004, 6:06pm UTC](https://boards.straightdope.com/t/the-cost-of-production-verses-what-the-market-will-bare/244750/21 "2004-05-13T18:06:04Z")

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> [@Roland Deschain](#):
>
> Okay, but why can’t they at least be honest about the reason for their price or price increase? When was the last time that a company said “we are raising prices because we believe that the market will support a higher price for our product or service.”?

Actually, when I was a tiny little cog in the giant marketing machine of a large multi-national company they were quite upfront about explaining that customers in the U.S. would pay more for the exact same product than customers in country X. To be fair, they also pointed out that they sold their products only in the U.S. for several years before they exported to other countries (these were products sold to producers, not consumers) and that the U.S. customers had a several year head start on getting the benefits of new products over the foreign (potential) competitors. They also noted that their U.S. patents would expire before the foreign patents and U.S. customers would see generic competition (hence lower prices) before the foreign customers.

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**Author:** ![Telemark](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/telemark/32/372_2.png) [@Telemark](https://boards.straightdope.com/u/Telemark)\
**Post date:** [May 13, 2004, 6:46pm UTC](https://boards.straightdope.com/t/the-cost-of-production-verses-what-the-market-will-bare/244750/22 "2004-05-13T18:46:00Z")

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For another good example of differing costs for the same product, consider seats on an airline. The service is exactly the same (getting you from point A to point B while feeding you peanuts) but demand for seats varies dramatically.

The airline is trying to maximize their profits by using multiple rates for the same service. If they can identify you as a business traveller (no Sat stay, out and back the same day, etc) they charge more because you are less price sensitive. If they identify you as a pleasure traveller (Sat night stay, different flight times, etc) they charge you less to fill up more seats.

If all businesses could determine what type of customer you were and could change the price accordingly they would, as it would maximize profit.

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**Author:** ![Chairman\_Pow](https://avatars.discourse-cdn.com/v4/letter/c/838e76/32.png) [@Chairman\_Pow](https://boards.straightdope.com/u/Chairman_Pow)\
**Post date:** [May 13, 2004, 10:51pm UTC](https://boards.straightdope.com/t/the-cost-of-production-verses-what-the-market-will-bare/244750/23 "2004-05-13T22:51:20Z")

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Of course, there’s the possibility of raising the price on an object to increase sales.

I remember a video I saw (investment-type pep talk) where they bragged about their diverse product line and how they “priced things to move;” they had a book that was whatever price and it didn’t sell, so they figured that they’d raise the price and it sold better. They lowered the price somewhere between the two and it sold better yet.

The tipping point in action.

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