tag:blogger.com,1999:blog-6245381193993153721.post8432096836141357271..comments2024-03-17T00:23:24.896-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Mark-up Pricing in CanadaLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-6245381193993153721.post-25604686834147202482014-01-09T10:43:50.474-08:002014-01-09T10:43:50.474-08:00"You can sort of tell that the people that sa..."You can sort of tell that the people that say that sort of thing have never worked at the sharp end in a business."<br /><br />Meanwhile my job is to literally price stuff for a corporation.Chris Phttps://www.blogger.com/profile/01821542216538343659noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-49644823370862239032014-01-08T10:04:35.045-08:002014-01-08T10:04:35.045-08:00You can sort of tell that the people that say that...You can sort of tell that the people that say that sort of thing have never worked at the sharp end in a business. <br /><br />If you do then it disabuses you of a load of economic religion in a very short amount of time. <br /><br />Of course then you'll get the appeal to aggregation as the trump card.NeilWhttps://www.blogger.com/profile/11565959939525324309noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-46894814126449879032014-01-08T09:29:23.175-08:002014-01-08T09:29:23.175-08:00It's absurd to suggest that businesses will do...<i>It's absurd to suggest that businesses will dogmatically cling to a mark up price in the face of a shortage or surplus.</i><br /><br />First, that assumes that businesses normally carry no inventories (which is wrong), but for those who want to see why "Chris P" has no idea what he is talking about, let us look at some empirical evidence.<br /><br />This is what is revealed by empirical reality: in the survey of 654 UK businesses, they were asked: what do you do when there is a boom in demand which cannot be met from stocks or inventories? <br /><br />Most UK firms said they simply increase overtime of workers (as reported by 62% of firms), hire more workers (12%), or increase capacity (8%) to produce more output, rather than increase the price of their product.<br /><br />Only 12% said they would increase the price of their product (Hall, S., Walsh, M. and A. Yates. 2000. “Are UK Companies’<br />Prices Sticky?,” Oxford Economic Papers 52.3: 425–446, at p. 442).<br /><br />But "Chris P" -- in the depths of his contemptible ignorance of the real world -- says that it is "absurd to suggest that businesses will dogmatically cling to a mark up price in the face of a shortage or surplus".Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-85842737418069570612014-01-08T09:14:04.608-08:002014-01-08T09:14:04.608-08:00(1) "You act like this implies supply and dem...(1) <i>"You act like this implies supply and demand have nothing to do with prices."</i><br /><br />I do no such thing, and this statement shows your sheer ignorance of this subject. <br /><br />Since mark-up prices are based on costs of production as measured in total average unit costs, of course they are related to supply. <br /><br />But once established in a market with various mark-up price businesses, they are not *generally* adjusted in response to demand changes, and instead output and employment levels will be adjusted to demand, not price.<br /><br />This entails that such mark-up prices are not market clearing prices in sense of neoclassical and Austrian economics.<br /><br />(2) <i>"It's absurd to suggest that businesses will dogmatically cling to a mark up price in the face of a shortage or surplus."</i><br /><br />You have no idea how the average firm works. The existence and holding of inventories is a very prevalent practice. If inventories pile up as demand falls, production will be cut. <br /><br />If inventories fall as demand rises, production will be ramped up.<br /><br /><br /><br /> Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-33890445746969124772014-01-08T09:00:36.167-08:002014-01-08T09:00:36.167-08:00And water is wet. You act like this implies supply...And water is wet. You act like this implies supply and demand have nothing to do with prices.<br /><br />If I'm a firm introducing a new product to market. Maybe it's just easier for me to add 10% to costs rather than doing elaborate market research to figure out the right price.<br /><br />But after the product is in the market, if the "mark up" price was too low it will blow through its inventor, if it's too high inventory will pile up.<br /><br />It's absurd to suggest that businesses will dogmatically cling to a mark up price in the face of a shortage or surplus. <br /><br />Are they going to adjust prices on an hourly basis? No. But are they going to adjust once they are confident they have enough data from their current prices to suggest they arent maximizing profit? Of course. <br /><br />Chris Phttps://www.blogger.com/profile/01821542216538343659noreply@blogger.com