Prices, who “sets” them?


If is often that we hear that a company “set” the price for some products, or that Steve Jobs, “set” the price of the iPad pretty good.  However, we usually forget that it is the job of entreprenuers to pronosticating what they expect would occur in the future in regard of the pricing process they follow.  Their job is to effectively understand their consumers’ (an specif consumer target of men determined by sociological and economical data) message and propose a price that will be of interest to marginal buyers.

However, it is consumers-an infinite list of individuals making valuations- who set the price of all products.  Here’s what Ludwig von Mises has to say in that regard,

“They are determined between extremely narrow margins: the valuations on the one hand of the marginal buyer and those of the marginal offerer who abstains from selling, and the valuations on the other hand of the marginal seller and those of the marginal potential buyer who abstains from buying.”  Ludwig von Mises.  Abstract from the Chapter XVI.  Prices: The Pricing Process.  Human Action. A Treatise on Economics

As such, in regard to the price setting of the iPad it was the result of individuals that demanded this product from the first time it was announced a couple months ago.  It was the job of the guys in Apple (entrepreneurs) to speculate on the closest price in which consumers were going to buy their product ie. the Ipad.  Prices cannot be effectively determined by any single men.  Surely, we will see the price of the iPad fluctuate in the near future.  Just as it happened with the Kindle and just as it happens with all products that are sold in the world.

PS: for more info on The Pricing process I recommend you to check the chapter XVI of Mises’ Treatise which can be found free online at the website of the Mises Institute.

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