If that is true, then it is also true that very few customers can dictate what they will pay to the market. Then how is price set? In my business, multiple competitors create products that meet customers need. There are differences in the design, in the materials chosen, in the automation and labor content, etc. Each competitor has it's own balance of engineering costs, SG&A, and what they will accept as a minimum profit. Customers don't know each competitors lowest price. Customers even know, that paying only for "break even" today, because that supplier can develop new product for tomorrow. We have some idea what our competitors can sell their part for, but even if the selling price is the same, there are differences in the value proposition. I may be quicker to respond to upside demand, or to quality issues, or I may provide better cost reductions over time. You may also be supplying many other products to that customer, so your cost to add one more part is less. So, the dance begins. It can be an open bid, but usually the customer get one bid, and may go back to those with the most attractive offer with the best and final. The seller has an advantage the buyer doesn't, we sell the same (or nearly the same) part to multiple companies. We know at what price we lose business, at what price we are the second source (40% or less allocation), at what price we are first source (60% or more allocation) and when we left money on the table (80% or more allocation). We also, as can our competitor, acquire competitor parts in the open market and reverse engineer them. We can read their patents. What see is materials and construction, what we don't see, and don't show, is manufacturability. In the end, as long as you are not the highest price supplier, you have price flexibility."Cost plus" is where we show the customer our total cost of manufacture, then negotiate profit - that never happens. As far as post Keynesianism, ROTFL. Business has been done this way long before Lord Keynes. And will continue long after his misunderstanding of the economy is return to academia as a good example of a bad idea.
You need to try validity. You're talking about stuff that has nothing to do with Laffer and then getting that wrong. Cost-plus is a simple idea. It has nothing to do with negotiations, but about a price fixing method that- for example- maximises effectiveness of planning
Your snipes have no value. Come back when you are ready to detail your position, in simple language. Then we can see how much you know.
There wasn't a snipe. That you're coming out with nonsense that its also completely unrelated to Laffer is just matter of fact. What you do with that fact is up to you. Logic suggests that you should adapt, but the assumption of rational economic man has always been a dodgy one!
You've already been given the details. Confusing a pricing policy (a demand side issue) with a supply side incentive issue wasn't cunning! That you then had to refer to cost-plus pricing (and still got that wrong) was just further icing on the cake
Try and dispute any element of my post. Perhaps its supply & demand where you've struggled? That's the usual one with you fellows!
To repeat: You really don't understand the concept of "details". Provide something more than vague comments.
That you've referred to a demand-side issue and called it a supply-side one isn't vague. Its specific and, to be frank, bleedin obvious!
The only thing that is obviousis that you are wasting my time. Cut and past my posts and your posts showing the details.
Are you seriously telling me that you can't appreciate the inappropriateness of mixing up supply-side and demand-side analysis? Golly gosh!
Like Reiver said, where cost-plus pricing occurs the buyer is a price taker, if I'm not mistaken this is an information asymmetry problem. But by and large the general concept is that in competitive markets (ceterus paribus) firms are price takers due to competitive forces. It's a purely supply side phenomenon. Nothing at all to do with negotiations. You also seem to want to equate brevity with a lack of content, I assure you the two aren't mutually exclusive.
It isn't brevity, it is lack of content. Your definition of "Cost Plus" is not the same as mine - I described mine, I have yet to see Reiver define any of his terms, you have for a few terms (Free Market Capitalism).
As I said, the two aren't mutually exclusive. We don't just get to make up definitions as we go. Finding them isn't hard either, sorry but your "definition" doesn't jive with how anyone else uses the term. The wiki or investopedia definitions are acceptable go with those.
Anyone else? Are you sure? That is the common definition in the companies I have worked in. The times I have looked up terms, Reivers use disagreed with the definition, as I said, it is a waste of my time.
You have a habit of using the dictionary to understand political economy and then hiding from definitions for well known specific concepts. Its of course a means to escape the debate, given a lack of response
Apologies, of course some folks don't know what their talking about. Only you can decide whether conversations with him are worth you're time. I think if you take a moment to understand them, even if you disagree in the end you'll be better off for it. However, arguing over terminology is futile and the making up definitions for commonly understood terms is painful to watch. =\
Not a generic dictionary, one for economics. But, I also use terms, as they are used in the work place. Being and engineer, I define my terms so those with different backgrounds understand. You are too busy sniping to bother communicating.
You can't understand political economy with a dictionary. Bleedin obvious really! I know that's not true so don't bother with that blag! I'm too busy having to deal with spam that isn't related at all to Laffer (all because the fellow can't say "oops" when informed of his gross error)
Terms have certainly grown colloquial uses, liberal for example is a highly bastardized term. Regardless, let's get back to where we started. I stated that firms are price takers this should help you with what I mean by that. It doesn't apply universally but is most easily seen in goods with perfect substitutes.
