Quote:
Originally Posted by Steve Jordan
I tend to look at it differently: The value isn't what the public says it is. That would suggest that if no one buys, the value of a product is zero. Price does not necessarily reflect the value for any product, it is truly arbitrary. But value can be figured against the cost of production, to the last penny.
At any rate, that's just semantics. You're right: I can set the price any way I want, but it's up to the consumer to accept that price.
|
Steve:
The thing you are calling "value" in the above is known to business and economics as "cost." And indeed, you can compute the cost of a product very accurately indeed. Further, economists (and business people) certainly agree that there is no reason why price and cost are or should be connected.
Value (in that terminology) is a very different animal. I buy something when its value (to me) is greater than its cost (to me). Note that "value" here includes both tangibles like immediate resale value, or commodity value (think gold); intangibles like sentimental value, my personal enjoyment, etc.; and imponderables, like the increased profit I think I can make using that improved tool/faster computer/whatever (imponderable, because my crystal ball may be, well... inaccurate).
If a business persistently produces some product at a tremendous cost that far exceeds that product's value to consumers, they lose a whole lot of money. After all, consumers won't pay more than that product's value to them.
Xenophon
P.S. A poster-child example of the difference between production cost, price, and value is celebrity autographs. Production cost is near-zero. Price is ???. Value to consumers ranges from negative (my value for a Paris Hilton autograph), to zero (most collector's value for, say, MY autograph), to incredible (some Boomer's value for an authentic Elvis autograph).