Pricing in practice in consumer markets

Abstract

This article offers a theory of pricing in consumer markets that relates cost-plus pricing and value-based pricing to price competition and price leadership, including, in particular, competitive price leadership as defined by Kenneth Boulding. It also argues that the basic question in Keynesian economics is why firms choose prices such that production is restricted by sales, not why prices, once chosen, can be “sticky.” And finally it shows that a firm’s labor demand depends on its sales at the price it sets and not on its “real wage.”.