Considerations in the Setting of Retail Prices

Abstract

HIS article describes the mechanisms and considerations involved in setting retail prices. It is addressed especially to those economists interested in prices as a practical background in their studies. Retail merchandise establishments are so varied in character that the considerations dominant in one are of minor importance in another. They may be classified in three groups, although there is a high degree of overlap. (I) Those dealing with the general public, in widely used articles. This class includes mail-order houses, department stores and chain or independent drug, grocery, variety, shoe, hardware and apparel stores. (2) Those dealing with the general public, but in a narrow set of specialized items. These include optical, sporting goods, and book stores. (3) Those dealing with a specific class or segment of the public. These classes include the rich, the debutante, the school girl or school boy, the baby, the expectant mother, the scientist, the book lover. Dealers in unique items and auctioneers are not included. The merchant is defined as one who deals in quantities of goods with large numbers of people. His prices are set in a general market, not individually. Accordingly, retail prices are administered, in the sense that they are set by the seller, with the only choice left to the purchaser of accepting or rejecting. There is little place for individual bargaining. The mechanism of setting retail prices is different from manufacturers' prices in at least two respects. First, they are set against an estimated demand based on the value in use; whereas, short of the point of consumption prices are set