Price Takers' Plenty in a Model of Pure Capitalism.

Scitovsky, Tibor

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Document type:: Collected items

Collection:: Josef Steindl Collection

Title:: Price Takers' Plenty in a Model of Pure Capitalism.

Author:: Scitovsky, Tibor

Scope:: Kopie eines Typoskripts, 27 Blätter, mit handschriftlicher Korrektur und Korrektur mit Korrekturfolie, Paginierung von 5.1-5.20 und von 3.21-3.26

Year of publication:: 1983

Source material date:: [November 1983]

Language:: English

Note:: Draft.

Related work:: Scitovsky, Tibor: Pricetakers' Plenty: A Neglected Benefit of Capitalism. In: Kyklos, Dec 1985, Vol. 38 Issue 4, S. 517-516

JEL Classification:: D41 [Market Structure, Pricing, and Design: Perfect Competition]

Shelfmark:: S/M.33.7

Access:: Free access

5.4 However elementary and well-known that argument is (or fehould be), it is worth restating it in another form by saying that MG, the gap between the price maker’s price and MC, measures not only his monopoly power but also the worth to him of the marginal transactions he makes and the marginal customers he exploits. Accordingly, the greater his monopoly power, the more he values the custom of the price takers facing him. Yftien he gains a lot from additional sales and loses a lot by losing some of his established clientele, he goes out of his way to hold on to the market he has and to expand it. As part of his efforts to accomplish those aims, he accommodates his price takers, offers them fringe benefits and otherwise courts their favor. Contrast that to the seller’s very different behavior in a perfectly competitive market, where he pushes all transactions to the margin of indifference and — making no profit on the marginal transaction -- is correspondingly indifferent to the marginal transactor facing him. The contrast is important, because just as price is determined on the margin, so are all other aspects of the market relationship as well. You may have noted that I switched terminology: from nonprice competition, which the price maker finds profitable to engage in, to calling the same thing, or the consequences of the same thing, fringe benefits, which the price takers value and find attractive. For nonprice competition provides a buyers 1 market, with all its familiar manifestations: the offer of information, great variety, an ample inventory of different sizes, styles and colors, the

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