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A ‘Representative’ Model of Average-Cost Pricing

  • A. Koutsoyiannis
Chapter

Abstract

Average-cost pricing models have been developed by various writers.1 Their basic characteristic is the postulate that price is set according to the average-cost principle
$$ P = AVC + GPM = AC $$
where AVC = average variable cost GPM = gross profit margin The firm sets a price equal to its total average cost which includes a certain net profit margin. This pricing behaviour is assumed by the writers in this field to be different than the marginalist behaviour of the traditional theory of the firm. We will return to this point in section IV of this chapter, where we attempt to compare the average-cost theories with other theories of the firm.

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A ‘Representative’ Model of Average-Cost Pricing

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Copyright information

© A. Koutsoyiannis 1979

Authors and Affiliations

  • A. Koutsoyiannis
    • 1
  1. 1.University of OttawaCanada

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