brianb@drutx.UUCP (Brian Bell) (09/19/86)
> Of course, this ignores the reality that corporate entities (businesses, >really) ****DON'T PAY TAXES****. Face it, it's true. The cost of taxes paid >by any properly managed business are passed on to the clients or customers of >that business, through higher prices. Thus, taxes may be paid *THROUGH* a >business, but seldom, if ever, are taxes paid *BY* a business. This is simply not true. A customer making a choice between equivalent products made by competing companies will choose the least expensive one (at least according to the "rational person" premise of economic theory). If Company A raises its prices to pay a 50% tax rate and Company B keeps its prices low and pays a 10% tax rate, Company A won't survive very long. The customer doesn't care how much tax each pays, it only wants the least expensive product. For long-term survival of both companies, they must have basically equivalent prices for equivalent products. Assuming that each has basically the same cost of production and sales, Company B will show a greater after-tax profit than Company A, because _Company A is paying more tax_. The price that a customer will pay in a competitive market has nothing to do with the costs (that includes taxes) that the supplier incurrs. The price is set by the marketplace itself. By the way, one of the reasons U.S. companies are having a hard time competing with the Far East is because of tax structures there that encourage investment in industry. In other words, Far East _companies_ are not paying as much tax as U.S. _companies_. Companies do pay taxes. Brian Bell
drv@mtx5w.UUCP (09/22/86)
> A customer making a choice between equivalent products made by > competing companies will choose the least expensive one (at least > according to the "rational person" premise of economic theory). I don't know what all the "rational person" premise says, but I do know from a few marketing courses that price isn't the only factor a person considers when making a purchase decision. Any argument that starts from that premise is suspect in my mind. Dennis R. Vogel AT&T Information Systems Middletown, NJ
brianb@drutx.UUCP (Brian Bell) (09/23/86)
I wrote: >> A customer making a choice between equivalent products made by >> competing companies will choose the least expensive one (at least >> according to the "rational person" premise of economic theory). Dennis replied: > I don't know what all the "rational person" premise says, > but I do know from a few marketing courses that price > isn't the only factor a person considers when making a > purchase decision. Any argument that starts from that > premise is suspect in my mind. You are correct. *Price* is only a portion of the costs I incur when I buy a product. Other costs may be transportation to my location, duty and brokerage fees if I'm buying a product from overseas, or repair and replacement costs for shoddily built material. There are also a myriad of possible costs connected to the terms of the sale. For instance, if I am required to pay in advance and the material is not in my hands for a number of weeks after that, I have incurred a cost through losing the use of that money for a period of time. The "rational person" premise states that people will choose a course of action based on minimizing their costs and maximizing their benefits. In an oversimplified phrase, "get the most for your money". If the science of marketing (or is it an art?) did not exist, I believe this premise would be quite valid. (On the other hand, I could argue that marketing merely adds considerations of prestige, self-esteem, etc. to the rational decision of which product to buy, but that's another subject entirely.) However, we all know that I did not buy my black and gold 280ZX with T-tops and leather interior because it was the best car for the money. But... This really has nothing to do with my argument, which is based on two companies with basically equivalent products (and equally effective marketing, if you care to add that). If one company pays a higher tax rate, that DOES NOT equate to higher prices for its product. If it did, that company would not be able to compete. It equates to LOWER PROFITS for that company, which is the boat that many U.S. corporations are riding in. And don't forget, PROFITS = INVESTMENT = GROWTH = JOBS (ok, ok, oversimplified... but true). > Dennis R. Vogel Brian Bell AT&T Technologies Denver CO
ark@alice.UucP (Andrew Koenig) (09/24/86)
>> A customer making a choice between equivalent products made by >> competing companies will choose the least expensive one (at least >> according to the "rational person" premise of economic theory). > I don't know what all the "rational person" premise says, > but I do know from a few marketing courses that price > isn't the only factor a person considers when making a > purchase decision. Any argument that starts from that > premise is suspect in my mind. Note the use of "equivalent" above. I claim there are only two things to consider when making a purchase decision: price and value. Price is usually fairly straightforward, but not always. Value is usually pretty complicated. For example, it may include such things as the buyer's feelings about the seller, the probability of repeat business as it affects service after the sale, and so on.
drv@mtx5w.UUCP (09/25/86)
> Brian wrote: > >> A customer making a choice between equivalent products made by > >> competing companies will choose the least expensive one (at least > >> according to the "rational person" premise of economic theory). > > I replied: > > I don't know what all the "rational person" premise says, > > but I do know from a few marketing courses that price > > isn't the only factor a person considers when making a > > purchase decision. Any argument that starts from that > > premise is suspect in my mind. > > Brian replied: > The "rational person" premise states that people will choose a course of > action based on minimizing their costs and maximizing their benefits. > In an oversimplified phrase, "get the most for your money". > But... > This really has nothing to do with my argument, which is based on two > companies with basically equivalent products (and equally effective > marketing, if you care to add that). OK, I missed a key assumption in your original; namely that the choice is between two "as equivalent as can be made" products. I agree with your analysis under that condition. Dennis R. Vogel AT&T Information Systems Middletown, NJ