Marginalism vs Real life pricing?

Question

to what extent is martginalist pricing a close approximate to actual pricing decisions??

Thnkas guys

Answer 1

Pretty close, as long as the industry in question is a perfect competition or an unregulated monpoly. Moreover, in a perfect competition, there is no pricing decision; the market price is a given, so producers must make PRODUCTION decisions based on the price.

As soon as assumptions of perfect competition (homogeneity of the product and absence of barriers to entry) break, pricing decisions begin to appear. In case of differentiable (i.e., non-homogenous) product, pricing is a part of product design (hence, the four Ps of marketing, Product, Price, Promotion, Place). In case of substantial barriers to entry, pricing usually becomes oligopolistic (price decreases by competition are usually matched, while price increases are usually not).