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Graduate School of Business, University of Santa Clara


In this paper we present a model of a profit maximizing firm in which one price is set for the entire multiperiod planning horizon. One of the consequences of such a pricing policy, if one employs widely used assumptions about demand and cost functions, is a decision rule for choosing the optimal price which may be interpreted as the "full -cost" pricing equation of much recent controversy. The significance of this result lies in the fact that full-cost pricing and profit maximization have often been held to be inconsistent. In addition, this model integrates the pricing decision with the other decisions taken by the firm.

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Economics Commons



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