Re: Quality versus Price

["Jon Juneau" <jjuneau@pier.st.usm.edu>]

I am also confused about quality versus price; however, I do have a 
theory:

1.	Price is determined in the marketplace by the supply and demand 
for the product.  When only supply or demand changes, it is 
relatively easy to determine what the price does.  When the supply 
and the demand change at the same time, the price could go either 
way.

2.	The supply in the marketplace is determined by the producer.  When 
the process is of high quality, it will be cheaper to produce the 
product and hence the supply should be greater.

3.	The demand for the product is determined by the customer.  The 
customer should demand the product when the value of the product is 
more than its price.  Quality, price, and product availability are 
some of the many order characteristics that affect the product's 
value to the customer.  In some marketplaces, the quality is a 
requirement to compete and the demand will not exist when quality is 
low.  In other marketplaces, the quality will be the deciding factor 
to the customer and improving product quality will help obtain (or 
maintain) market leadership.

In conclusion, since changes in the supply and demand curve affect 
the price is complicated ways, and the supply and demand curves are 
affected by quality in complicated ways, I am not sure if a true 
relationship between quality and price is possible to know.  This 
theory seems to make sense to me, even though it does not give a 
complete answer to the question.

Since the theory does not provide a complete answer, it needs work, 
but I guess it's okay because:
"The most important figures needed for management of any organization 
are unknown and unknowable."
-Out Of The Crisis, p. 20.

Jon Juneau