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ETHICAL PROBLEMS IN PRICE AND WAGE DETERMINATION.

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Presentation on theme: "ETHICAL PROBLEMS IN PRICE AND WAGE DETERMINATION."— Presentation transcript:

1 ETHICAL PROBLEMS IN PRICE AND WAGE DETERMINATION

2 PRICE THEORIES One theory holds that a man is entitled to enjoy the fruits of his labor and may therefore establish any price he pleases for the goods produced. Fair price as that one obtained by fair competition in an open market

3 METHODS OF DETERMINING FAIR PRICE 1. FAIR PRICE RELATED TO FAIR RETURN Varies with each industry The return established as fair for one industry should be fair for all members of the industry The pricing structure of a company is fair when its profit in the same industry, for the same amount of capital and total resources used

4 METHODS OF DETERMINING FAIR PRICE 1. FAIR PRICE RELATED TO FAIR RETURN Bases of fair price: a. Equity and capital b. Total value of assets used

5 METHODS OF DETERMINING FAIR PRICE 2. PRICE IN A FIXED PRICE SYSTEM In fixed price system the seller is expected to establish the lowest prices for his good and the customer is in turn expected to take or leave them at price quoted. The advantages of fixed price system is speed, equality for all buyers, minimum prices and honesty between seller and buyer.

6 METHODS OF DETERMINING FAIR PRICE 2. PRICE IN A FIXED PRICE SYSTEM Requirements of a fixed price system: a. The seller must give his final price. If a seller offers a secret discount, he violets the requirements of a fixed price system b. The fixed price should be the same for all buyers. It is unethical to give one person a “ special” price as this gives him an advantage over others

7 METHODS OF DETERMINING FAIR PRICE 3. BARGAINING OR MOVABLE PRICE SYSTEM Price arrived at through the process of bargaining is said to be fair because bargaining takes place in an open market. Where competition is really keen, competing companies have to find ways to reduce cost but not sacrificing quality

8 METHODS OF DETERMINING FAIR PRICE 3. BARGAINING OR MOVABLE PRICE SYSTEM * Movable price system which makes bargaining possible, is time consuming, induces the seller and the buyer to lie to each other and the price is not uniform for all buyers of the product.

9 METHODS OF DETERMINING FAIR PRICE 4. BIDDING Some businessmen resort to bidding to get the approximation of a fair price. Bidders are expected to name their final price which the minimum they are willing to accept

10 METHODS OF DETERMINING FAIR PRICE 4. BIDDING As the bids are supposed to be confidential and the lowest reasonable bid is supposed to be accepted, the price of the lowest qualified bidder approximates the price Purchasing managers in revealing the bids of other people to other bidders is definitely unethical.

11 PRICING PRACTICES 1. VARRYING PRICE POLICY The price varies with each buyer, depending on whether he is favored customer or he has bargaining power. 2. FOLLOW THE LEADER PRICING Pricing goods at almost the same level as the better known and better quality products, even if they could be sold at a lower price

12 PRICING PRACTICES 3. ODD PRICING This practice uses odd numbered prices such as 8.97, 9.96, LOSS LEADER PRICING This pricing technique quotes some well known items at a lower price while other goods are at regular prices

13 FACTORS TO CONSIDER IN ESTABLISHING FAIR WAGES 1. DUTIES AND RESPONSIBILITIES AND THE REQUIREMENTS OF THE JOB 2. LAWS AND REGULATIONS\ 3. COST OF LIVING 4. GOING RATE OR COMMUNITY RATE 5. FINANCIAL CONDITION OF THE COMPANY


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