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In Defense of Average Cost Pricing

Many industries in the modern economy are ridiculed for the financing strategies they employ.  Only marginal cost pricing is defended as a legitimate practice.  Yet it is infeasible for industries with high fixed costs and low production costs to rely on marginal cost pricing.   The diverse approaches of these industries include: bundling/unbundling as with service contracts and supporting software, market segmentation by Saturday night layovers, time release strategies for books and DVDs,  encryption, intellectual property rules, specialized marketing channels as allowed by retail price maintenance, product differentiation, diversity pricing and a host of others.  The political response to almost all these practices is: "Why don't your charges reflect more closely the costs of production?"  The challenge for industries is to use non-marginal cost financing strategies more creatively to encourage their political "legitimacy."