People have written the general formula for determing a way to price a product for retail sales. Take the costs, multiply by some percentage, and that`s the suggested retail price. Okay, that`s fine. This is more of a "certainty" question: when you come up with a price, how do you know for sure that you`re at the best price, not too low, but also not too high?
Is there a logical or mathematical or evidentiary way to know the correct price?
My thinking is that when you reach a price where other people think they can compete with you, that`s the basic market price. So for example; you`re test-marketing a $5 item, not counting your labor, and it sells say on eBay for say $20. You try other price points, and it seems to stop selling at $30.
Is $30 the "true" market price? There`s the eBay venue, with it`s problems and mentality, and perhaps if you sold it at Nordstrom`s, it would bring in $90.
But sell it at $10, and nobody could compete, because of commercial manufacturing costs. On the other hand, when you price it at $40, it may not sell on eBay, but that`s where "any" company could profitably enter into competition with you. Is that the true, or "real" market price?
I don`t know, so I`m asking the financial people and business analysts in the community if there`s some formula for this kind of thing?