The issues concerning the determination of fair prices of commodities and services have attracted economists’ and philosophers’ interest for a long time. In this regard, there are two major theoretical views that seek to explain what factors should be considered for the product’s value to be just. They include cost theories and market theories of value (Elegido, 2007). The former frameworks are based on the premise that the fair price of the goods should be determined from overall production costs plus moderate profit. On the contrary, the supporters of the latter approach believe that the economic value dictated by the free market is the most correct one from an ethical standpoint.
Generally, the market theories of value are more supported due to several reasons. For instance, the researchers mention that it would be unfair for somebody to receive the payment for a good close to its cost if the latter is much smaller than the subsequent value it brings. Additionally, there is a particular difficulty in determining certain non-material costs, such as talent, expertise, and responsibility, to name a few. Yet, market-based value is also not free from certain types of flaws. As such, some scholars argue that the existence of special needs, ignorance towards local prices, and monopolies are associated with unfair pricing. As an example that most of us are probably familiar with, consider the case of a tourist who wants to buy something in a foreign country. In this case, sellers may attempt to increase the price significantly as the traveler is unlikely to be familiar with the current prices. Therefore, it is fair to claim that if the seller succeeds in selling the good at a higher price, the transaction can be considered unjust.
In my opinion, a fair price should be determined considering both frameworks simultaneously, without preferring extensively any of them. For example, when there is a monopolist in the market, the prices can be inadequately high; that is why the cost can be a good factor in establishing a fair price. On the contrary, as was mentioned above, deciding the value based on the cost also does not provide adequate information concerning material, physical, and mental investments all the time. Therefore, balancing the two methods can help avoid the disadvantages of each approach separately while embracing their advantages.
Reference
Elegido, J. M. (2007). Business ethics technical note no 3: Fair prices.