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Pricing and Investment

In: The Economics of the Modern Construction Firm

Author

Listed:
  • Stephen L. Gruneberg

    (University College London)

  • Graham J. Ive

    (University College London)

Abstract

In this chapter we model the pricing and investment decisions of firms, using the Eichner — Wood model (Eichner, 1980; Wood, 1975). This model will bring together the concepts of pricing, output, finance, profit margins, and gross operating profits, but it is the inclusion of growth which introduces a dynamic element, allowing for change and uncertainty. We shall use the Eichner model to demonstrate the tradeoff between the need for internal funding for investment and the constraint of the market on a firm’s ability to raise these funds by increasing its pricing mark-up. We adopt Wood’s approach to determining the maximum rate of sales growth and profit margin and suggest that this model can be applied to firms working in the construction industry.

Suggested Citation

  • Stephen L. Gruneberg & Graham J. Ive, 2000. "Pricing and Investment," Palgrave Macmillan Books, in: The Economics of the Modern Construction Firm, chapter 9, pages 201-226, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-51043-2_9
    DOI: 10.1057/9780230510432_9
    as

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