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What is a List Price?

Manufacturers suggest the retail, or list, price for goods.
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  • Originally Written By: R. Kayne
  • Revised By: A. Joseph
  • Edited By: Niki Foster
  • Last Modified Date: 26 March 2014
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The term "list price" refers either to the manufacturer's suggested retail price (MSRP) of a consumer good or to the initial asking price of something before any discounts or negotiations. The list price typically is determined based on factors such as supply, demand and manufacturing costs, when applicable. A buyer might be able to pay less than the list price, such as when an item is on sale, when there are discounts or coupons that can be used or when the price is negotiable. In some cases, however, a buyer might have to pay even more than the list price if the product or property is in high demand.

Consumer Goods

Virtually all manufactured products have suggested retail prices. Manufacturers set suggested prices based on the costs involved in the manufacturing, transporting, storing and selling the products. The suggested prices help ensure that manufacturers, wholesalers and retailers will make a profit when the products are sold. The difference between all of the costs associated with a product and the final price paid by the buyer is called the profit margin. When products are sold for less than their list prices, their profit margins are reduced.

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Automobiles

The list price of an automobile is often referred to as the sticker price, because it commonly is displayed on a sticker attached to one of the vehicle's windows. Unlike most manufactured goods, automobiles usually have negotiable prices — especially used automobiles. The sticker price is therefore the most that a buyer would have to pay, and he or she might be able to negotiate a reduced price.

Real Estate

In the real estate business, the list prices of houses or other properties typically are determined by what has been paid for comparable homes or properties. Houses typically are compared with other houses in the same area that are similar in size, construction, age, condition and other factors and that were sold within a certain time period, such as the previous six months or year. Buyers often are able to purchase houses for less than their list prices, but when they must compete with other buyers for highly desirable homes, they sometimes must offer more than the list prices to avoid being outbid.

Discounts and Sales

Businesses often offer discounts, coupons or sales that allow buyers to pay less than full price. When businesses do this, they typically tell the consumers the list price or MSRP as well as the reduced price, so that the consumers will know that they are paying less. Such advertising not only can entice people to buy that product, it also can help attract more people to a store, potentially increasing the number of other products that are sold.

Deceptive Pricing

Some businesses might set or advertise a list price that is artificially high so that it can offer a reduced price that still permits it to make a considerable profit. This is considered unethical by many people. Consumer advocates advise potential buyers to shop around and compare prices in order to avoid paying more than necessary.

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Discuss this Article

Pimiento
Post 5

@BelugaWhale - Yes, and I hate that (price gouging/price differences). It is often the reason why many people feel the need to shop around as the list price can be the price for some retailers while second hand or discount/damage stores can often sell it at a much more reasonable price. I also believe that the list price is a means of negotiations, but only on items like cars or homes.

BelugaWhale
Post 4

@ellaesans - I kind of have to disagree with you in that list prices are a negotiating point. I think it's the ideal profit a company would like to make on a product and that they use this figure as a means of making something look like a "deal." Think about price gouging in emergency situations if you need an example. The ARV (Average Retail Value) and the List Price can vary greatly depending on where the item is sold and whether the manufacturer has struck a deal with that retailer - sometimes up to hundreds of dollars.

ellaesans
Post 3

@empanadas - The PPU (Price Per Unit) is most commonly found at grocery stores on their item labels. Aside from that, I agree that the list price is often a negotiation point. While it might be something ideal the seller wants to achieve, the reality is that many consumers don't often pay the list price unless they are in a hurry, bad at negotiating, or just the fact that money might not be an object.

empanadas
Post 2

The list price is often a jumping off or negotiating price. The list price also often differs from the wholesale price list provided for items sold in wholesale situations or stores. This price is often discounted a few cents per item in order to create a more enticing situation for the buyer when in reality it is getting a consumer to buy more with the bargain of a lower price per unit.

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