Price Differentiation

Differentiation, Price

 

the establishment of various levels of prices existing in the USSR for the same kind of goods in connection with expenditures related to economic, natural, territorial and other differences not dependent on individual enterprises and also in connection with the quality of production (such as grade, class, and type).

In industry, the wholesale prices of enterprises are differentiated especially widely. Often a different level of production cost for the same items at different enterprises depends not on the economic activity of the enterprises themselves but is associated with their geographic location, natural factors, and other objective causes. This applies above all to such industries as coal, peat, lumbering, and cement, where wholesale prices must reflect difference in the expenditures of enterprises attributable to the diverse natural conditions of individual regions, basins, deposits, and so on. Uniform wholesale factory prices are established for the users of the output of these industries (sometimes taking account of zonal differences), whereas differentiated accounting prices are set for producer enterprises, based on the planned prime cost of the output at a given enterprise or among a group of enterprises that have homogeneous production conditions.

In several of the extractive sectors (such as coal and iron ore), a zonal differentiation of wholesale prices, reflecting differences in levels of socially necessary expenditures in individual zones (or regions), is employed. In agriculture, as a result of great differences in soil, climatic, and economic conditions of the production of the most important agricultural products (grain, sunflowers, sugar beets, potatoes, vegetables, livestock products), purchase prices are differentiated by Union republics, geographic regions, or zones, based on the average zonal expenditures for the production of output. The differentiation of purchase prices is one of the important tools for leveling out economic conditions and the revenues of kolkhozes and sovkhozes that work under unequal natural-economic conditions. Moreover, purchase prices are differentiated on the basis of the quality of output. For instance, in consideration of the high milling and baking qualities of hard wheats, the purchase prices for them have been set 40 percent higher than for varieties of soft wheats; beer barley is priced 20 percent higher than feed barley; purchase prices for milk are differentiated (with the aid of markups and markdowns) on the basis of fat content, acidity and other quality indexes. Purchase prices for potatoes, vegatables, melons, fruits, meat, and some other foodstuffs are also differentiated with consideration of the seasonal conditions of the production and sale of output.

An important feature of state retail prices for consumer goods is their stability and consistency for the same goods, which ensures a uniform purchasing power for the ruble. For most industrial goods (such as fabrics, footwear, clocks and watches, refrigerators, radios, washing machines, sewing machines, and cameras), uniform retail prices exist for the entire country. However, for certain commodities it is necessary to take account of different levels of production costs in individual regions, as well as the difference in outlays for transportation if they constitute a sizable share of the commodity’s prime cost. Therefore, in addition to unified all-Union retail prices, zonal retail prices are used (differentiated by zones of the country), chiefly for foodstuffs—cereal products, meat products, fish products, sugar, confectionery, salt, canned goods, and the like—and for some difficult-to-transport industrial commodities, such as furniture, lumber, and window glass. For most of these commodities three price zones have been established in the USSR. The lowest prices are established for the first zone, which includes regions of mass production of the given commodity, with a low level of costs for its production and shipment. Zonal price differentiation changes with a change in the location and conditions of production and marketing of commodities in the country’s individual regions.

G. I. KABKO

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