Where Do Prices Come From?

Many people think that haggling is a game of psychological manipulation, and it is certainly is that, but more importantly, it reflects the disinformation between buyer and seller. The seller knows his cost, and more importantly, the going market rate, but the buyer usually does not. Haggling is, therefore, a way of indirectly surveying the price the seller thinks the market will bear. Sometimes the price depends on the cost of a good to the seller, but it just as likely may not. A fashion retailer will sell out of fashion clothing far below cost, and a hot, imported gadget may sell for several times what it cost the seller to acquire.