2.
THE TRANSACTION MODEL
A business can be profitable only if it regularly can sell its products for a price
higher than what it costs to manufacture or purchase them. One objective of
business, thus, is to cost-effectively evoke in the buyer an evaluation, which
will yield the desired profit margin. Imagine the obscene contrast between a
4000$ luxury watch in comparison to an equally accurate time-keeping device
obtainable at 50$, when you just see them as such. And then realise that the
buyers of the two may be just as satisfied with their acquisitions.
It is obvious that the supplier creates his commercial offer by a number of actions
to be able to ask the price he wants. The buyer, on his side, values what
benefits he gets from paying this price for this product.
The equilibrium can be illustrated by balancing the two product descriptions of
the object of trade with each other: i.e., both the supplier's and the buyer's
product. Here, the product is discussed at depth as the object of trade, whereas
the exchange of money is seen as a prerequisite.
The supplier's complete offer, and the price asked for this total product, has to
be balanced against the buyers' evaluation of this offer in view of their (anticipated)
total gain from the deal.