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.
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.