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Maximizing consumer's, employee's salary, and shareholder's value

Maximizing consumer's, employee's salary, and shareholder's value

I'm trying to maximize the value of an economic system, which constitutes only consumers, employees, and shareholders. The three of these people have no overlap, although I'm not sure if that matters, but for simplicity, let's assume that a consumer can't be the other two and so on.

Intuitively, we know that by selling the goods/service at a cheaper price, the cost to the consumer has been reduced, but the shareholder's value (measured as earnings or net income) decreases also. On the other hand, by decreasing the employee's salary (SG&A), and holding everything else constant, we know that the shareholder's would benefit, since the capital would flow down to the bottom line. Finally, we also know by increasing the cost of the goods/service (i.e. increasing revenues by raising the price), the shareholders benefit, all things being equal. However, this has an increased cost to the employees.

Therefore, I'm interested in finding an optimal price for the goods/ service, the amount for SG&A (i.e. the salaries), and earnings of the company to maximize the following: 1.

  1. 3. Total Wealth of Society = SG&A + Earnings - Consumer's price .

My "baseline" company had the following: Revenue = 100 SG&A = 20 Tax Rate = 40% COGS = 60 - This variable doesn't change, and it maybe interpreted as the fixed costs. Consumer price = 0 ----> Because at these price levels, the consumer's real cost is $0 when revenues are $100. However, the cost is $10 when the revenues are $110. The cost of the goods/service maybe interpreted as the price the consumer paid - the value of the goods/service. Another example is, for this simplified example, the cost to the consumer is -10 if the revenues of the company is 90. Earnings = Revenue - 0.4*(Revenue - COGS - SG&A) Consumer's cost = NewRevenue - 100 --> Again, if the NewRevenue (which is the new price of the goods/service) is

Reply to
Draccarlaw
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Therefore, to maximize the value of a society - another words, to maximize the aggregate capital that everyone in an economic system has

- you must reduce the price of the goods/services to be sold to just offset the NET Income to the company. Another words: price the items/ services such that the Revenues = COGS + SG&A. When this occurs, the Net Income is 0.

Now here's the interesting part of things: The only kind of economic model like this, which is counter to corporate earnings, is a socialist economiy - or an economy owned by a government.

Reply to
Draccarlaw

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