Cost-plus pricing

Cost-plus pricing is especially common for utilities and single-buyer products that are manufactured to the buyer's specification, such as for military procurement.

[5] In another example, at the bottom of each product page, Everlane breaks down the manufacturing cost into five categories: materials, hardware, labor, duties, and transport.

For markets that feature relatively similar production costs, companies do not have a dominant strategy.

The strategy enables price changes to goods and services relative to increases or decreases in the product cost which are simple to communicate and justify to customers.

[8] Cost-based pricing is a way to induce a seller to accept a contract the costs of which represent a large fraction of the seller's revenues, or for which costs are uncertain at contract signing, as for example for research and development.

In the long run, marginal and average costs (as for cost-plus) tend to converge, reducing the difference between the two strategies.

Although this method of pricing has limited application as mentioned above, it is used commonly for the purpose of ensuring a business covers its costs by "breaking even" and not operating at a loss whilst generating at least a minimum rate of profit.