[gaius]

Right, the price of anything is what people are willing to pay, there is minimal correlation with production costs. If the inputs get cheaper profits will go up but the consumer will pay the same.

Do we see massive price drops whenever any company outsources their call centre to India? Nope, the price stays the same and the execs pocket the difference in bonuses.

[orangecat]

Right, the price of anything is what people are willing to pay, there is minimal correlation with production costs.

This only works if the seller has monopoly pricing power. Otherwise gas would be $5/gallon all the time.

Do we see massive price drops whenever any company outsources their call centre to India?

Massive, no, but the prices of most things other than housing, health care, and education have in fact been dropping.

[brianlweiner]

Or they are in response to internal rising costs; e.g outsource 20 IT positions because health insurance costs for your other 200 employees are increasing 16%.