MOST consumer purchases have an emotional component to them (Starbucks or Folgers, Sierra Nevada Pale Ale or Bud, Loaded with Options and in Red or base model in white ???) Even in highly competitive markets. Since most won't do the math, they'll never figure out whether the higher FairTax price is justified or not ... that's why most "rebates" never get claimed.
In competitive markets, prices fall to the lowest price that provides an acceptable investment return after all costs have been covered.
Tell that to GM.
[There is neither a family nor a company on the planet which will engage in the analysis you suggest for the pricing of a flat panel LCD.]
Oh, ye of little faith !
These decisions are made intuitively by every consumer with every purchase. Every purchase contains a subconcious evaluation of the price of a product relative to all other items they could purchase. That's what a market IS -- consumers choosing and dictating the prices by their choices.
Do you honestly believe that a consumer doesn't look at two items -- even completely unrelated items -- and decide which one gives them the most bang for their buck ? Do you think people look at a restaurant menu and decide what to eat solely based on what sounds good ? So if they are in the mood for a steak, they will never be swayed to something else based on the price differential ?
What a strange world you must live in.