# Frontier provider

At the current market price , provider D is the borderline provider . Its unit cost corresponds to the price.

Marginal supplier (also border operation , marginal producer or marginal supplier ; English marginal supplier ) is in the price theory a supplier whose marginal costs are equal to the average costs and these are equal to the market price .

## General

The term “border supplier” comes from economic theory , and according to Erich Gutenberg one should “be aware of this fact when using this term in economic policy discussions”. Colloquially, cross-border providers are also called those companies that are in a corporate crisis and may soon have to file for bankruptcy.

Such a provider is in an operational borderline situation, because without changing its cost structure (including material cost ratio , personnel cost ratio , production structure ), it cannot cope with price reductions because its sales are just enough to cover costs . In this situation he does not receive a producer pension. If the market price were to fall below the total costs of the marginal supplier, he would have to reduce his capacities so that the resulting excess demand could lead to rising prices. However, the fact that covers the profit competitors of the marginal supplier under a predatory competition will try to oust the border providers by reducing prices by the market.

That is why every supplier can be described as a marginal supplier who only produces in a cost-covering manner. The opposite of the marginal customer is a customer who leaves the market first in the event of a price increase.

## detection

The definition states that for the marginal provider, the marginal costs are identical to the average costs : ${\ displaystyle K_ {G}}$${\ displaystyle K_ {D}}$

${\ displaystyle K_ {G} = K_ {D}}$

and the average cost equals the market price so that ${\ displaystyle P}$

${\ displaystyle K_ {G} = P}$

applies. This means that the total costs correspond to the sales revenues, so that the marginal supplier cannot make a profit .

## economic aspects

However, this contradicts the corporate goal of maximizing profits , so the marginal sellers of Polypol only on cost reductions is dependent because it the market price as a data parameter can not influence. Any further price cut would bring him into the red. Frontier suppliers cannot take part in the price competition because they have already reached their lower price limit . If a company is a cross-border supplier for a long time, the risk of its liquidation increases .