Perceptions and Pricing Power

Inflation is known to increase costs of producing goods and services thereby lowering profits of firms. A quick fix solution to this challenge would be for business to pass on this extra cost to the customer in form of higher prices. However, firms today are not exactly passing on this extra cost. Companies have the ability to exercise pricing options but are not using them fully. (Kapoor, 2004). One wonders whether this reduced pricing power of businesses is due to lowering inflation worldwide, or a result of some other factor. Reconciliation of this anomaly is of key importance to improving organizational planning amidst an increasingly volatile economic environment. The author investigates this percieved influence of inflation on pricing power of firms