Thursday, 4 July 2013

Eurosclerotic price setting

My previous post on Miles Parker's excellent research into how New Zealand firms set their prices mentioned, in passing, how little attention Eurozone firms appeared to pay to competitive conditions in their markets when they set their prices.

I didn't expect to come across such a wonderful example in such short order, but when I signed out from blogging about Miles' research and went trolling through some of the French websites I follow, I found this gem.

It's about how the French post office apparently wants to raise its prices - by 1% more than inflation in 2014 and 2015, and by (wait for it) 3% more than inflation in each of 2106, 2017, and 2018. The article says that, if inflation is 2% a year, this translates into a cumulative price increase of 24%. I make it 22.8%, but same diff.

It's a lovely insight into where many Eurozone businesses' minds are. My business in in free fall (the number of letters carried is expected to fall by 6% a year, similar to what's happening to mail carriers everywhere). So I'm entitled to big price increases to keep my revenue where it used to be.

Yeah, right.

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