Pricing Always Comes Back to the Market

Ever wonder how people figure out cost-of-living adjustments? People go and buy a representative “market basket.” Someone sent me this piece, thinking perhaps I could get to Italy to do some kind of pricing survey (it’s only for military personnel and their families who are already stationed over there).

The work the government does in this area often serves as the foundation for private companies’ cost-of-living rates. For information on how the calculate rates, see this page. Here’s the overall table.

For folks selling goods and services around the world, especially to consumers, these variations are critical. Overprice, and volume will be far below expectations. Underprice, and you will leave a ton of money on the table. The introduction of a single currency in much of Europe highlighted the tremendous differences in price levels for basic items across the EU. (Differences still exist between countries, but the band has narrowed.)

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