Customer pays price for rising costs

March 28, 1997

Reports by Phil Baty from the Royal Economic Society's annual conference at Staffordshire University this week. See research papers.

Companies tend to raise prices when their costs go up, not when demand rises, a Bank of England research team has found. A survey of 700 companies revealed that 64 per cent said they pass on higher costs through price rises, while only 12 per cent said they would put prices up if demand grew. Researchers Simon Hall and Mark Walsh also found that retailers review prices more than manufacturers who make three or four changes a year; companies with long-standing customer relationships change prices less frequently; and cost rises were much more likely to lead to price rises than a cost fall would lead to a price fall.

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