Sticky Prices

Sticky Prices

Sticky Prices Jonathan Poland

Sticky prices are a common phenomenon in many markets, and they can have a significant impact on the overall economy. These prices are often resistant to changes in supply and demand, and they can persist for long periods of time even in the face of economic forces that would normally push prices in the opposite direction.

One possible reason for sticky prices is the existence of contracts or agreements that lock in prices for a certain period of time. For example, companies in a particular industry may agree to maintain their prices within a certain range in order to avoid competition on price. This can lead to prices that are “sticky” because they remain unchanged even in the face of changes in supply or demand.

Another factor that can contribute to sticky prices is the existence of psychological barriers that prevent prices from changing. For example, consumers may be resistant to paying higher prices for a particular product or service, and this can make it difficult for companies to increase their prices even when it is justified by changes in the market.

Sticky prices can be a source of market inefficiency and can lead to suboptimal allocation of resources. However, they can also provide stability and predictability in the economy, which can be beneficial for businesses and consumers.

Here are some examples of sticky prices:

  • The prices of certain products, such as gasoline or food items, may remain relatively stable despite fluctuations in supply and demand. This is often because consumers have a strong preference for these products and are willing to pay a certain price, regardless of the market conditions.
  • The salaries of certain workers, such as teachers or government employees, may remain unchanged for long periods of time even if the demand for their skills increases. This can be due to the existence of collective bargaining agreements or other factors that prevent wages from changing.
  • The prices of certain assets, such as real estate or stocks, may remain relatively stable even in the face of economic shocks. This can be because investors are hesitant to sell these assets at a lower price, and they are willing to hold onto them even if it means accepting lower returns.

Content Database

Marketing Communications Jonathan Poland

Marketing Communications

Marketing communications refers to the various forms of communication that are utilized in order to achieve marketing goals. These channels…

Solution Selling Jonathan Poland

Solution Selling

Solution selling is a type of sales approach that focuses on offering customers a tailored solution to their problems, rather…

Quality Management Jonathan Poland

Quality Management

Quality management is a process that ensures products and services meet certain standards of quality before they are released to…

Business Development Skills Jonathan Poland

Business Development Skills

Business development is a term that is often used to refer to sales jobs. However, it can also refer to…

What is Risk Communication? Jonathan Poland

What is Risk Communication?

Risk communication involves informing people about potential hazards and the steps that can be taken to prevent or mitigate those…

What is Cost Overrun? Jonathan Poland

What is Cost Overrun?

A cost overrun occurs when the actual cost of completing a task or project exceeds the budget that was allocated…

Risk Response Jonathan Poland

Risk Response

Risk response is the process of addressing identified risks in order to control or mitigate their impact. It is an…

Channel Structure Jonathan Poland

Channel Structure

Market penetration is the percentage of a target market that purchased a company’s product or service over a period of time.

Pricing Strategies Jonathan Poland

Pricing Strategies

Pricing strategy involves deciding on the right prices for a company’s products or services in order to achieve specific business…