Abstract
Warren Buffet once said that pricing power is the most important determinant of a company’s value. Already in my childhood, I had visceral first-hand experiences with the power of price. When our hogs were ready for slaughter, my father would bring them to the local wholesale market, but he had no influence on the price. And I didn’t like that the price was often lousy. Pricing eventually became my vocation. I started with theory, then practice, followed by the psychology of price and even its philosophy. The Romans already knew that price equals value. They have the same word “pretium” for both. Price is the most powerful instrument in marketing and competition. It drives profit like no other factor. But it is also dangerous. It can ignite price wars. And it is now conquering even wider realms of society, with uncertain consequences. It is likely that no one else has written more about pricing than I have.
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Notes
- 1.
“Hier ist meine Seele vergraben,” interview with Hermann Simon Welt am Sonntag, November 9, 2008, p. 37.
- 2.
“Brauereien beklagen Rabattschlachten im Handel,” Frankfurter Allgemeine Zeitung, April 20, 2013, p. 12.
- 3.
My own article in this reader has the title “How Price Consulting is Coming of Age,” pp. 61–79.
- 4.
Personal letter from Peter Drucker from June 7, 2003.
- 5.
Personal e-mail from Peter Drucker’s wife Doris Drucker from November 2, 2005. She writes: “I am sorry to tell you that Peter is very ill. Before his collapse, he dictated a letter to you. The secretary just brought it here for his signature,” followed by the quoted text. I received the letter only after Peter Drucker’s death on November 11. We had planned to meet at his house in Claremont, CA, near Los Angeles, on November 12, 2005.
- 6.
The term “lemon” for a bad product was first used in a widely read article of the American economist George A. Akerlof in which he examines the signals of prices in the used-car market. George A. Akerlof, The Market for “Lemons”: Quality Uncertainty and the Market Mechanism, The Quarterly Journal of Economics, August 1970, pp. 488–500. Akerlof received the Nobel Prize in 2001.
- 7.
www.iposs.de/1/gesetz-der-wirtschaft; accessed on Jun 6, 2017.
- 8.
From the transcript of an interview of the Financial Crisis Inquiry Commission (FCIC) with Warren Buffett on May 26, 2010.
- 9.
The study was conducted in 2012.
- 10.
Socrates, Euthydemos.
- 11.
Aristotle (384-322 BC) is often cited as the father of the sharing economy. But actually the pioneer was Socrates. The lives of these two philosophers did not overlap. Plato, the mentor of Aristotle, who lived from 427 to 348 BC, overlapped with both Socrates and Aristotle.
- 12.
Aristotle, Politics, Book I; see also Younkins (2018).
- 13.
“Post-Sandy Price Gouging: Economically Sound, Ethically Dubious,” Time, November 2, 2012.
- 14.
“Uber’s Prices Surged in Sydney During the Hostage Crisis, and Everyone Is Furious,” New Republic, December 14, 2014.
- 15.
“London terror attack: Uber slammed for being slow to turn off ‘surge pricing’ after rampage,” Independent, June 4, 2017
- 16.
“Uber is refunding passengers who used the service after the London terror attack,” Mashable, June 5, 2017.
- 17.
For an in-depth treatment of price differentiation and quantification of subjective value, see Simon and Fassnacht (2019).
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Simon, H. (2021). The Seductive Power of Price. In: Many Worlds, One Life. Copernicus, Cham. https://doi.org/10.1007/978-3-030-60758-6_9
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