Mark-up Pricing in 21 Nations and the Eurozone: the Empirical Evidence

There is a mountain of empirical evidence that shows that administered prices are the majority of prices in most modern market economies. These prices are also sometimes called “mark-up prices,” “average cost prices,” “full cost prices,” “normal cost prices,” or “cost-plus prices.”

This post lays out what administered prices/mark-up prices/full cost prices are, and the empirical evidence for them from 21 nations and the Eurozone.

Mark-up prices are set by businesses through their cost accounting conventions in an ex ante manner before transactions take place, on the basis of (1) total average unit costs plus (2) a profit mark-up, at a given, estimated, projected or target quantity of output or level of sales (from which of course the ex post or actual quantity of output produced or sold in a given time period might differ).

Empirical evidence shows us that mark-up prices are generally inflexible with respect to demand, but tend to change – though it is by no means a necessary or universal process – when total average unit costs change or when the business wants to change its profit mark-up.

The early empirical work and theory development on administered prices/mark-up prices was done by Gardiner C. Means (1935, 1936, 1939–1940, 1962, 1992 [1933], and 1972, which are discussed here and here), Hall and Hitch (1939) (discussed here and here), P. W. S. Andrews (1949, 1949a, 1964), Kalecki (1954, 1971), A. D. H. Kaplan (Kaplan et el. 1958), and others.

But much more empirical evidence has been done over the past 50 years too (much of it listed here or in Appendix 1 below, including literature from the related “marginalist” controversy), and especially by central bank surveys on price setting over the past 10 years that were inspired by Blinder’s influential direct surveys on US business price setting (Blinder 1998).

The standard Post Keynesian works on mark-up pricing are Lee (1998) and Downward (1999).

The most recent empirical evidence on mark-up pricing in many nations can be seen below, with longer analysis given in separate posts I link to at the end of each “literature” section:
(1) The United States
Literature:
Kaplan, A. D. H., Dirlam, J. B. and Lanzillotti, R. F. 1958. Pricing in Big Business: A Case Approach. The Brookings Institution, Washington DC.

Lanzillotti, R. F. 1964. Pricing Production and the Marketing Policies of Small Manufacturers. Washington State University Press, Pullman, Washington.

Gordon, L. A., Cooper, R., Falk, H., and D. Miller. 1981. The Pricing Decision. National Association of Accountants, New York.

Govindarajan, V. and R. Anthony. 1986. “How Firms use Cost Data in Price Decisions,” Management Accounting 65: 30–34.

Shim, Eunsup, and Ephraim Sudit. 1995. “How Manufacturers Price Products,” Management Accounting 76.8: 37–39.

Blinder, A. S. et al. (eds.). 1998. Asking about Prices: A New Approach to Understanding Price Stickiness. Russell Sage Foundation, New York.

Downward, Paul and Frederic Lee. 2001. “Post Keynesian Pricing Theory ‘Reconfirmed’? A Critical Review of Asking about Prices,” Journal of Post Keynesian Economics 23.3: 465–483.

“Two Marketing Studies on US Administered Prices,” November 16, 2013.
Govindarajan and Anthony (1986) and Shim and Sudit (1995) are two marketing surveys that found that from the 1980s to the 1990s mark-up pricing accounted for roughly 70% to 85% of US industrial prices.

In a much broader and more representative survey for the US economy as a whole, Blinder et al. (1998: 200–201) found that 56.8% of the firms they surveyed said that the idea that prices and price changes depend mainly on costs of production ranked as “very important” (38.8%) or moderately important (18%).

(2) Canada
Literature:
Amirault, D., Kwan, C. and G. Wilkinson. 2004. “A Survey of the Price-Setting Behaviour of Canadian Companies,” Bank of Canada Review 2004/2005: 29–40.
http://www.bankofcanada.ca/2006/09/publications/research/working-paper-2006-35/

“Mark-up Pricing in Canada,” January 7, 2014.
Amirault, Kwan, and Wilkinson (2004) examine price setting in Canada, and report the results of a survey of 170 private, unregulated, non-primary sector firms in the sectors of construction (10%), manufacturing (26%), trade (14%), and services (49%), in a sample which should give representative results for about 70% of Canada’s output in 2002 (Amirault, Kwan, and Wilkinson 2004: 3–4).

An impressive 67.1% of firms surveyed attributed price inflexibility to “cost-based pricing” – that is, to mark-up pricing (Amirault, Kwan, and Wilkinson 2004: 21).

(3) Eurozone
Literature:
Fabiani, S., M. Druant, I. Hernando, C. Kwapil, B. Landau, C. Loupias, F. Martins, T. Mathä, R. Sabbatini, H. Stahl and A. Stokman. 2006. “What Firms’ Surveys tell us about Price-Setting Behavior in the Euro Area,” International Journal of Central Banking 2.3: 3–47.

Fabiani, Silvia, Suzanne Loupias, Claire, Monteiro Martins, Fernando Manuel and Roberto Sabbatini. 2007. Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York.

“Administered Prices in the Eurozone: Some Empirical Data,” October 16, 2013.
The wide-ranging survey of Fabiani et al. (2006) and (2007) on prices in the Eurozone from many central bank studies finds that the average for mark-up pricing throughout the Eurozone is 54%, a majority of firm prices.

In industrial goods markets in Germany, the largest economy in Europe, a strikingly high 73% of firms have administered prices (Fabiani et al. 2006: 18, Table 4).

(4) the UK
Literature:
Downward, Paul. 1999. Pricing Theory in Post-Keynesian Economics: A Realist Approach. Edward Elgar Publishing, Cheltenham, UK and Northampton, MA.

Greenslade, Jennifer V. and Miles Parker. 2012. “New Insights into Price-Setting Behaviour in the UK: Introduction and Survey Results,” Economic Journal 122.558: F1–F15.

Hall, S., Walsh, M. and A. Yates. 2000. “Are UK Companies’ Prices Sticky?,” Oxford Economic Papers 52.3: 425–446.

“Mark-up Pricing in the UK,” February 15, 2014.

“Downward’s Pricing Theory in Post-Keynesian Economics: Chapter 8,” January 23, 2014.
Hall, Walsh, and Yates (2000) report the results of a survey of 654 UK companies in 1995 carried out by the Bank of England, and mostly of large companies in manufacturing (68% of the survey), as well as some in services (13%), retailing (13%), and construction (6%) (Hall, Walsh, and Yates 2000: 426–428).

The survey asked firms if they recognised a specific “pricing theory as being important” for explaining their pricing behaviour. It was found that 47.1% of firms chose cost-based pricing as the second most important theory (the theory of constant marginal costs came first at 53.8%).

Greenslade and Parker (2012) report the results of a new survey of 693 UK firms (conducted in December 2007 and February 2008) chosen to be representative of the private sector economy of the UK as a whole, including manufacturing, electricity and gas supply, construction, services, and retail trade, but excluding public sector firms or those under regulatory price control (Greenslade and Parker 2012: F13–F14).

When asked how prices for their main product were determined, 68% of firms said that competitors’ prices were “very important” or “important” in determining price (Greenslade and Parker 2012: F9).

The second most important explanation was mark-up pricing, with variable mark-ups (58%) and constant mark-ups (44%) both being important (Greenslade and Parker 2012: F10).

Downward (1999, Chapter 8) presents a survey of 283 UK manufacturing enterprises (Downward 1999: 150–151). When asked whether the firm set its prices for its products by means of a mark-up on average costs, 63.7% of firms said either “very often” (29.9%) or “often” (33.8%). A further 17.3% said “sometimes.” Only 7% said “rarely,” and only 8.1% said “not at all” (Downward 1999: 160).

(5) Ireland
Literature:
Keeney, Mary, Lawless, Martina, and Alan Murphy. 2010. “How Do Firms Set Prices? Survey Evidence from Ireland,” Central Bank of Ireland, Research Technical Papers, no 7/RT/10.
http://ideas.repec.org/p/cbi/wpaper/7-rt-10.html

“Mark-up Pricing in Ireland,” November 22, 2013.
Keeney et al. (2010) report the results of a survey of 1000 Irish firms and finds that the largest type of pricing is mark-up pricing at 44% of firms. Other evidence from their paper, presented in my post here, suggests that the real percentage is higher than this, since when firms were asked how likely it was that they would adjust prices downwards in response to a negative demand shock, 66.5% of firms said that negative demand shocks were of little or no relevance to pricing decisions.

(6) Norway
Literature:
Langbraaten, Nina, Nordbø, Einar W. and Fredrik Wulfsberg. 2008. “Price-setting Behaviour of Norwegian Firms – Results of a Survey,” Norges Bank Economic Bulletin 79.2: 13–34.
http://www.norges-bank.no/en/about/published/publications/economic-bulletin/economic-bulletin-22008/price-setting-behaviour-of-norwegian-firms--results-of-a-survey/

“Mark-up Pricing in Norway,” November 23, 2013.
Langbraaten et al. (2008) cite a well-sampled survey of 725 firms throughout many sectors of the Norwegian economy that found that 69% of Norwegian businesses use mark-up pricing.

(7) Sweden
Literature:
Apel, Mikael, Friberg, Richard and Kerstin Hallsten. 2005. “Microfoundations of Macroeconomic Price Adjustment: Survey Evidence from Swedish Firms,” Journal of Money, Credit and Banking 37.2: 313–338.

“Mark-up Pricing in Sweden,” January 9, 2014.
Apel et al. (2005) provide data on price setting behaviour in Sweden, from a survey of about 600 private sector firms (Apel et al. 2005: 314) weighted to create a more representative sample of the Swedish economy (Apel et al. 2005: 316), but their study fails to directly ask firms how they set price.

Interestingly, when asked why they leave prices unchanged in response to small changes in demand, many firms said “it is better to leave the price unchanged as long as the costs do not change” (Apel et al. 2005: 323), which gives some support to the view that mark-up pricing is important.

(8) Iceland
Literature:
Ólafsson, Thorvardur Tjörvi, Pétursdóttir, Ásgerdur, and Karen Á. Vignisdóttir. 2011. “Price Setting in Turbulent Times: Survey Evidence from Icelandic Firms,” Working Paper Central Bank of Iceland
www.sedlabanki.is/lisalib/getfile.aspx?itemid=8891‎

“Mark-up Prices in Iceland,” November 25, 2013.
Ólafsson et al. (2011) cite a survey of 580 Icelandic firms and finds that mark-up pricing is the largest type of pricing at 45%. Evidence suggests that more mark-up prices are concealed in the other categories in the survey, so that the real percentage is higher than this.

(9) Netherlands
Literature:
Hoeberichts, Marco and Ad Stokman. 2006. “Price Setting Behaviour in the Netherlands: Results of a Survey,” ECB Working Paper Series No 607 (April)
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp607.pdf

Hoeberichts, Marco and Ad Stokman. 2007. “A Price Behavior of Dutch Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 140–151.

“Mark-up Pricing in the Netherlands,” May 2, 2014.
Hoeberichts and Stokman (2006) (reprinted with some changes in Hoeberichts and Stokman 2007) report the results of a survey conducted in May 2004, with 1,246 responses from firms, mainly in the Dutch manufacturing and services sectors (Hoeberichts and Stokman 2006: 7–8).

Of all firms surveyed, 59.3% reported that they used mark-up prices, with variable mark-up being the most widely used form (at 35.4%).

(10) Luxembourg
Literature:
Lünnemann, P. and T. Y. Mathä. 2006. “New Survey Evidence on the Pricing Behaviour of Luxembourg Firms,” ECB Working Paper Series No 617
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp617.pdf

Lünnemann, P. and T. Y. Mathä. 2007. “A Survey of Price Setting Practices of Luxembourg Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 124–139.

“Mark-up Pricing in Luxembourg,” April 27, 2014.
Lünnemann and Mathä (2006) report the results of a survey on price setting behaviour in Luxembourg (see also Lünnemann and Mathä 2007).

The survey was conducted by the Banque centrale du Luxembourg in the second half of 2004 and involved responses from 367 firms in the construction, industry, services, trade and retail trade sectors, and the replies were adjusted to be representative of the Luxembourg economy as a whole (Lünnemann and Mathä 2006: 7–8).

Although the survey does not ask firms directly if they use mark-up pricing, there is a considerable amount of indirect evidence that this form of pricing is prevalent.

(11) Belgium
Literature:
Aucremanne, Luc and Martine Druant. 2005. “Price-Setting Behaviour in Belgium. What can be learned from an ad hoc Survey?,” ECB Working Paper Series No. 448
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp448.pdf

Aucremanne, Luc and Martine Druant. 2007. “Why Are Prices Sticky?: Evidence from an Ad Hoc Survey in Belgium,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 69–82.

“Mark-up Pricing in Belgium,” March 26, 2014.
Aucremanne and Druant (2005) report the results of a survey of price setting behaviour by Belgian firms (see also Aucremanne and Druant 2007).

The survey was conducted in 2004 by the National Bank of Belgium and involved 1,979 firms in the industrial, construction, trade and services sectors, in a sample that should represent about 60% of Belgian GDP (Aucremanne and Druant 2005: 8, 10).

Fabiani et al. (2006: 18, Table 4) use the data from the survey and estimate that the number of firms using mark-up pricing is about 46%.

(12) Germany
Literature:
Stahl, Harald. 2005. “Price Setting in German Manufacturing: New Evidence from New Survey Data,” ECB Working Paper Series No. 561
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=868433

Stahl, Harald. 2007. “Price Setting in German Manufacturing: Evidence from New Survey Data,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 97–109.

“Mark-up Pricing in Germany,” March 29, 2014.
Stahl (2005) reports the results of a survey on price setting behaviour by German manufacturing firms (see also Stahl 2007).

The survey was conducted in 2004 by the Ifo Institute for the Deutsche Bundesbank (Germany’s central bank) and involved 1,200 manufacturing firms (Stahl 2005: 9–10).

Mark-up pricing accounted for 73% of price setting.

(13) France
Literature:
Loupias, Claire and Roland Ricart. 2004. “Price Setting in France: New evidence from Survey Data,” ECB Working Paper Series No. 423
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp423.pdf

Loupias, Claire and Roland Ricart. 2007. “Asymmetries in Price Setting: Some Evidence from French Survey Data,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 83–96.

“Mark-up Pricing in France,” March 28, 2014.
Loupias and Ricart (2004) report the results of a survey on price setting behaviour by French firms (see also Loupias and Ricart 2007).

The survey was conducted during the winter of 2003–2004 by the Banque de France and involved 1,662 manufacturing firms (Loupias and Ricart 2004: 8).

Though mark-up pricing is reported only at 36.9% of firms, it seems clear that the “competitors’ prices” category in the survey conceals other mark-up prices too, as mark-up pricing firms which follow “price leaders” often tend to report their pricing strategy in this category (as the evidence from Ireland and Norway suggests).

(14) Austria
Literature:
Kwapil, Claudia, Baumgartner, Josef and Johann Scharler. 2005. “Price-Setting Behavior of Austrian Firms,” ECB Working Paper Series no. 464
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp464.pdf

Kwapil, Claudia, Baumgartner, Josef and Johann Scharler. 2007. “Price Reactions to Demand and Cost Shocks: Survey Evidence from Austrian Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 55–68.

“Mark-up Pricing in Austria,” March 24, 2014.
Kwapil, Baumgartner and Scharler (2005) report the results of a survey of price setting behaviour by Austrian firms (with a summary in Kwapil, Baumgartner and Scharler 2007).

The survey was conducted in January 2004 by the Austrian Institute of Economic Research (WIFO) and 873 firms participated, which were mainly in the manufacturing and manufacturing-related services sectors, and often producing intermediate goods (Kwapil, Baumgartner and Scharler 2005: 9–11).

Firms were asked to rank 11 different theories of why prices are generally inflexible, and cost-based pricing was ranked the third most important theory.

(15) Italy
Literature:
Fabiani, Silvia, Gattulli, Angela, and Roberto Sabbatini. 2004. “The Pricing Behaviour of Italian Firms: New Survey Evidence on Price Stickiness,” ECB Working Paper Series No. 333
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp333.pdf

Fabiani, Silvia, Gattulli, Angela, and Roberto Sabbatini. 2007. “The Pricing Behaviour of Italian Firms: New Survey Evidence on Price Stickiness,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 110–123.

“Mark-up Pricing in Italy,” April 19, 2014.
Fabiani, Gattulli and Sabbatini (2004) report the results of a survey on price setting behaviour by Italian firms (see also Fabiani, Gattulli and Sabbatini 2007).

The survey was conducted in January 2003 and involved 333 industrial and service firms (Fabiani et al. 2004: 8), although about 66% were industrial firms. Furthermore, the survey was biased towards firms selling producer goods or wholesale goods (Fabiani et al. 2004: 13).

It was found that 63.1% of firms surveyed used mark-up pricing.

(16) Spain
Literature:
Álvarez, Luis J. and Ignacio Hernando. 2005. “The Price Setting Behaviour of Spanish Firms Evidence from Survey Data,” ECB Working Paper Series No. 538 (October)

Álvarez, Luis J. and Ignacio Hernando. 2007. “Pricing Behavior of Spanish Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 165–181.

Fabiani, S., M. Druant, I. Hernando, C. Kwapil, B. Landau, C. Loupias, F. Martins, T. Mathä, R. Sabbatini, H. Stahl and A. Stokman. 2006. “What Firms’ Surveys tell us about Price-Setting Behavior in the Euro Area,” International Journal of Central Banking 2.3: 3–47.

“Mark-up Pricing in Spain,” May 7, 2014.
Álvarez and Hernando (2005) report the results of a survey conducted by a private company between May and September 2004 using a questionnaire prepared by the Banco de España, which involved 2,008 firms from the manufacturing, energy, trade, hotel and restaurant, transport and communications sectors (Álvarez and Hernando 2005: 8). These sectors represent about 51.3% of Spanish Gross Value Added (GVA) (Álvarez and Hernando 2005: 8).

While the survey fails to ask firms whether they use mark-up pricing, nevertheless the results strongly suggest that this form of price setting is important: for example, the survey results indicate that changes in costs of production are the main cause of price increases (Álvarez and Hernando 2005: 36). Moreover, Fabiani et al. (2006: 18, Table 4) report that the percentage of Spanish firms using mark-up pricing is 52% (though it is unclear where this data comes from).

(17) Portugal
Literature:
Fabiani, S., M. Druant, I. Hernando, C. Kwapil, B. Landau, C. Loupias, F. Martins, T. Mathä, R. Sabbatini, H. Stahl and A. Stokman. 2006. “What Firms’ Surveys tell us about Price-Setting Behavior in the Euro Area,” International Journal of Central Banking 2.3: 3–47.

Martins, Fernando. 2005. The Price Setting Behaviour of Portuguese Firms Evidence from Survey Data,” ECB Working Paper Series No 562 (December)
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp562.pdf

Martins, Fernando. 2007. “How Portuguese Firms set their Prices,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 152–164.

“Mark-up Pricing in Portugal,” May 6, 2014.
Martins (2005) reports the results of a survey on price setting behaviour of firms in Portugal conducted between May and September 2004 by the Banco de Portugal, which involved 1,370 Portuguese firms, mainly from manufacturing (Martins 2005: 6).

Unfortunately, the survey did not ask firms directly if and how frequently they used mark-up pricing. Nevertheless, Fabiani et al. (2006: 18, Table 4) use the data from the survey and estimate that the number of firms using mark-up pricing is about 65%.

(18) Japan
Literature:
Hsu, Robert. 1999. “Pricing Practices in Japan,” Global Business and Economics Review 1.2: 164–171.

Nakagawa, S., R. Hattori and I. Takagawa, 2000. “Price-Setting Behaviour of Japanese Companies,” Bank of Japan Research Paper
http://www.boj.or.jp/en/research/brp/ron_2000/ron0009b.htm/

“Mark-up Pricing in Japan,” November 29, 2013.
Nakagawa and Takagawa (2000) cite a survey of 630 Japanese companies. As interpreted by Fabiani et al. (2007: 190), the data suggest that least 54% of Japanese firms use mark-up pricing.

(19) New Zealand
Literature:
Parker, Miles. “Price-Setting Behaviour in New Zealand”
https://cama.crawford.anu.edu.au/amw2013/doc/Parker,Miles.pdf

“Mark-up Pricing in New Zealand,” November 30, 2013.
Parker cites a survey of around 5,300 New Zealand firms that finds that mark-up prices account for about 54% of business prices.

(20) Australia
Literature:
Park, Anna, Rayner, Vanessa and Patrick D’Arcy. 2010. “Price-Setting Behaviour – Insights from Australian Firms,” Reserve Bank of Australia Bulletin (June Quarter): 7–14.
http://www.rba.gov.au/publications/bulletin/2010/jun/bu-0610-2a.html

“Mark-up Pricing in Australia,” November 30, 2013.
Park, Rayner, and D’Arcy (2010) cite a survey of around 700 Australian firms that finds that mark-up prices account for at least 49% of firm prices. Once we add likely mark-up prices concealed in the other categories in the survey, the percentage will be higher than this.

(21) South Africa
Govender, Neelan and Mike Holland. 2013. “Pricing Behaviour in Manufacturing Industry in South Africa: Implications for Competition Policy,” Seventh Annual Conference on Competition Economics and Policy, 5th September, Johannesburg.
http://www.pricemetrics.co.za/sg_userfiles/Pricing_Behaviour_in_Manufacturing_Industry_Paper_Final.pdf

“Mark-up Pricing in South Africa,” January 20, 2014.
Govender and Holland (2013) report the results of a limited survey from May to August 2012 on the pricing behaviour of 34 manufacturing firms in South Africa on the prices of their main products (Govender and Holland 2013: 2).

It was found that 73.5% firms said that price setting on the basis of direct costs plus a variable percentage mark-up was either a “very important” (38.2%) or “fairly important” (35.3%) form of price setting (Govender and Holland 2013: 3).

And 55.9% of firms said that price setting on the basis of direct cost plus a fixed percentage mark-up was either a “very important” (35.3%) or “fairly important” (20.6%) form of price setting (Govender and Holland 2013: 3).

(22) Pakistan
Literature:
Malik, W. S., ul HaqSatti, A. and G. Saghir. 2010. “Price Setting Behaviour of Pakistani Firms: Evidence from Four Industrial Cities of Punjab,” PIDE Working Papers
http://www.eaber.org/node/23069
Malik et al. (2010) provides some interesting evidence on mark-up pricing in Pakistan, and reports the results of a 2008 survey of 343 manufacturing firms in four industrial cities of the Punjab Province (Malik et al. 2010: 2–4).

About 75% of these firms reported that they had more than 20 competitor firms (Malik et al. 2010: 2).

Furthermore, of the 57% of the firms that reported that they set their own prices, 62% reported that they set prices as a mark-up over costs (Malik et al. 2010: 7–8). A further 30% reported that the price of their main competitor was used to set price, and, as in other surveys, it is likely that this category also conceals mark-up pricing.

So even in developing nations, mark-up pricing is significant.
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Fabiani, Silvia, Suzanne Loupias, Claire, Monteiro Martins, Fernando Manuel and Roberto Sabbatini. 2007. Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York.

Fabiani, Silvia, Gattulli, Angela, and Roberto Sabbatini. 2007. “The Pricing Behaviour of Italian Firms: New Survey Evidence on Price Stickiness,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 110–123.

Govender, Neelan and Mike Holland. 2013. “Pricing Behaviour in Manufacturing Industry in South Africa: Implications for Competition Policy,” Seventh Annual Conference on Competition Economics and Policy, 5th September, Johannesburg.
http://www.pricemetrics.co.za/sg_userfiles/Pricing_Behaviour_in_Manufacturing_Industry_Paper_Final.pdf

Govindarajan, V. and R. Anthony. 1986. “How Firms use Cost Data in Price Decisions,” Management Accounting 65: 30–34.

Greenslade, Jennifer V. and Miles Parker. 2012. “New Insights into Price-Setting Behaviour in the UK: Introduction and Survey Results,” Economic Journal 122.558: F1–F15.

Hall, R. L. and C. J. Hitch. 1939. “Price Theory and Business Behaviour,” Oxford Economic Papers 2: 12–45.

Hall, S., Walsh, M. and A. Yates. 2000. “Are UK Companies’ Prices Sticky?,” Oxford Economic Papers 52.3: 425–446.

Hill, Greg. 1996. “Capitalism, Coordination, and Keynes: Rejoinder to Horwitz,” Critical Review 10: 373–387.

Hoeberichts, Marco and Ad Stokman. 2006. “Price Setting Behaviour in the Netherlands: Results of a Survey,” ECB Working Paper Series No 607 (April)
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp607.pdf

Hoeberichts, Marco and Ad Stokman. 2007. “A Price Behavior of Dutch Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 140–151.

Kalecki, M. 1954. Theory of Economic Dynamics. Allen and Unwin, London.

Kalecki, M. 1971. Selected Essays on the Dynamics of the Capitalist Economy. Cambridge University Press, Cambridge.

Kaplan, A. D. H., Dirlam, J. B. and Lanzillotti, R. F. 1958. Pricing in Big Business: A Case Approach. The Brookings Institution, Washington DC.

Keeney, Mary, Lawless, Martina, and Alan Murphy. 2010. “How Do Firms Set Prices? Survey Evidence from Ireland,” Central Bank of Ireland, Research Technical Papers, no 7/RT/10.
http://ideas.repec.org/p/cbi/wpaper/7-rt-10.html

Kwapil, Claudia, Baumgartner, Josef and Johann Scharler. 2005. “Price-Setting Behavior of Austrian Firms,” ECB Working Paper Series no. 464
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp464.pdf

Kwapil, Claudia, Baumgartner, Josef and Johann Scharler. 2007. “Price Reactions to Demand and Cost Shocks: Survey Evidence from Austrian Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 55–68.

Langbraaten, Nina, Nordbø, Einar W. and Fredrik Wulfsberg. 2008. “Price-setting Behaviour of Norwegian Firms – Results of a Survey,” Norges Bank Economic Bulletin 79.2: 13–34.
http://www.norges-bank.no/en/about/published/publications/economic-bulletin/economic-bulletin-22008/price-setting-behaviour-of-norwegian-firms--results-of-a-survey/

Lee, Frederic S. 1998. Post Keynesian Price Theory. Cambridge University Press, Cambridge and New York.

Loupias, Claire and Roland Ricart. 2004. “Price Setting in France: New evidence from Survey Data,” ECB Working Paper Series No. 423
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp423.pdf

Loupias, Claire and Roland Ricart. 2007. “Asymmetries in Price Setting: Some Evidence from French Survey Data,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 83–96.

Lünnemann, P. and T. Y. Mathä. 2006. “New Survey Evidence on the Pricing Behaviour of Luxembourg Firms,” ECB Working Paper Series No 617
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp617.pdf

Lünnemann, P. and T. Y. Mathä. 2007. “A Survey of Price Setting Practices of Luxembourg Firms,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 124–139.

Malik, W. S., ul HaqSatti, A. and G. Saghir. 2010. “Price Setting Behaviour of Pakistani Firms: Evidence from Four Industrial Cities of Punjab,” PIDE Working Papers
http://www.eaber.org/node/23069

Martins, Fernando. 2005. The Price Setting Behaviour of Portuguese Firms Evidence from Survey Data,” ECB Working Paper Series No 562 (December)
https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp562.pdf

Martins, Fernando. 2007. “How Portuguese Firms set their Prices,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 152–164.

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Means, G. C. 1935. Industrial Prices and their Relative Inflexibility. US Senate Document no. 13, 74th Congress, 1st Session, Government Printing Office, Washington DC.

Means, G. C. 1936. “Notes on Inflexible Prices,” American Economic Review 26 (Supplement): 23–35.

Means, G. C. 1939–1940. “Big Business, Administered Prices, and the Problem of Full Employment,” Journal of Marketing 4: 370–381.

Means, G. C. 1962. Pricing Power and the Public Interest. Harper and Brothers. New York.

Nakagawa, S., R. Hattori and I. Takagawa, 2000. “Price-Setting Behaviour of Japanese Companies,” Bank of Japan Research Paper
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Ólafsson, Thorvardur Tjörvi, Pétursdóttir, Ásgerdur, and Karen Á. Vignisdóttir. 2011. “Price Setting in Turbulent Times: Survey Evidence from Icelandic Firms,” Working Paper Central Bank of Iceland
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Park, Anna, Rayner, Vanessa and Patrick D’Arcy. 2010. “Price-Setting Behaviour – Insights from Australian Firms,” Reserve Bank of Australia Bulletin (June Quarter): 7–14.
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Parker, Miles. “Price-Setting Behaviour in New Zealand”
https://cama.crawford.anu.edu.au/amw2013/doc/Parker,Miles.pdf

Pittman, Russell. 2009. “Who Are You Calling Irrational? Marginal Costs, Variable Costs, and the Pricing Practices of Firms,” Economic Analysis Group Discussion Paper 09-3
http://www.justice.gov/atr/public/eag/248394.htm

Shim, Eunsup, and Ephraim Sudit. 1995. “How Manufacturers Price Products,” Management Accounting 76.8: 37–39.

Stahl, Harald. 2005. “Price Setting in German Manufacturing: New Evidence from New Survey Data,” ECB Working Paper Series No. 561
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Stahl, Harald. 2007. “Price Setting in German Manufacturing: Evidence from New Survey Data,” in S. Fabiani, C. Suzanne Loupias, F. M. Monteiro Martins and Roberto Sabbatini (eds.), Pricing Decisions in the Euro Area: How Firms set Prices and Why. Oxford University Press, New York. 97–109.

Appendix 1
Below are the main surveys and articles in the “full cost” and marginalist pricing debate of the 1940s to 1970s

Against Marginalism
Kaplan, A. D. H., Dirlam, J. B. and Lanzillotti, R. F. 1958. Pricing in Big Business: A Case Approach. The Brookings Institution, Washington DC.

Lanzillotti, Robert F. 1958. “Pricing Objectives in Large Companies,” American Economic Review 48.5: 921–940.

Kahn, Alfred E. 1959. “Pricing Objectives in Large Companies: Comment,” American Economic Review 49.4: 670–678.

Lanzillotti, Robert F. 1959. “Pricing Objectives in Large Companies: Reply,” American Economic Review 49.4: 679-687.

Barback, R. H. 1964. Pricing of Manufactures. Macmillan and Co Ltd., London.

Wentz, Theodore E. 1966. “Realism in Pricing Analyses,” Journal of Marketing 30.2: 19–26.

Skinner, R. C. 1970. “The Determination of Selling Prices,” Journal of Industrial Economics 18.3: 201–217.

Sizer, John. 1971. “Note on ‘the Determination of Selling Prices,’” The Journal of Industrial Economics 20.1: 85–89.

Hague, D. C. 1971. Pricing in Business. George Allen and Unwin, London.

Burck, G. 1972. “The Myths and Realities of Corporate Pricing,” Fortune 85.4: 85–89, 125–126.

Atkin, B. and Skinner, R. 1975. How British Industry Prices. Industrial Market Research Limited, London.

Shipley, David D. 1981. “Pricing Objectives in British Manufacturing Industry,” The Journal of Industrial Economics 29.4: 429–443.

Gordon, L. A., Cooper, R., Falk, H., and D. Miller. 1981. The Pricing Decision. National Association of Accountants, New York.

Hankinson, A. 1985. A Study of Pricing Behaviour of Dorset-Hampshire Small Engineering Firms. Dorset Institute of Higher Education, Poole, Dorset.

Bruegelman, T., Haessly, G., Wolfangel, C. P. and Schiff, M. 1985. “How Variable Costing is used in Pricing Decisions,” Management Accounting 66: 58–61, 65.

Samiee, S. 1987. “Pricing in Marketing Strategies of US- and Foreign-based Firms,” Journal of Business Research 15: 17–30.

Defending Marginalism
Gordon, R. A. 1948. “Short Period Price Determination in Theory and Practice,” American Economic Review 38: 265–288.

Hague, D. C. 1949–1950. “Economic Theory and Business Behaviour,” Review of Economic Studies 16: 144–157.

Edwards, R. S. 1952. “The Pricing of Manufactured Products,” Economica 19: 298–307.

Simon, H. A. 1952. “A Behavioural Model of Rational Choice,” Quarterly Journal of Economics 69: 99–118.

Simon, H. A. 1959. “Theories of Decision Making in Economies,” American Economic Review 49: 253–283.

Simon, H. A. 1962. “New Developments in the Theory of the Firm,” American Economic Review 52: 1–15.

Shackle, G. L. S. 1955. “Businessmen on Business Decisions,” Scottish Journal of Political Economy 2: 32–46.

Earley, James S. 1956. “Marginal Policies of ‘Excellently Managed’ Companies,” American Economic Review 46.1: 44–70.

Cook, A. C., Dufty, N. F. and Jones, E. H. 1956. “Full Cost Pricing in the Multiproduct Firm,” The Economic Record 32: 142–147.

Pearce, I. F. 1956. “A Study in Price Policy,” Economica n.s. 23.90: 114–127.

Pearce, I. F. and Amey, L. R. 1956–1957. “Price Policy with a Branded Product,” The Review of Economic Studies 24: 49–60.

Fog, B. 1960. Industrial Pricing Policies: An Analysis of Pricing Policies of Danish Manufacturers. North Holland Publishing, Amsterdam.

Knox, R. L. 1966. “Competitive Oligopolistic Pricing,” Journal of Marketing 30: 47–51.

Neutral Studies
Alt, R. M. 1949. “The Internal Organisation of the Firm and Price Formation: An Illustrative Case,” Quarterly Journal of Economics 63: 92–110.

Woodruff, W. 1953. “Early Entrepreneurial Behaviour in Relation to Costs and Prices,” Oxford Economic Papers 5: 41–64.

Blackwell, R. 1953–1954. “The Pricing of Books,” Journal of Industrial Economics 2: 174–183.

Cook, A. and Jones, F. 1954. “Full Cost Pricing in Western Australia,” The Economic Record 30: 272–274.

Balkin, N. 1956. “Prices in the Clothing Industry,” Journal of Industrial Economics 5.1: 1–15.

Lazer, W. 1956–1957. “Price Determination in the Western Canadian Garment Industry,” Journal of Industrial Economics 5: 124–136.

Pool, A. G. and Llewellyn, G. 1957. The British Hosiery Industry: A Study in Competition. Leicester University Press, Leicester.

Lydall, H. F. 1958. “Aspects of Competition in Manufacturing Industry,” Institute of Economics and Statistics Bulletin 20: 319–337.

Haynes, W. W. 1962. Pricing Decisions in Small Business. University of Kentucky Press, Lexington, KY.

Haynes, W. W. 1964. “Pricing Practices in Small Firms,” The Southern Economic Journal 30: 315–324.

Lanzillotti, R. F. 1964. Pricing Production and the Marketing Policies of Small Manufacturers. Washington State University Press, Pullman, Washington.

Rosendale, R. B. 1973. “The Short Run Pricing Policies of Some British Engineering Exporters,” National Institute Economic Review 65: 44–51.

Nowotny, Ewald and Herbert Walther. 1978. “The Kinked Demand Curve—Some Empirical Observations,” Kyklos 31: 53–67.

Forgionne, G. A. 1984. “Economic Tools used by Management in Large American Operated Corporations,” Business Economics 19: 5–17.

Jobber, D. and Hooley, G. 1987. “Price Behaviour in the UK Manufacturing Service Industries,” Managerial and Decision Economics 8.2: 167–171.

Smiley, Robert. 1988. “Empirical Evidence on Strategic Entry Deterrence,” International Journal of Industrial Organization 6.2: 167—180.

Blinder, Alan S. 1991. “Why are Prices Sticky? Preliminary Results from an Interview Study,” American Economic Review 81.2: 89–96.

Additional Studies
Alchian, A. A. 1950. “Uncertainty, Evolution and Economic Theory,” Journal of Political Economy 58: 211–221.

Robinson, A. 1950. “The Pricing of Manufactured Products,” Economic Journal 60: 771–780.

Machlup, F. 1946. “Marginal Analysis and Empirical Research,” American Economic Review 36: 519–554.

Heflebower, R. F. 1955. “Full Costs, Cost Changes, and Prices,” in National Bureau of Economic Research, Business Concentration and Price Policy. Princeton University Press, Princeton. 361–392.

Coase, R. 1955. “Full Cost, Cost Changes, and Prices: Comment,” in National Bureau of Economic Research, Business Concentration and Public Policy. Princeton University Press, Princeton. 392–394.

Wiles, P. 1950. “Empirical Research and the Marginal Analysis,” Economic Journal 60: 515–530.

Robinson, J. V. 1953. “Imperfect Competition Revisited,” Economic Journal 63: 579–593.

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