pricing

Method adopted by a firm to set its selling price. It usually depends on the firm's average costs, and on the customer's perceived value of the product in comparison to his or her perceived value of the competing products. Different pricing methods place varying degree of emphasis on selection, estimation, and evaluation of costs, comparative analysis, and market situation. See also pricing strategy.

Convincing customers to buy your products is tough enough without suppliers giving you a hard time. Basic rule of thumb: The fewer the number of suppliers, the more sway they have. Take the steel industry, which relies on a handful of companies for its iron feedstock. If two of those big guys should get together--as BHP Billton and Rio Tinto have been discussing--they would have significant pricing power, potentially crimping steel producers' margins. On the flipside, beware getting hooked on low-cost providers who don't keep an eye on quality. ("Lead-laced" Barbie, anyone?)

• Technological Progress and the Consumer