Price Ratchet
Categories: Company Management
What’s that sound? The sound of a price ratcheting up...or (God forbid) down.
When something big happens that triggers an obvious price change in an asset, it’s a price ratchet. Price ratchets happen from news spreading. A company doing better than everyone thought they would will see an upward price ratchet. Likewise, companies that report poor quarterly earnings compared to what was expected of them will see a downward price ratchet.
Geopolitical events also cause price ratchets. There have been price ratchets on the British Sterling pound after Brexit speeches. Sometimes, gas prices go way up or down in response to political conflicts in the Middle East. Other reports, like government-issued reports on the state of the economy, could price ratchet the entire stock market.
Price ratchets aren’t necessarily bad...but they are jerky.
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Cost Accounting: What is Price Fixing?0 Views
And finance Allah Shmoop what is price fixing up Okay
So why are we fixing prices anyway Like when did
they break Okay Yeah Old joke among collude er's And
that's pretty much what price fixing is It's collusion Like
in a given market There are three cellars of zombie
hosiery Extra thick stockings Teo you know keeping all the
goop and bones stuff What one specializes in the fall
line another the spring and another the summer But instead
of competing against each other such that a setup like
this lovely ensemble might fetch one hundred dollars at Zombie
Mart while they collude on pricing and all agreed and
never sell ho shary for less than two hundred dollars
per And zombies well have to buy it or you
know bad things happen All right Well the biggest price
fixer in the world OPEC These guys the Organization of
the Petroleum Exporting Countries the people who control oil price
fixing of oil in their countries is in fact legal
But not in the U S So how do we
police it or manage it Are what do we do
Just embrace Tesla's Yeah Hard to do on a global
scale Well airlines have price fixed in the past So
have computer chip manufacturing companies and well so have self
cleaning litter box companies And if you think about the
motivation to fix prices well it's big Three owners get
together in a bar and quietly opine on their low
profit margins You know the ones they're getting in their
existing business competing against each other The three of them
represent ninety two percent of all the sales in their
industry segment holiday You know solar powered roof tiles segment
at a dollar a tile They make a dime in
operating profit But if they all colluded and sold them
for a dollar forty instead of a dollar bill nobody
would really know the difference the costs or just passed
on to the idiot consumer who simply wants his refrigerator
to be powered by the great and powerful Sun God
But at a buck forty way higher than where supply
meets demand On this graph here Instead of operating profits
of a dime a tile they make like fifty cents
five times the profit number Is all that additional profit
worth the legal risk of colluding illegally in countries who
don't allow you to collude Is it worth the jail
time Well for some it is especially you know those 00:02:21.03 --> [endTime] who look good in orange