Pricing Consulting and the Law of One Price

Simon-Kucher announced last month that it's opening an office in Stockholm, Sweden. Aside from its testimony to the strength of the market for pricing consulting in which this firm specializes, by association the move calls to mind the work of Gustav Cassel, a member of the Stockholm school of economic thought of the 1930s and one-time professor at Stockholm University. Cassel developed the purchasing power parity theory of exchange rates. The idea is that exchange rates between currencies should reflect the relative price levels in the respective countries, following the law of one price. Else savvy arbitragers would buy products in the country in which they were cheaper to sell them in the other, thus bidding up the currency in the cheaper market to equalize prices.

Companies traditionally behave as though the law of one price is the law of the land within countries but has no jurisdiction between them. Pricing consulting consequently evolved as a relatively narrow albeit vibrant discipline, with consulting firms orienting their offerings around relatively narrow pricing elasticity studies delivered by local teams along with minor adjustments to country-level performance and workflow management.