How do UK companies set prices?

Quarterly Bulletin 1996 Q2
Published on 01 June 1996

By Simon Hall, Mark Walsh and Tony Yates of the Bank’s Structural Economic Analysis Division.

In the autumn of 1995, the Bank conducted a survey of price-setting behaviour in 654 UK companies that maintain regular contact with the Bank’s Agents. The survey was inspired by the work of Alan Blinder in the United States. The survey has made available much new information. For example, companies do not regard the direct costs of changing prices as being particularly important, although prices are typically changed infrequently, on average only twice a year. Preserving customer relationships is very important for firms in making decisions about prices. And there are many differences among firms about which factors influence price changes. These results throw light on how monetary policy—which is focused on the control of inflation—affects the economy. The article describes the survey results and how they compare with other information about UK price setting.

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