Pricing Power : The phenomenon where the value of money falls below the price of goods is called inflation , and it is said we are currently in an era of inflation. However, it’s not that simple. Inflation is realistically characterized by prices not rising all at once during an inflationary period but rather increasing rapidly for some items and slowly for others over several years. This phenomenon is known as the ‘ Cantillon Effect .’ In other words, inflation is neither uniform nor regular. Conversely, when prices fall below the value of money, it is referred to as deflation . To survive deflation, companies must innovate, often by reducing costs and expenses. During inflation, rising costs must be passed on to other economic agents through increased prices, a concept known as Pricing Power. Since companies cannot pass on all the rising costs, many go bankrupt during periods of inflation. - Joseph’s “just my thoughts”
The Anchoring Heuristic In 1974, Tversky and Kahneman divided two groups and asked one group to calculate the value of "8x7x6x5x4x3x2x1" and the other group to answer the question "1x2x3x4x5x6x7x8" immediately. The average calculation result of the first group was 2,250, and that of the second group was 512. For both groups, the original answer is 40,320, which is the same. Although they multiplied by the same number, the first group multiplied by the order of the larger number, resulting in a higher baseline adjustment, while the second group did the opposite. When we judge and make decisions, the reference point determines the extent and direction of our illusion. When we live, we have to deal with these fallible human beings. - Joseph's "just my thoughts"