Game Changer

INTRODUCTIONChanging the Pricing Conversation

Companies, governments, and individuals make countless price decisions every day, because every commercial transaction involves a price. The collective sum of the value they exchange represents not only the size of the world economy – estimated at roughly $100 trillion per year – but also all of the decisions about how that “pie” gets divvied up.¹ Prices are the numerical shorthand that allows the transacting parties to make quick, easy comparisons to other transactions and gives them trust and confidence that the money exchanged represents a fair trade.

That’s why business executives and economists acknowledge that prices play a critical role in markets and society. But the current conversation around pricing – as expressed in economics textbooks, anecdotal “war stories,” political discourse, and the backs of cocktail napkins – makes it easy to believe that pricing is nothing more than a technical, tactical, and, for most people, boring game based on four premises:

1. Zero sum: Think of your price as a position on a slider bar of fixed length. The more you charge, the less the other party gets, and vice versa.
2. Value extraction: Given a zero‐sum scenario, sellers have a natural and strong incentive to extract the maximum value, and buyers strive to strike the best bargains. Neither party wants to leave money on the table.
3. Static: ...