Predicting pricing strategy from financial condition.

Abstract

The purpose of this research is to determine if pricing strategy for pioneer products in the defense aerospace industry can be predicted using financial ratios. The sample population includes eleven contractors and thirty five contracts. Fifteen ratios were developed from corporate reports or 10K reports for the year of the contract and the three preceeding years. These ratios were correlated to the slope of the price reduction curve for the contracts. The analysis used both standard and stepwise regression methods. A nine variable, linear regression model was developed that is significant in explaining pricing strategy. The model possesses potential to predict pricing strategy but requires additional validation.