How PPP pricing is calculated
Purchasing power parity compares what a basket of goods costs in different countries. Dividing a country's PPP conversion factor by its market exchange rate gives a ratio, sometimes called the price level, that shows how much cheaper or more expensive life is there than in the base country.
Multiply the base price by that ratio to get the adjusted price. If a plan is $10 in the United States and a country's price level is 0.35, the PPP-adjusted price is about $3.50, charged in local currency.
Why use PPP instead of the exchange rate
Exchange rates reflect trade and capital flows, not household budgets. A price converted at the exchange rate can equal a day's wages in one market and a few minutes' in another. PPP gives a starting point grounded in what people can afford.
Limits of PPP pricing
Treat the PPP figure as a first estimate, then adjust for competitors, set a floor that covers your cost per viewer and round to a natural local price.
- It is an average across all goods, not a measure of willingness to pay for streaming
- Local competitors may price well above or below the PPP figure
- A raw PPP price rarely lands on a tidy local price point
- Your costs, such as delivery and app store commission, do not fall with local incomes
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