What are the causes of price escalation? Do they differ for exports and goods produced and sold in a foreign country?
Causes for price escalation are incurred costs from the following;
Taxes, tariffs, and administrative costs
Inflation
Exchange variation → Variation in the exchange rate of two currencies.
Basically, if a company is experiencing high inflation in a country where they are selling their products, it may sometimes be even better to retain its inventory instead of selling at below its replacement costs. Ways of controlling inflation can be done by charging for extra services, inflate costs in transfer pricing, break up products into components and price each part separately.
Exchange-rate fluctuations hedging → insuring against a negative currency rate
Varying currency values
Middlemen withdrawals (from longer distribution channels)
Transportation and shipping