PRICI – The Standard Framework
Rules-based conduct measurement framework designed for inflationary environments
Addresses four diagnosed market failures simultaneously: sellers’ inflation, financialisation, monopsony power, and Innovation Inflation
Overview
The Price Restraint and Investment Compliance Index (PRICI) is a rules-based conduct measurement framework designed for inflationary environments. It addresses four diagnosed market failures simultaneously: sellers’ inflation, financialisation, monopsony power as well as Innovation Inflation.
PRICI creates a unified incentive structure that makes extraction expensive and investment rewarding, forcing productive capital deployment without discretionary political intervention.
The Formula
Core Calculation
Price Intensity
Catches unjustified markups
Extraction Signal
Measures distributions
Investment & Commitment
Rewards productive deployment
Score Interpretation
0.00 – 0.29
Safe Harbour
0.30 – 0.49
Watch Band
0.50+
Penalty Zone
Component Breakdown
Price Intensity
Measures: Incremental price increases relative to sector median
Purpose: Catches unjustified markup expansion (addresses sellers’ inflation)
Calculation:
Thresholds:
- PI < 1.0 = Below sector average pricing
- PI = 1.0 = Sector-aligned pricing
- PI > 1.05 = Watch band (varies by sector calibration)
- PI > 1.15 = Automatic penalty consideration
Example:
If retail sector median price increase is 5% and Firm A increases prices 6.5%:
PI = 6.5% ÷ 5% = 1.30
Indicates pricing pressure above sector norm
Extraction Signal
Measures: Distributions (dividends, buybacks) relative to sustainable earnings
Purpose: Catches financialisation and excessive shareholder extraction
Calculation:
Multi-year smoothing (3 years) to catch lumpy patterns
Thresholds:
- ES < 0.70 = Conservative distribution policy
- ES = 0.70 – 1.00 = Normal range
- ES > 1.00 = Extracting more than business generates (automatic penalty)
Example – Asda:
- Paid £2.1bn dividend (smoothed over 3 years)
- Owner Earnings: £2.04bn
- ES = 2.1 ÷ 2.04 = 1.03
- Extracting more than business generates
Investment & Commitment
Measures: Verified productive deployment (CapEx, R&D, median wages)
Purpose: Rewards genuine productive investment, addresses monopsony power
Calculation:
• Verified CapEx increases (e.g., 40%)
• R&D intensity (e.g., 20%)
• Median cash pay increases (e.g., 40%)Weights vary by sector and macroeconomic calibration
Key feature: Median wages component directly incentivises sharing productivity gains with workers
Example – John Lewis:
- Suspended distributions (ES = 0.00)
- 10% staff pay rise (high IC wage component)
- PRICI Score: 0.00 (Safe Harbour)
How PRICI Addresses Each Mechanism
🏢 Against Sellers’ Inflation (Market Power)
PI component catches unjustified price increases above sector median
- Firms can’t sustain high markups without offsetting investment
- High PI + Low IC = Penalty
Forces: moderate pricing OR increase productive deployment
💰 Against Financialisation (Short-Termism)
ES component directly targets extraction behaviour
- Measures all forms of distributions vs. sustainable earnings
- Multi-year smoothing prevents timing games
Forces: reduce extraction OR increase investment to offset
👥 Against Monopsony Power (Wage Suppression)
IC component explicitly rewards median wage increases
- Not just executive comp (median is key)
- Weighted significantly in formula (e.g., 40%)
Forces: share productivity gains with workers OR face penalties
⚡ Against Innovation Inflation
Combined formula addresses both pathways:
- Profit Capture: High PI + High ES without IC = Penalty (can’t extract efficiency gains)
- Process Capture: IC excludes “complexity rent,” rewards genuine investment
Forces: diffuse value through prices, investment, or wages
Real-World Evidence
Spain Macroeconomic Intervention (2026-27 Simulation)
Problem:
Services inflation sticky, investment slowdown
PRICI Calibration:
- PI threshold: 1.05x median for tourism/hospitality
- IC weighting: 40% median wages, 40% CapEx, 20% R&D
Forecast Results (vs. baseline):
- GDP growth: +0.25 percentage points
- Inflation: -0.30 percentage points
- Private investment: +0.60 percentage points
- Cost-benefit ROI: 35:1 to 70:1
Asda vs. John Lewis (UK Retail)
Two firms, similar sector, opposite conduct:
| Metric | Asda | John Lewis |
|---|---|---|
| PI | 0.83 | 0.55 |
| ES | 1.03 | 0.00 |
| IC | 0.31 | 0.92 |
| PRICI Score | 0.78 (Penalty) | 0.00 (Safe) |
What happened:
- Asda extracted £2.1bn while workers lagged peer wages
- John Lewis suspended distributions, raised staff pay 10%
- PRICI revealed pattern invisible to conventional metrics
Technical Resources
Download Specification Sheet
PRICI Specification Sheet v10.1 (30 pages, PDF)
Complete technical specification
Access Calculator
Live Company Scores
Pre-calculated PRICI scores for 50+ companies
For Different Audiences
Related Frameworks
Explore other tools in the PRICI suite:
PRICI-Lite
For secular stagnation
PRICI_P
Public sector efficiency
MIA
Macro-level measurement
RCG Theory
Theoretical foundation
Last Updated: January 2025 | Version: 10.1
Citation: Charakupa, J. (2025). “The Price Restraint and Investment Compliance Index (PRICI) Specification Sheet v10.1.” The PRICI Foundation.