How do firms set prices?

For economics students, obsessed with demand and supply diagrams, setting prices is child's play. But how do firms set their prices? What information do thay need to set a price that will hopefully clear the market. An interesting article in the FT, offering advice to firms about what to consider when setting prices in an economic slowdown. A key factor is to 'understand how price-sensitive customers will behave - and act on that knowledge more quickly than competitors'. Price sensitivity, a concept that should be familiar to students. Read the FT article here.