Price of products depends on both internal and external factors.

Internal factors include marketing

objectives, marketing strategy, costs whereas external factors include elasticity of demand, customer
expectations, competitive and other products and government regulations. In case of international trade
the cost of logistics plays an important role in pricing of goods. The extent of impact is likely to vary from
goods to goods. The theories of trade suggests that trade is based on principles of comparative
advantage (Ricardo, 1817), demand & supply (Mill, 1899), factors of endowment (Heckscher – Ohlin
Theory (HO Model), 1933), distance between seller and buyer (Gravity Model by Tinbergen, 1962) and
consumer preference (New Trade Theory by Krugman, 1996). Armington’s trade theory (1969, 2003, and
2004) pointed out that non-trade cost play an important role in trade between two countries. He
identified that these primarily include the transportation and other related cost not collected by the
producer. A crude approximation suggests that 30% of the trade cost supported by consumers in
importing countries is not incurred by the sector producers in the exporting countries. As such the
pricing decisions of the manufacturers do not tend to consider this factor. This paper aims at
distinguishing between trade and non-trade cost, the impact of non-trade cost on demand of goods in
global markets, determining the sensitivity of the demand of the goods with change in price of the
goods, and suggesting a pricing framework based on these factors for goods sold in global markets.