Pricing over the Cycle

Pricing over the Cycle In recent studies, the cyclical behavior of markups is examined, but the role of costs in determining markups is ignored. Here, a pricing equation is estimated that implicitly measures the rate of change in markup as a function of aggregate demand growth, aggregate inflation and industry cost inflation. Results for 21 two-digit SIC industries in the U.S. over 1948 to 1979 show incomplete pass-through from cost into price, implying a negative relationship between cost and the markup. Aggregate inflation positively influences prices and markups. Aggregate demand negatively influences prices and markups in highly concentrated industries, but not otherwise. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Pricing over the Cycle

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Publisher
Springer Journals
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1011148618698
Publisher site
See Article on Publisher Site

Abstract

In recent studies, the cyclical behavior of markups is examined, but the role of costs in determining markups is ignored. Here, a pricing equation is estimated that implicitly measures the rate of change in markup as a function of aggregate demand growth, aggregate inflation and industry cost inflation. Results for 21 two-digit SIC industries in the U.S. over 1948 to 1979 show incomplete pass-through from cost into price, implying a negative relationship between cost and the markup. Aggregate inflation positively influences prices and markups. Aggregate demand negatively influences prices and markups in highly concentrated industries, but not otherwise.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 3, 2004

References

  • Pricing in Australian Manufacturing
    Bloch, H.

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