tag:blogger.com,1999:blog-6245381193993153721.post8340777454753722723..comments2024-03-28T17:08:15.784-07:00Comments on Social Democracy for the 21st Century: A Realist Alternative to the Modern Left: Mark-up Pricing in the UKLord Keyneshttp://www.blogger.com/profile/06556863604205200159noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6245381193993153721.post-5303274646615201012014-07-10T08:18:18.237-07:002014-07-10T08:18:18.237-07:00"For example, most companies in manufacturing...<i>"For example, most companies in manufacturing in our survey offer discounts that vary by class of customer, product and month depending on market conditions, i.e. in response to short-term demand and competitive conditions."</i><br /><br />Yes, but this type of behaviour, by and large, involves mere reductions in the size of the mark-up for bulk purchases/favoured customers or matching a competitor's mark-up price.<br /><br />"Discounting" in this sense hardly vindicates marginalist pricing theory -- or even really contradicts standard cost-based pricing theory.<br /><br />After all, these firms are not cutting prices to clear markets in a recession and clear their whole stock in the marginalist sense: they are just reducing the profit mark-up as a "good will" measure for clients. <br /><br />E.g., are the firms in question aggressively cutting prices, even to below costs of production, to clear the stock?Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-90548005829161879342014-07-10T08:05:08.328-07:002014-07-10T08:05:08.328-07:00A very interesting discussion. These empirical res...A very interesting discussion. These empirical results, however, need to be examined carefully. As someone who has undertaken or supervised research on pricing I have found that while firms' list prices are sticky/rigid the transaction prices are more flexible. For example, most companies in manufacturing in our survey offer discounts that vary by class of customer, product and month depending on market conditions, i.e. in response to short-term demand and competitive conditions. It is therefore unwise to assume that many of these surveys (by central banks) indicate strong price rigidity. Nevertheless, our results confirm that cost-plus pricing is prevalent and list prices do not change for extended periods (months at a time)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-19275032888042274562014-02-20T06:24:59.505-08:002014-02-20T06:24:59.505-08:00You are quite right.
The author in his original p...You are quite right.<br /><br />The author in his original point (2) states "This suggests that price stickiness isn't universal."<br /><br />Well, nobody said that price stickiness "is universal." So that is a straw man.<br /><br />He cites Greenslade and Parker (2012) but that study says that when asked how prices for their main products were determined, the second most important explanation given by firms was mark-up pricing, with variable mark-ups (58%) and constant mark-ups (44%) both being important (Greenslade and Parker 2012: F10).<br /><br />And you only need to read S. Hall, M. Walsh, and A. Yates. 2000. “Are UK Companies’ Prices Sticky?,” Oxford Economic Papers 52.3: 425–446 as a further refutation of his idea that "Price and wage stickiness is over-rated."<br /><br /> E.g., Hall et al. asked: what happens when there is strong demand and this cannot be met from inventories or stocks?<br /><br />The result was as follows:<br />Increase overtime | 62%<br />Hire more workers | 12%<br /><b>Increase price | 12%</b><br />More capacity | 8% (Hall, Walsh, and Yates 2000: 442). <br />______<br />Only 12% would increase price! That's a pretty damning finding.<br /><br />Lord Keyneshttps://www.blogger.com/profile/06556863604205200159noreply@blogger.comtag:blogger.com,1999:blog-6245381193993153721.post-7815524374982529542014-02-20T06:13:50.336-08:002014-02-20T06:13:50.336-08:00Hey LK, you want something to criticise? Check out...Hey LK, you want something to criticise? Check out point (2) here:<br /><br />http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/02/the-macroeconomic-challenge.html<br /><br />Here is my comment which might help you formulate a possible response given your extensive knowledge of the literature:<br />______________<br /><br /><br /><br />Point (2) is quite misleading indeed. The report states that the main cause of changes in prices are raw material costs and wage costs -- which is consistent with fixed-price theory.<br /><br />The point here is: although half of firms may change their prices in the face of changes in demand it is by no means clear that they change the prices to clear markets -- this is the key to vindicating flexible price arguments.<br /><br />Also, so far as I can see (I didn't read the whole report), the report does not take into account the SIZE of the firms that respond to changes in demand quickly. If 50% of firms do respond quickly but these 50% are small firms -- which logic tells us they would be -- then they may make up maybe 10% of GDP.<br /><br />Again, I think what you said in point (2) is quite misleading.Philip Pilkingtonhttp://fixingtheeconomists.wordpress.com/noreply@blogger.com