American Economic Review · 1986 · 499 citations · 0 references
Social SciencesBusiness EconomicsEconomicsIndustrial OrganizationMicroeconomicsPricing TheoryMarket ConcentrationMarket StructureTransaction Cost EconomicsIndustry Concentration EffectsNonprice EffectsPrice RigidityPrice Setting BehaviorRationingTransaction Price ModelingTransactions
The study aims to analyze price behavior using individual transaction price data and to examine how price rigidity, price change, and the duration of buyer‑seller relationships interact. It does so by employing evidence from individual transaction prices. The evidence shows that prices remain rigid for over a year, that this rigidity is positively correlated with industry concentration, that price changes across buyers are weakly correlated, and that these findings underscore the importance of nonprice rationing and the inadequacy of price‑only market‑clearing models. © 1986 American Economic Association.
This paper uses evidence on individual transaction prices to analyze price behavior. The evidence shows that, for many transactions, pricesremain rigid for periods exceeding one year. The rigidity of price ispositively correlated with industry concentration. For several productsthe correlation of price changes across buyers is low. The paper alsoinvestigates the relationship between price rigidity, price change, andthe length of time a buyer and seller have been doing business together. The author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets. Copyright 1986 by American Economic Association.