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Price Stickiness: A Post Keynesian Microeconomic Perspective

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  • Paul Downward


    (Division of Economics, Staffordshire University Business School)

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    This paper explores price stickiness from a Post Keynesian microeconomic perspective. A realist interpretation of Post Keynesian pricing theory is put forward. In seeking to empirically re-examine this theory, and consistent with an open-system epistemology, both descriptive and statistical analysis of a sample of data drawn from UK manufacturing firms is undertaken. It is argued that the results offer support for the Post Keynesian perspective that price stickiness is a normal feature of business activity. The results show that pricing stability is actively sought, that firms are interested in long-run pursuit of objectives including goodwill, and that firms set prices with reference to their competitors by following mark-up pricing mechanisms. To the limited extent that firms do change their prices in response to changes in their environment then, in addition to this being understood as a contingency, once again the key features of the Post Keynesian accounts are important: Mark-up pricing methods, with mark ups set to take account of competitors' prices.

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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 27 (2001)
    Issue (Month): 2 (Spring)
    Pages: 165-182

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    Handle: RePEc:eej:eeconj:v:27:y:2001:i:2:p:165-182
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