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Industrial Seigniorage, the Other Face of Competition

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  • Jordan Melmiès

Abstract

This paper tries to develop an original view on industrial practices in competitive capitalist economies. In particular, we question the link between prices, competition and the quality of goods and services. We try to show that it is rational for firms to try to reduce the quality and/or the identity of goods and services while still presenting theses goods and services as the same as before, in order to reduce their prices and so to improve their relative position in the competitive struggle and in order to increase their profits. By reducing quality, we mean the practice that consists of mixing inputs at the margin with cheaper ones or with alternative products that give weight. This practice reminds us of the old Seigneurs who used to mix gold with other metals to produce more coins. That’s why we propose to label this practice 'industrial seigniorage'. The article first tries to delineate the widespread existence of this practice among French firms, and then explains the fundamental elements of (Post Keynesian) consumers' behaviour which allow for this practice to exist. We especially insist on the inability of the consumer to evaluate the quality of goods and services, and his inability to distinguish a good which have been modified at the margin. In a third part, we analyze the phenomenon of industrial seigniorage in a kaleckian model. We show the impact on sectoral profit rates and on prices, as well as the global and macroeconomic consequences on growth, distribution and employment.

Suggested Citation

  • Jordan Melmiès, 2013. "Industrial Seigniorage, the Other Face of Competition," GREDEG Working Papers 2013-25, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
  • Handle: RePEc:gre:wpaper:2013-25
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    File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2013-25.pdf
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    References listed on IDEAS

    as
    1. Marc Lavoie, 1994. "A Post Keynesian Approach to Consumer Choice," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 16(4), pages 539-562, July.
    2. Wood, Donna J., 1985. "The Strategic Use of Public Policy: Business Support for the 1906 Food and Drug Act," Business History Review, Cambridge University Press, vol. 59(3), pages 403-432, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Industrial seigniorage; Input substitution; product downsizing; Post Keynesian economics; Stock-Flow consistent modelling;
    All these keywords.

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D20 - Microeconomics - - Production and Organizations - - - General

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