Title: “Market Power and Inflation: A Short-Run Target Return Model”—Comment
Abstract: John Blair's article represents a major extension of his earlier American Review article, Economic Concentration and Depression Price Rigidity. Essentially, he argues that perverse price flexibility (upward movement of prices during recessions) has become more and more prevalent since the end of World War II. To test this basic proposition Blair uses the new BLS Industry-Sector price indexes (prices organized on the SIC basis), covering 344 SIC five-digit classes (about one-third of the number of all product classes) and representing more than 50 percent of their total value. The test period used is the 1970 recession (December 1969-December 1970) and the 1971 reflation (December 1970-December 1971). His conclusions are essentially the same as in his 1955 study, namely, that prices in concentrated oligopolistic industries tend to rise both during periods of declining and expanding demand. Finally, he offers a variant of full-cost pricing theory, that is, a short-run target-return model to explain this kind of behavior. Considering that this is the first attempt of which I am aware to use the new BLS SIC Industry-Sector price indexes, itself a sample of five-digit product groups, and since only one recession and recovery period is involved in the analysis, Blair's analysis is likely to raise
Publication Year: 1974
Publication Date: 1974-06-01
Language: en
Type: article
Indexed In: ['crossref']
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