About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

32 Antitrust Bull. 451 (1987)
Oligopoly Theory and Price Rigidity

handle is hein.journals/antibull32 and id is 451 raw text is: The Antitrust Bulletin/Summer 1987 Oligopoly theory and price rigidity BY HOWARD N. ROSS* I. Introduction There is general agreement that oligopolists can raise absolute price above the competitive level; however, there is widespread disagreement about whether oligopolists differ from more com- petitive sellers in the formation of relative prices. This apparent inconsistency underlies a paradox. If oligopolists have the market power to control the level of price so as to optimize the value of the firm, why is that power not exercised to control the rate at which price adjusts, which also affects the value of the firm? Price policy in markets of few firms embodies discretion and cooperation, and should be concerned with present as well as future revenues. There seems little question that coordinated oligopolists can, if they wish, influence future revenues by regu- lating the path of price change. The controversy centers on whether they do, and in what manner. The most frequent asser- tion is that oligopolists stabilize prices in response to what they regard as temporary and short-run cyclical fluctuations in de- mand. The existence of rigid prices is prima facie inconsistent with market equilibrium, and can cause procyclical adjustments in output and employment, which fall more in recession and rise more in recovery than in a regime of flexible prices. If rigid prices are, in fact, widespread and important, their role in generating business cycles and as a disturbance to macroequilibrium should be an issue for public policy. Baruch College, The City University of New York. , 1987 by Federal Legal Publications, Inc.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most