Abstract
In recent studies, the cyclical behavior of markups is examined, but the role of costs in determining markups is ignored. Here, a pricing equation is estimated that implicity measures the rate of change in markup as a function of aggregate demand growth, aggregate inflation and industry cost inflation. Results for 21 two-digit SIC industries in the U.S. over 1948 to 1979 show incomplete pass-through from cost into price, implying a negative relationship between cost and the markup. Aggregate inflation positively influences prices and markups. Aggregate demand negatively influences prices and markups in highly concentrated industries, but not otherwise.
Original language | English |
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Pages (from-to) | 99-108 |
Number of pages | 10 |
Journal | Review of Industrial Organization |
Volume | 19 |
Issue number | 1 |
DOIs | |
Publication status | Published - 2001 |
Keywords
- Business cycle
- Price-cost markups
- Pricing