IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v17y2017i2p12n3.html
   My bibliography  Save this article

Dynamic Stability of Post-Keynesian Pricing

Author

Listed:
  • Kemp-Benedict Eric

    (Stockholm Environment Institute, Somerville, MA, USA)

Abstract

Conventional economic theory assumes a Walrasian pricing mechanism that is known to pose theoretical difficulties. Less well-known is that conventional price theory conflicts with empirical studies of price-setting in industrial firms. Post-Keynesian theory, which assumes mark-up pricing on normal costs and infrequent price changes, is consistent with observation, and we show in this paper that post-Keynesian pricing, unlike conventional pricing, features stable dynamics. We focus on the short run, because post-Keynesian theory posits complex and historically-contingent long-term price dynamics. Specifically, we show that under very general conditions, prices converge to a unique equilibrium price vector.

Suggested Citation

  • Kemp-Benedict Eric, 2017. "Dynamic Stability of Post-Keynesian Pricing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 17(2), pages 1-12, June.
    • Handle: RePEc:bpj:bejtec:v:17:y:2017:i:2:p:12:n:3
    DOI: 10.1515/bejte-2016-0013
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejte-2016-0013
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bejte-2016-0013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    2. Joaquim Oliveira Martins & Stefano Scarpetta & Dirk Pilat, 1996. "Mark-Up Ratios in Manufacturing Industries: Estimates for 14 OECD Countries," OECD Economics Department Working Papers 162, OECD Publishing.
    3. Haibin Wu, 2009. "Entry barriers and markup ratios: evidence from OECD countries," Applied Economics Letters, Taylor & Francis Journals, vol. 16(2), pages 125-130.
    4. Gintis Herbert, 2006. "The Emergence of a Price System from Decentralized Bilateral Exchange," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-17, December.
    5. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April.
    6. Araujo, Ricardo Azevedo & Trigg, Andrew B., 2015. "A neo-Kaldorian approach to structural economic dynamics," Structural Change and Economic Dynamics, Elsevier, vol. 33(C), pages 25-36.
    7. Kirman, Alan, 1989. "The Intrinsic Limits of Modern Economic Theory: The Emperor Has No Clothes," Economic Journal, Royal Economic Society, vol. 99(395), pages 126-139, Supplemen.
    8. Kemp-Benedict, Eric, 2013. "Material needs and aggregate demand," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 44(C), pages 16-26.
    9. Herbert Gintis, 2007. "The Dynamics of General Equilibrium," Economic Journal, Royal Economic Society, vol. 117(523), pages 1280-1309, October.
    10. A. P. Kirman & K. J. Koch, 1986. "Market Excess Demand in Exchange Economies with Identical Preferences and Collinear Endowments," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 53(3), pages 457-463.
    11. Trevor W. Chamberlain & Myron J. Gordon, 1989. "Liquidity, Profitability, and Long-Run Survival: Theory and Evidence on Business Investment," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 11(4), pages 589-610, July.
    12. Lambrecht, Bart M., 2004. "The timing and terms of mergers motivated by economies of scale," Journal of Financial Economics, Elsevier, vol. 72(1), pages 41-62, April.
    13. Paul Downward & Frederic Lee, 2001. "Post Keynesian Pricing Theory “Reconfirmed”? A Critical Review of," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 23(3), pages 465-483, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Eric Kemp‐Benedict, 2020. "Convergence of actual, warranted, and natural growth rates in a Kaleckian–Harrodian‐classical model," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 851-881, November.
    2. Eric Kemp-Benedict & Emily Ghosh, 2018. "Downshifting in the Fast Lane: A Post-Keynesian Model of a Consumer-Led Transition," Economies, MDPI, vol. 6(1), pages 1-17, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simone Landini & Mauro Gallegati & J. Barkley Rosser, 2020. "Consistency and incompleteness in general equilibrium theory," Journal of Evolutionary Economics, Springer, vol. 30(1), pages 205-230, January.
    2. Maria-Augusta Miceli & Federico Cecconi & Giovanni Cerulli, 2013. "Walrasian Tatonnement by Sequential Pairwise Trading: Convergence and Welfare Implications," Working Papers in Public Economics 161, University of Rome La Sapienza, Department of Economics and Law.
    3. Richters, Oliver, 2021. "Modeling the out-of-equilibrium dynamics of bounded rationality and economic constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 846-866.
    4. G. Fagiolo & A. Roventini, 2009. "On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 6.
    5. Kemp-Benedict, Eric, 2013. "Material needs and aggregate demand," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 44(C), pages 16-26.
    6. Richters, Oliver, 2020. "Between bounded rationality and economic imperatives: essays on out-of-equilibrium dynamics," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 228534, January.
    7. Chen, Shu-Heng, 2012. "Varieties of agents in agent-based computational economics: A historical and an interdisciplinary perspective," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 1-25.
    8. Marchionatti, Roberto & Sella, Lisa, 2015. "Is Neo-Walrasian Macroeconomics a Dead End?," CESMEP Working Papers 201502, University of Turin.
    9. Tongkui Yu & Shu-Heng Chen, 2021. "Realizable Utility Maximization as a Mechanism for the Stability of Competitive General Equilibrium in a Scarf Economy," Computational Economics, Springer;Society for Computational Economics, vol. 58(1), pages 133-167, June.
    10. repec:hal:pseose:halshs-00825217 is not listed on IDEAS
    11. Glötzl, Erhard, 2022. "Macroeconomic General Constrained Dynamic models (GCD models)," MPRA Paper 112385, University Library of Munich, Germany.
    12. Antoine Mandel & Carlo Jaeger & Steffen Fürst & Wiebke Lass & Daniel Lincke & Frank Meissner & Federico Pablo-Marti & Sarah Wolf, 2010. "Agent-based dynamics in disaggregated growth models," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00542442, HAL.
    13. Gerard Ballot & Antoine Mandel & Annick Vignes, 2015. "Agent-based modeling and economic theory: where do we stand?," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 10(2), pages 199-220, October.
    14. Amitava Krishna Dutt & Peter Skott, 2006. "Keynesian Theory and the AD-AS Framework: A Reconsideration," Contributions to Economic Analysis, in: Quantitative and Empirical Analysis of Nonlinear Dynamic Macromodels, pages 149-172, Emerald Group Publishing Limited.
    15. Guerini, Mattia & Napoletano, Mauro & Roventini, Andrea, 2018. "No man is an Island: The impact of heterogeneity and local interactions on macroeconomic dynamics," Economic Modelling, Elsevier, vol. 68(C), pages 82-95.
    16. Sabiou M. Inoua & Vernon L. Smith, 2020. "The Classical Theory of Supply and Demand," Working Papers 20-11, Chapman University, Economic Science Institute.
    17. Erlingsson, Einar Jon & Teglio, Andrea & Cincotti, Silvano & Stefansson, Hlynur & Sturlusson, Jon Thor & Raberto, Marco, 2014. "Housing market bubbles and business cycles in an agent-based credit economy," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-42.
    18. Erhard Glötzl & Florentin Glötzl & Oliver Richters, 2019. "From constrained optimization to constrained dynamics: extending analogies between economics and mechanics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(3), pages 623-642, September.
    19. Giorgio Fagiolo & Paul Windrum & Alessio Moneta, 2006. "Empirical Validation of Agent Based Models: A Critical Survey," LEM Papers Series 2006/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    20. G. Dosi, 2012. "Economic Coordination and Dynamics: Some Elements of an Alternative “Evolutionary” Paradigm," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 12.
    21. Giorgio Fagiolo & Andrea Roventini, 2017. "Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 20(1), pages 1-1.

    More about this item

    Keywords

    general equilibrium; prices; post-Keynesian; Perron-Frobenius theorem; Sraffian;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • B5 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:17:y:2017:i:2:p:12:n:3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.