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Transaction-Cost Influences on the Adjustment of Industries' Prices and Outputs

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  • Bradburd, Ralph M
  • Caves, Richard E

Abstract

Short-run adjustments of prices and outputs in producer-goods industries should reflect suppliers' continuing quasi-contractual relationships with their industrial customers. The authors test hypotheses about these relationships by analyzing cross-section determinants of time-series coefficients showing the rates of adjustment of industries' prices and outputs to movements of demand (inferred from customers' outputs). They confirm that price adjustments decrease with the bases for "sticky" relations with customers; the sensitivity of quantity adjustments increases with those bases and decreases with suppliers' own adjustment costs. They also confirm the standard hypothesis that price flexibility decreases with producer concentration. Copyright 1987 by MIT Press.

Suggested Citation

  • Bradburd, Ralph M & Caves, Richard E, 1987. "Transaction-Cost Influences on the Adjustment of Industries' Prices and Outputs," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 575-583, November.
    • Handle: RePEc:tpr:restat:v:69:y:1987:i:4:p:575-83
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    Cited by:

    1. Craig Gallet, 2001. "The Gradual Response of Market Power to Mergers in the U.S. Steel Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(3), pages 327-336, May.
    2. Weiss, Christoph R., 1995. "Determinants of price flexibility in oligopolistic markets: Evidence from austrian manufacturing," Journal of Economics and Business, Elsevier, vol. 47(5), pages 423-439, December.

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