As far as I am concerned, the marginal variable cost curve for an industrial plant is typically a reverse L-shape. Industrial firms generally practice some sort of administrative, full-cost, or markup pricing policy. Empirical work on this point, I guess, goes back at least to Hall and Hitch. Post Keynesians will look back to Kalecki. (Sraffians have argued that Kaleckian models should be modified to incorporate a dependence of relative prices on distribution.) Steve Keen
cites a recent book by Alan Blinder et al to the same point. And James Galbraith's empirical
results suggest Kalecki was on to something in his classification of economic sectors.
Tyler Cowen wants to know how to avoid
teaching students these ideas. I do like “Person’s” query in that thread:
”Stupid question: how about just admitting that businesses price based on (expected) average cost, instead of carving out all these epicycles? I'm just asking, is all.”
(Tyler Cowen is amusing
here, too.)
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