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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

2 Issues per year


IMPACT FACTOR increased in 2015: 0.412
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Online
ISSN
1935-1704
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Dynamic Stability of Post-Keynesian Pricing

Eric Kemp-Benedict
  • Stockholm Environment Institute, Somerville, MA, USA
  • :
Published Online: 2017-02-24 | DOI: https://doi.org/10.1515/bejte-2016-0013

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.

Keywords: general equilibrium; prices; post-Keynesian; Perron-Frobenius theorem; Sraffian

JEL Classification: E3: Prices; Business Fluctuations; and Cycles; C67: Input–Output Models; B5: current heterodox approaches


Published Online: 2017-02-24


Citation Information: The B.E. Journal of Theoretical Economics. ISSN (Online) 1935-1704, ISSN (Print) 2194-6124, DOI: https://doi.org/10.1515/bejte-2016-0013, February 2017

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