Over Marktvormen En Economische Research

Summary

In the volume TheBrookings Quarterly Econometric Model of the United States (Amsterdam, 1965), there are papers by C. L. Schultze and J. L. Tryon on price determination in the industrial sector, and by D. W. Jorgenson on the investment behaviour of firms in that same sector. When comparing these two contributions, one is struck by the fact that Schultze and Tryon point out that industrial firms are price makers in selling their products, whereas Jorgenson assumes that these firms are price takers. This curious fact gives rise to two questions:

• (1) If both price equations and investment equations occur in the same model, must then one and the same assumption with respect to producers' behaviour necessarily underlie both types of equation?

• (2) What is the present state of empirical research on price determination under different market forms?

Ad (1): In hisEconomic Fluctuations in the United States, 1921–1941, L. R. Klein has proved that certain assumptions exist concerning the investment equation of either a monopolist (who is a price maker) or a price taker that are consistent with the same set of exogeneous quantities (data) for both cases. In the light of this proposition one may feel entitled to conclude that no inconsistencies exist between the assumptions made by Schultze and Tryon on the one hand and Jorgenson on the other. It should be noted that Klein proceeds on the idea that price makers are monopolists. It may, however, be better to assume that industrial firms are oligopolists.

Ad (2) : A good deal of research has been done with respect to production and pricing in markets that have the characteristics of homogeneous polypoly (“pure competition”). In the field of oligopoly, however, hardly any empirical research has been done; here, theoretical constructions are practically all we have. The theory of oligopoly states that the central problem is to find out what is the best hypothesis concerning the reactions of firms on an action taken by one of them. The few investigations on price and investment decisions in oligopolistic markets that do exist (Meyer and Kuh, Meyer and Glauber, Eisner) do not allow for this circular interdependence. It may well be that the theory of oligopoly has laid too much stress on this problem.

The work of J. S. Bain on the relations between market forms and market performance is qualified as an important step in the empirical research on oligopolistic price determination.