Abstract
THE study of cyclical price behavior has been a debate over the extent to which prices behave in a classical manner: falling in recessions and rising in expansions. At one extreme in this debate, the proponents of administered prices state that In recessions administered prices tend to fall less than market dominated prices; . . . similarly, since administered price does not fall as much in recession, it rises less in recovery [8, p. 292]. Some proponents [4][I][7, p. ii] have suggested a response lag in administered price industries, resulting in countercyclical price behavior in these industries. At the other extreme in this debate, Stigler and Kindahl (SK and annual data do not exactly test cyclical hypothesis. Rice [i i] used three concentration intervals and found little relation to the standard deviation of the percentage change in average annual prices. He used both BLS list price data and NBER transactions price data. His test is also biased against any cyclical hypotheses since business cycles are not annual phenomena. If the relation between price changes and concentration is U-shaped the concentration intervals selected will be crucial to any U-shape test. Also, a Chi-square test of this sort is weaker than the parametric tests which could have been used on the same data. Weiss investigated the relations between concentration, percentage price changes, and deviation from trend for the NBER transactions price series over different stages of the business cycle using three concentration groups. He found that in recessions prices in the least concentrated industries were more likely to fall both absolutely and relative to trend then other price series but there was no distinction between price behavior in the two most concentrated
Published Version
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