Monopoly, Competition and Variability of Market Prices

Abstract

Our text for exegesis is the following:

The first impact of this policy [tight money] is the higher interest rate. Plainly the impact of this will be very different on a firm that has control over its prices and hence can pass along this higher cost as compared with the firms whose prices are given and which, accordingly, must bear the cost itself. The point need not be labored.

The US Steel Corporation justified it price increase of two weeks ago by the contention that its cost had risen. In doing so it not conceded its ability to pass on higher costs, including interest charges, to the consumer but based its policy on the need to do so. But no such opportunity is open to the farmer or to the smaller businessman. They cannot raise their prices, for they are market-determined. They shoulder the costs of this policy.

J. K. Galbraith, in Administered Prices, Hearings before the Subcommittee on Anti-trust and Monopoly of the Committee on Judiciary, U.S. Senate (1957, p. 41).

(1960).