Prices and the Guideposts : The Effects of Government Persuasion on Individual Prices.

by Arthur J. Alexander

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A brief discussion of the government's economic policy during the period 1962-68 and the influence exerted on the pricing behavior of firms. From 1962 until the close of the Johnson Administration in 1968, a number of wage-price guideposts were established to moderate the rate of inflation; during this time, attempts were made to influence the pricing decisions of firms through a series of public and private confrontations. This paper describes the policy of confrontation, proposes alternative hypotheses to explain the resultant behavior of firms, and analyzes statistically those variables predicted to be associated with government success and failure in influencing firm behavior. Detailed analysis of the period from October 1965 to June 1967 suggestes a number of variables related to government effectiveness in restraining price increases, including market power, markup, vulnerability, level of public and private confrontations, advertising, and strength of demand. 31 pp. Bibliog. (KB)

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