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ADMINISTERED PRICES (SET BY FIRMS)

Statistics Directorate    
Definition:
Administered prices are prices set by firms that do not vary in response to short-run fluctuations in demand and supply conditions.

Context:
This price rigidity has been viewed by some economists as arising from the exercise of market power. Various research studies have been conducted attempting to link administered prices to concentration and inflation. What emerges from the findings is that there are differences across industries (and across countries) in the degree of price flexibility which simple models of market clearing cannot fully explain. However, researchers have been confronted with serious measurement difficulties, notably the fact that official price indices often do not reflect price discounts. "The Theory and the Facts of How Markets Clear", D. W. Carlton in R. Schmalensee and R. Willig (eds.), The Handbook of Industrial Organization, North Holland, Amsterdam, 1989.

Source Publication:
Glossary of Industrial Organisation Economics and Competition Law, compiled by R. S. Khemani and D. M. Shapiro, commissioned by the Directorate for Financial, Fiscal and Enterprise Affairs, OECD, 1993.

Cross References:
Administered price (schemes)

Hyperlink:
http://www.oecd.org/dataoecd/8/61/2376087.pdf

Statistical Theme: Financial statistics

Created on Thursday, January 03, 2002

Last updated on Thursday, April 25, 2013