A Puzzling Story: The Cyclical Behavior of Price-cost Margins / Eine verwirrende Geschichte: Das zyklische Verhalten von Preis-Kosten-Margen

Wied-Nebbeling Susanne
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Wied-Nebbeling Susanne: Staatswissenschaftliches Seminar der Universität zu Köln, Albertus-Magnus-Platz, D-50923 Köln

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 1999, vol. 218, issue 1-2, 107-127

Abstract: Some recent empirical studies reveal countercyclical price-cost margins. From a microeconomic point of view this is not plausible because for the overwhelming number of industries, profits are highest in boom. As indicators of profitability price-cost margins should be procyclical. However, it will be shown that a margin relying on marginal cost can behave countercyclically or remains constant even with procyclical profits. A margin based on average cost is a better indicator of the development of profits. Therefore, empirical analysts should not regard different definitions of price-cost margins as equivalent.

Keywords: Price-cost margins; profit indicators; demand variations and pricing; Preis-Kosten-Margen; Gewinnindikatoren; zyklisches Preisverhalten (search for similar items in EconPapers)
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:218:y:1999:i:1-2:p:107-127

DOI: 10.1515/jbnst-1999-1-207

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