Gravitation of Market Prices towards Normal Prices: Some New Results

Enrico Bellino, Franklin Serrano

Research output: Working paper

2 Citations (Scopus)

Abstract

The gravitation process of market prices towards production prices is here presented by means of an analytical framework where the classical capital mobility principle is cou-pled with a determination of the deviation of market from normal (natural) prices which closely follows the description provided by Adam Smith: each period the level of the market price of a commodity will be higher (lower) than its production price if the quantity brought to the market falls short (exceeds) the level of effectual demand. This approach also simplifies the results with respect to those obtained in cross-dual litera-ture. Three versions of the model are here proposed: i) assuming a given level of aggre-gate employment; ii) assuming a sort of Say’s law; iii) and on the basis of an explicit adjustment of actual outputs to effectual demands. All these cases describe dynamics in which market prices can converge asymptotically towards production prices.
Original languageEnglish
PublisherCentro di Ricerche e Documentazione "Piero Sraffa"
Number of pages32
Publication statusPublished - 2017

Keywords

  • Market prices
  • classical competition
  • effectual demand
  • gravitation
  • normal prices

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