International Competitiveness and Industry Pricing in Canadian Manufacturing.

This paper examines the effect of the international competitiveness of home producers on their pricing. Evidence based on the 1970-75 period supports the claim that in the Canadian manufacturing sector domestic prices are set in accordance with a mixture of two pricing hypotheses: the "Eastman-Stykolt pricing hypothesis" (ESPH) and the "monopolistic pricing hypothesis" (MPH). However, in the 1975-80 period when their competitiveness increased, prices were set solely according to the MPH. For the purposes of assessing the impact of free trade, this paper shows the circumstances under which each or a mixture of these pricing hypotheses employed in the Harris-Cox model on the gains from freer trade would be appropriate.