Price Stickiness: A Post Keynesian Microeconomic Perspective

This paper explores price stickiness from a Post Keynesian microeconomic perspective. A realist interpretation of Post Keynesian pricing theory is put forward. In seeking to empirically re-examine this theory, and consistent with an open-system epistemology, both descriptive and statistical analysis of a sample of data drawn from UK manufacturing firms is undertaken. It is argued that the results offer support for the Post Keynesian perspective that price stickiness is a normal feature of business activity. The results show that pricing stability is actively sought, that firms are interested in long-run pursuit of objectives including goodwill, and that firms set prices with reference to their competitors by following mark-up pricing mechanisms. To the limited extent that firms do change their prices in response to changes in their environment then, in addition to this being understood as a contingency, once again the key features of the Post Keynesian accounts are important: Mark-up pricing methods, with mark ups set to take account of competitors' prices.