price fixing

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Price Fixing

A practice whereby all competitors in an industry agree to charge the same price for their competing products. Price fixing deprives consumers of the fair market price for the products because the fixers can simply raise and lower prices at will. Most economists (with objectivists being a major exception) believe price fixing to be anti-competitive, thus they oppose it. In the United States, price fixing is illegal under the Sherman Anti-Trust Act. See also: Monopoly, Duopoly.

price fixing

the establishment of a common PRICE for a good or service by a group of suppliers acting together, as opposed to each supplier setting his own price independently. Price fixing is often a feature of an unregulated OLIGOPOLY market. See ANTICOMPETITIVE PRACTICE, RESTRICTIVE TRADE AGREEMENT, COLLUSION, CARTEL, ADMINISTERED PRICE.

price fixing

An agreement among competitors to charge roughly the same price as each other, denying consumers a meaningful choice in the marketplace. The practice is illegal under the Sherman Antitrust Act.In the real estate area,the most famous application of this principle has to do with real estate commissions and the complaint that local REALTOR® association members agreed to all charge the same rate. It is the reason for the disclaimer that appears on most real estate company form listing contracts and purchase contracts,“The commission is negotiated among the parties and is not set by... .“

References in periodicals archive ?
As recent literature has shown, with forward looking price setting, establishing a credible commitment to maintaining price stability in the future reduces the cost of doing so in the present.
As emphasized by Krugman, (6) Eggertson and Woodford (7) and others, with forward looking price setting, an economy constrained by the zero interest rate bound may be able to nonetheless stimulate economic activity by committing to inflate in the future.
How a central bank should go about engineering a disinflation, for example, depends critically on the extent to which: 1) there may be a short-run tradeoff between inflation and real activity and 2) expectations of future economic activity affect current price setting behavior.
This literature, in turn, is an outgrowth of early theoretical work by Fischer (1), Taylor (2), Calvo (3) and others that emphasized staggered nominal wage and price setting by forward looking workers and firms.
Put differently, one reason for the empirical failure of the baseline model may be that the output gap is not a good proxy for marginal cost, rather than the canonical model of staggered forward price setting being incorrect.
(4) As mentioned, the Calvo and Taylor models of price setting result in very different nominal behavior, and these differences carry over to the empirical tests of forward-looking pricing.
Thus, under the null of generalized Taylor-style price setting, the tests commonly used to determine whether forward-looking price setting explains the behavior of inflation are misspecified.
Equation (2) (also a log-linear approximation) describes forward-looking price setting and reflects the notion that firms understand they may not be able to reset their price in future periods.
"Partial Adjustment and Staggered Price Setting," Manuscript, Board of Governors of the Federal Reserve System.