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This chapter reports the results of a survey on price setting behavior conducted in 2004 among 2,000 Belgian firms. The results clearly deviate from a situation of perfect competition and show that firms have some market power. Prices are rather sticky, the average duration between two consecutive price reviews being ten months, whereas it amounts to thirteen months between two consecutive price changes, and both time-dependent and state-dependent behavior are observed. Evidence is found in favor of both nominal (mainly implicit and explicit contracts) and real rigidities (including flat marginal costs and counter-cyclical movements in desired mark-ups). The survey results point to a non-negligible degree of non-optimal price setting.

This chapter analyses the pricing behavior of Luxembourg firms. It provides evidence on the use of time- and state-dependent, as well as on forward-looking, backward-looking, and rules of thumb behavior. Firms' adjustment speed differs according to the type and source of shock. Similarly, the factors judged most relevant for price increases and decreases differ. The most relevant theories explaining price rigidity are implicit contracts, cost-based pricing and explicit contracts.

This chapter compares internationally the available survey evidence of firms' price setting behavior. It reports a number of remarkable similarities across countries. Firms typically operate in imperfectly competitive markets, where they have a low market share, face several competitors, and are primarily engaged in long-term relationships with their customers, mainly other firms. The modal price review and price change frequency per year is one across countries. Implicit and explicit contracts, coordination failure, and cost-based pricing are recognized as the most important reasons for price rigidity.

The main features of pricing behaviour are the long-term impacts of the demand on prices, the level to which prices are sticky in response to nominal shocks, and the degree to which prices respond more to demand shifts in the short term than in the long run. The latter is called the extent of hysteresis in price-setting. Proof suggests that long-term demand effects are insignificant and that such effects are greater the more competitive the product market is. Prices have the tendency to increase with demand either because marginal costs rise or because the mark-up of price over marginal cost rises.

Environmental tax reform could bear heavily on manufacturing sectors that are energy‐intensive and highly traded, in particular if their options for adapting technology are limited. However, to the extent that such sectors can pass on the cost of the environmental taxes through higher prices charged to their customers, they will not suffer a lasting drop in profitability or output. To assess pricing power in key sectors, a model of long‐run price‐setting behaviour is specified and tested. Significant and plausible results emerged from this exercise. Of the six sectors analysed, the basic metals sector revealed least pricing power and, hence, greatest vulnerability, and the non‐metallic minerals sector revealed most pricing power. The results indicated that the world price, proxied by the US price, was less of a constraint than the EU price, proxied by the German price. Thus, international competitiveness fears are reduced not just where there is good potential for adapting technology, but also if application of environmental tax reform is EU‐wide.

This chapter examines the emergence and consequences of a vernacular “science of financial investments.” While many eighteenth-century writers saw financial knowledge as devilish and destructive (centered upon the bodily and verbal skills required by street transactions), these new authors set out to build a science of investments grounded in observation and calculation. Among the main outcomes of this process are the rationalization of investor behavior and the representation of financial markets as supra-individual, quasi-natural entities, which cannot be controlled by any group. It is the latter notion which allowed for the shift to price behavior as the core actor of abstract market models. The effort to transform investment knowledge into a science is crowned by the formulation of basic views of the random walk hypothesis. The first mathematical formulation of the random walk hypothesis plays a decisive role in the development of mathematical finance (more specifically, of the options pricing theory). The main tenet of the random walk hypothesis is that securities prices move independently of each other, and that future movements do not depend on past movements. One of the most important implications of this hypothesis is that in the long run, the market cannot be controlled by any group or person.

In the eighteenth century and during the first half of the nineteenth century, the trustworthiness of price data was inextricably tied to personal trust and authority. In their turn, these relied on bodily techniques like glances, hand movements, or attire, together with technologies of personal authority, such as letters. While some brokers-cum-authors developed abstract models of price behavior, others were interested in technical devices which could help record or predict price movements. Some were simply interested in using devices to keep outsiders away from price information. These interests made a far-reaching technological shift, i.e., the replacement of pencils and paper by the stock ticker. This chapter examines the context and consequences of the stock ticker. The ticker transformed the character of price data: a continuous flow of data replaced the rather unsystematic price lists. Trust was shifted from idiosyncratic knowledge of transaction partners to a machine which could travel across social contexts. New modes of attention and observation were introduced, which brought individuals together into price monitoring activities, in public places.

The chapter begins by considering various alternative views of competition: Smith, Ricardo, and Marx, who emphasize the antagonistic nature of capitalism and the turbulent character of competitive outcomes; Schumpeter and the Austrians, who treat competition as a process but retain some key neoclassical features; Marxian Monopoly Capital, Imperfect Competition, Kaleckian, and post-Keynesian schools, all of which rely on some version of imperfect competition; and modern Sraffian and classical traditions, which turn back to competition. The second section summarizes the contrasting patterns expected by various schools and compares them to the empirical evidence on pricing behavior, concentration, monopoly power, the ‘structure-performance’ findings from Bain, and the empirical results from Mann, Stigler, Brozen, Demsetz, and Semmler, among others. The evidence is shown to be quite consistent with the notion of real competition.

This chapter investigates the pricing behavior of Internet service providers (ISP) from 1993 to 1999 with the goal of generating price indexes. The results show that ISP pricing has been falling rapidly over time. The bulk of the price decline occurred between early 1995 and the spring of 1996. There was a 20 percent decline in price per unit of ISP quality for the thirty-three-month period between late 1996 and early 1999. Assessment of alternative models that varied in their attention to aspects of qualitative change showed that this attention matters. Accounting for qualitative change shapes the estimates of price declines and the recorded timing of those declines.

This chapter considers another important need for successful investing: an accurate estimate of a security's intrinsic value. All approaches to investing in company securities can be divided into two basic types: those based on analysis of the company's attributes, known as “fundamentals,” and those based on study of the price behavior of the securities themselves. In other words, an investor has two basic choices: gauge the security's underlying intrinsic value and buy or sell when the price diverges from it, or base decisions purely on expectations regarding future price movements. This chapter first discusses technical analysis and momentum investing before turning to value investing and growth investing. In particular, it explains the difference between value investors and growth investors. It also highlights the potential of value investing to consistently produce favorable results.

In the early 2000s, financial investors began pouring billions of dollars into the commodity futures markets seeking the unique investment benefits of this distinct asset class. This “financialization” process has called into question the fundamental risk and return properties of commodity futures as evidence has emerged favoring the idea that the massive increase in investor flows caused a rise in futures prices, volatility, and intra- and intermarket return correlations. However, a contrarian line of research contends that the effects of the new “speculative” capital on the futures markets are unsubstantiated and the increased participation of financial investors poses little consequence to the economics of the marketplace. This latter line of literature maintains that the investment benefits of commodity futures have not been diminished and that fundamental factors and business cycle variations can explain the observed changes in commodity price behavior.