The study aims at contributing to the debate whether there are demand effects in models that seek to explain prices as mark-ups on costs. For costs it considers actual costs, normal costs and an intermediate model with a partial adjustment to the deviation of actual from normal costs. For demand effects it considers an effect on the price level of a change of demand, with an allowance for asymmetry between demand growth and demand decline. Tests and estimates are conducted on the basis of data from retailing.

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European Economic Review
Erasmus School of Economics

Nooteboom, B., Kleijweg, A. J. M., & Thurik, R. (1988). Normal costs and demand effects in price setting: a study of retailing. European Economic Review, 999–1011. doi:10.1016/0014-2921(88)90057-8