TY  - JOUR
AU  - Hall,Robert E.
TI  - The Relation Between Price and Marginal Cost in U.S. Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1785
PY  - 1988
Y2  - December 1988
UR  - http://www.nber.org/papers/w1785
L1  - http://www.nber.org/papers/w1785.pdf
N1  - Author contact info:
Robert E. Hall
Hoover Institution
Stanford University
Stanford, CA  94305-6010
Tel: 650/723-2215
E-Mail: rehall@gmail.com
AB  - An examination of data on labor input and the quantity of output reveals that most U.S. industries have marginal costs far below their prices. The corilusion rests on the empirical finding that cyclical variations in labor input are small compared to variations in output. In booms, firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs. The paper documents the disparity between price and marginal cost,where marginal cost is estimated from variations in cost from one year to the next. It considers a wide variety of explanations of the flndings that are consistent with competition, but none is found to be plausible.
ER  -