Classical-type temporary positions: a "cost-plus" model

Abstract

Within Hicks's temporary equilibrium method, the paper explores the possibility of supporting the Sraffian theory of prices with a cost-plus explanation of pricing. The model proposed assumes that all firms take their investment decisions with reference to an accounting period, constituted by various production periods, within which cost-plus prices tend to converge toward a Sraffian configuration generally characterized, however, by the divergence between expected and actual profit rates. The paper concludes that the abandonment of the long-period method represents the cost that classical-type theories should sustain in order to provide a persuasive explanation of prices and distribution within contemporary capitalism.

Keywords:

• equilibrium
• markup
• prices