----- Original Message -----
From: "andie nachgeborenen" <andie_nachgeborenen at yahoo.com>
> But this is the puzzle for neoclassical economics. If
> you don't drop your price when costs fall, why don't I
> drop mine to sell more quantity? And then you must
> drop yours to compete. That's what the model predicts.
>
> jks
>
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That presupposes perfect diffusion of the new cost saving technique. In an oligopoly setting where a firm that happens to stumble on a cost saving technique, the incentives are enormous not to divulge the existence of that technique via a price change. Let the other bastards find out by reading the 10-k over a couple of years, or, conversely -if you're one of those other bastards, hire those who made the cost saving technique.
Ian
Ian