Administered prices

Administered Prices refer to prices of goods set by the internal pricing structures of firms which take into account cost rather than through the market forces of supply and demand and predicted by classical economics. Administered prices were first described by institutional economists Gardiner Means and Adolf A. Berle in their 1932 book The Modern Corporation and Private Property. As Means argues in 1972: “Basically, the administered-price thesis holds that a large body of industrial prices do not behave in the fashion that classical theory would lead one to expect. It was first developed in 1934–35 to apply to the cyclical behavior of industrial prices. It specifically held that in business recessions administered prices showed a tendency not to fall as much as market prices while the recession fall in demand worked itself out primarily through a fall in sales, production, and employment.”