Larger context for LACK in Corpus USbrown_UKbncw/US_brown.txt
Part 3, discusses the empirical relevance and policy implications of the conclusions.
Part 4, is a brief summary.
The Mathematical Appendix presents the rigorous argument, but is best read after Part 1, in order that the assumptions underlying the equations may be explicit. 1, THE ASSUMPTIONS OF THE MODEL
THE INDUSTRY The industry with which this model is concerned is a basic industry, producing a substantial share of gross national product.
Price competition is lacking.
For the purposes of setting the product price, the industry behaves as a single entity.
In wage negotiations, the industry bargains as a unit with a single union. B.
THE DEMAND FOR THE INDUSTRY'S PRODUCT We are concerned with aggregate demand for the industry's product.
The manner in which this is shared among firms is taken as given.
In any given time period, the aggregate demand for the industry's product is determined by two things: the price charged by the industry, and the level of GNP.
For the purposes of this discussion, the problem of relative prices is encompassed in these two variables, since GNP includes other prices.
(We abstract here from technological progress and assume that prices of all other products change proportionately.)
The form of the industry demand function is one which makes quantity demanded vary inversely with the product price, and vary directly with the level of GNP. C.