(navigation image)
Home American Libraries | Canadian Libraries | Universal Library | Community Texts | Project Gutenberg | Children's Library | Biodiversity Heritage Library | Additional Collections
Search: Advanced Search
Anonymous User (login or join us)
Upload
See other formats

Full text of "Investigation of concentration of economic power; monograph no. 1[-43]"

"^3d Sessfon^^l SENATE COMMITTEE PRINT 



INVESTIGATION OF CONCENTRATION 
OF ECONOMIC POWER 



TEMPORARY NATIONAL ECONOMIC 
COMMITTEE 



A STUDY MADE UNDER THE AUSPICES OF THE BUREAU 
OF LABOR STATISTICS FOR THE TEMPORARY NATIONAL 
ECONOMIC COMMITTEE, SEVENTY-SIXTH CONGRESS, 
THIRD SESSION, PURSUANT TO PUBLIC RESOLUTION NO. 
113 (SEVENTY-FIFTH CONGRESS), AUTHORIZING AND 
DIRECTING A SELECT COMMITTEE TO MAKE A FULL AND 
COMPLETE STUDY AND INVESTIGATION WITH RESPECT 
TO THE CONCENTRATION OF ECONOMIC POWER IN, AND 
FINANCIAL CONTROL OVER, PRODUCTION AND 
DISTRIBUTION OF GOODS AND SERVICES 



MONOGRAPH No. 1-3 
PRICE BEHAVIOR AND BUSINESS POLICY 



Printed for the use of the 
Temporary National Economic Committee 




U 



UNITED STATES CA, 

GOVERNMENT PRINTING OFFICE 
WASHINGTON : 1941 



northeaster;^ UNiVEKoiTV SCHOOL of LAW OBi??^ 



TEMPORARY NATIONAL ECONOMIC COMMITTEE 

(Created pursuant to Public Res. 113, 75th Cong.) 

JOSEPH C. O'MAIIONEY, Senator from Wyoming, Chairman 

HATTON W. SUMNERS, Representative from Texas, Vice Chairman 

WILLIAM H. KINO, Senator from Utah 

WALLACE H. WHITE, Jr., Senator from Maine 

CLYDE WILLIAMS, Representative from Missouri 

B. CARROLL REECE, Representative from Tennessee 

THURMAN W. ARNOLD, Assistant Attorney General 

♦WENDELL BERQE, Special Assistant to the Attorney General 

Representing the Department of Justice 

JEROME N. FRANK, Chairman 

•SUMNER T. PIKE, Commissioner 

Representing the Securities and Exchange Commission 

GARLAND S. FERGUSON, Commissioner 

•EWIN L. DAVIS, Chairman O^^ \. 

Representing the Federal Trade Commission f f^ \ 

ISADOR LUBIN, Commissioner of Labor Statistics CT>' 

•A. FORD HINRICHS, Chief EconomLst, Bureau of Labor Statistics '' 

Representing the Department of Labor 
JOSEPH J. O'CONNELL, Jr., Special Assistant to the General Counsel ~^ 

•CHARLES L. KADES, Special Assistant to the General Counsel 

Representing the Department of the Treasury f "t 

ijj 

Representing the Department of Commerce f—^ 

LEON HENDERSON, Economic Coordinator 
DEWEY ANDERSON, Executive Secretary 
THEODORE J. KREPS, Economic Adviser 
♦Alternates. 



Monograph No. 1 
PRICE BEHAVIOR AND BUSINESS POLICY 

BY 

SAUL NELSON AND WALTER Q. KEIM 

ASSISTED BY 

LAURA MAE BROWN, JOHN M. BLAIR, AND WILLIAM C. FRENCH, JR., UNDER THE 
GENERAL SUPERVISION OF ARYNESS JOY AND EDWARD S. MASON 



REPRINTED 

BY 

WILLIAM S HEIN & CO , INC 

BUFFALO. N. Y. 
1968 



ACKNOWLEDGMENT 

This monograph was written by 

SAtJL NELSON 
Senior Industrial Economist, 
Bureau of Labor Statistics 

AND 

WALTER G. KEIM 

Statistician, 
Bureau of Labor Statistics 

under the supervision of 

EDWARD S. MASON 

Professor oj Economics, 
Harvard University 

The Temporary National Economic Committee is greatly indebted 
to these authors for this contribution to the literature of the subject 
under review. 

The status of the materials in this volume is precisely the same as that 
of other carefully prepared testimony when given by individual witnesses; 
it is information submitted for Committee deliberation. No matter what 
the official capacity of the witness or author may be, the publication of 
his testimony, report, or monograph by the Committee in no way signifies 
nor implies assent to, or approval of, any of the facts, opinions or recom- 
mendations, nor acceptance thereof in whole or in part by the members 
of the Temporary National Economic Committee, individually or 
collectively. Sole and undivided responsibility for every statement in 
such testimony, reports, or monographs rests entirely upon the respective 
authors. 

(Signed) Joseph C. O'Mahoney, 
Chairman, Temporary National Economic Committee. 

m 



TABLE OF CONTENTS 



Pas* 

Letter of transmittal _ xv 

Summary . xix 

PART I 

Preface 3 

CHAPTER 1 

Price Behavior and Business Policy __ 4 

CHAPTER II 

Price Flexibil ity 11 

Summary . 11 

The nature of the problem 14 

The meaning of flexibility 20 

The measurement of price flexijjility 27 

The distinction between measures of behavior and of responsive- 
ness - 27 

The specific measures utilized 29 

Measures of flexibility compared 31 

Factors affecting price behavior 32 

Prices and production.. ^ 37 

Price relationships 43 

Cost-price relationships 60 

Conclusions 51 

CHAPTER III 

Nonprice Competition . _ 64 

Summary 64 

Price versus nonprice competition — the setting of the problem 68 

The changing focus of competition 68 

Prices related to nonprice elements of the transaction 63 

Aspects of nonprice competition 63 

Quality and performance 63 

Guarantees - 69 

Price lines 70 

Advertising, brands, and trade-marks 76 

Other forms of nonprice competition — escape devices 90 

Conclusions 101 

CHAPTER IV 

The Electrical Equipment Industries — An Illustrative Case 109 

Summary . 109 

Price and production trends 111 

Market saturation 117 

Saturation by income groups.. 120 

Expenditures by families 130 

Income residuals 130 

Competition and sales strategy 131 

Price uniformity 131 

Concentrat ion 134 

Emphasis upon quality .--»-. 135 

The turning point — the 1937-38 recession 137 

Problems of sales policy determination 138 



VI TABLE OF CONTENTS 

Page 
The Electrical Equipment Industries — An Illustrative Case — Continued. 

Expanding the original sales market -- 138 

Quality emphasis and advertising 138 

Credit terms --- 141 

Price reductions 141 

Reductions in the cost of manufacturing. — 143 

Distribution costs 143 

The replacement market 148 

Need for considering the replacement market •- 148 

Extent of replacement sales 148 

Factors influencing replacement sales 149 

Durability 149 

Obsolescence 149 

Cost of replacement — the trade-in allowance 150 

Facilities for reconditioning equipilnent — -the Crosley plan 152 

The Philadelphia plan 153 

Reconditioning exchange system in vacuum cleaners 153 

Summary 153 

Current trends in the electrical refrigerator industry _ 154 

The role of Government- 158 

Conclusions 161 

APPENDIX I 

Measures of Price Flexibility 165 

Purpose 165 

The criteria utilized 166 

Presentation of the data 168 

Relationships between the measures presented 169 

Depression decline compared with extent of recovery 170 

Relationships between various aspects of timing 170 

Frequency of change and amplitude of cyclical movement 170 

Frequency and timing.. 171 

Amplitude of cyclical movement and timing of change 171 

Change per change compared with frequency, cyclical flexibility, 

and timing 171 

Aggregate change less net change 171 

APPENDIX n 

Conventional Price Lines 242 

Introduction -.1 : 242 

Wearing apparel 242 

Corsets and bratsieres 242 

Dresses 244 

Girls' cotton dresses 246 

Coats _• 247 

Women's hose 247 

Girls' anklets , ,. 247 

Men's work shirts -_«_. 248 

Yard goods 248 

Consumers' durable goods 249 

Washing machines and vacuum cleaners 249 

Radios 249 

Refrigerators 249 

The cash di^ount in the apparel market : 250 

APPENDIX III 

Statistical Data Supporting Charts ._ 252-265 



TABLE OF CONTENTS VII 

PART II Page 

Preface 269 

CHAPTER I 

Types of Geographic Price Structure 271 

Introduction 271 

The importance of transportation costs. 271 

Factors affecting freight costs 272 

Economic significance 272 

Types of structure summarized 273 

Common forms of structure — development and characteristics 275 

. F. 0. b. plant prices 275 

Freight equalization 276 

Basing point systems 279 

Postage stamp and zone systems .--."" ^^^ 

Buyer-dominated structures — equalization at the point of origin. 284 

Unsystematic price variation 285 

CHAPTER II 

Geographic Practices in American Markets 286 

Methods of analysis - 286 

Agricultural commodities '.- 287 

Wheat - 289 

Milk 290 

Cattle : 290 

Potatoes 290 

Fresh fruits and vegetables 292 

Cottonseed 292 

Food and kindred products 293 

Meats 294 

Vegetable oils 294 

Vegetable shortening 295 

Bread 295 

Sugar ..... 295 

Salt 296 

Coffee 298 

Rice 298 

Other food products 299 

Textiles and textile products 300 

Yarns-.-. . 300 

Gray goods - 301 

Finished cloth 301 

Finished apparel - 301 

Binder twine 302 

Manila rope 303 

Leather and its major products 303 

leather 303 

Leather boots and shoes 303 

Leather transmission belting 304 

Tobacco products 304 

Cigarettes and tobacco 304 

Cigars 305 

Snuff 305 

Steel- and steel products 305 

Other iron and steel products 308 

Ferro-alloys 308 

Hardware, tools and other light fabricated steel 308 

Lumber and its products 308 

Lumber: 

Douglas fir 308 

Ponderosa pine 308 

Southern pine 309 

Maple flooring. 309 

Oak flooring 309 



VIII TABLE OF CONTENTS 

Geographic Practices in American Markets — Continued, 

Lumber and its products — Continued. Pago 

Philippine mahogany 30& 

Mahogany — Honduran, African, and Cuban 309* 

Doors — Douglas fir and Ponderosa pine 309 

Windows and window frames 309 

Wooden boxes --^ 309 

Wooden caskets and coffins 309 

Axe handles 309 

Ladders 309 

Plywood 310 

Summary 310 

Turpentine 310 

Building materials other than steel and lumber 310 

Lime 311 

Cement 311 

Brick 312 

Sand and gravel 312 

Building tile 312 

Floor tile 312 

Sewer pipe 312 

Gypsum plaster 312 

Insulation board 313 

Prepared roofing 313 

Heating boilers and radiation 313 

Plumbing fixtures, closets, lavatories, sinks, and bathtubs 314 

Paint materials: 

Linseed oil 314 

White lead 314 

Prepared paints 314 

Window glass 315 

Summary 315 

Furn i tu re industry 315 

Household furniture _. 3 15 

Busi ness furniture 316 

Chemicals 316 

Simple f. o. b. plant systems 318 

Freight equalization systems , 318 

Postage stamp and zone pricing 319 

Zone differentials and changes in zone systems _- 320 

Basing-point systems 320 

Summar}' 321 

Drugs, cosmetics and toiletries 323 

Fertilizer and fertilizer materials 324 

Fert ilizer materials 324 

Mixed fertilizer 326 

Paper and pulp industries 328 

Pulp 328 

Paper 328 

Newsprint 328 

Wrapping paper, tissue paper, and paper towels 329 

Paper board 329 

Fine paper 329 

Paper products 330 

Passenger automobiles 330 

Agricultural implements and machinery 331 

Machinery and related products 331 

Electrical machinery and apparatus 332 

Milling machines, grinding machines, screw machines, etc 335 

Engines, turbines, water wheels, and windmills 335 

Pumps . 335 

Excavating and road machinery 336 

Business and trade equipment 336 

Electrical household equipment 336 

Electric refrigerators .• . 336 

Electric washing machines and ranges 337 

Vacuum cleaners and fans 338 



TABLE OF CONTENTS IK 

Geographic Practices in American Markets — Continued. Pag« 

Nonf errous metals 338 

Aluminum 338 

Zinc _- 338 

Lead . 339 

Copper 1 .- - 339 

Lake copper 340 

Scrap metal 340 

Petroleum and its products 341 

Crude oil 341 

Gasoline 341 

Bituminous coal 342 

Summary — Extent of major types of geographic price structure 343 

Uniform f. o. b. plant pricing 343 

Uniform delivered prices _ 343 

Zone delivered prices 344 

Freight equalization 344 

Basing-point industries 345 

Local markets 345 

Unsystematic variation 345 

PART III 

CHAPTER I 

Preface - 349 

General Characteristics of the Market 351 

Resale price controls 352 

CHAPTER 11 

Retail Markets 355 

Retail price trends, 1929-39 355 

Analgesic tablets 356 

A drug sundry 357 

A shaving article 358 

A dentifrice _ 360 

A nationally advertised liquid laxative 360 

A standard, unbranded, liquid laxative 360 

Price trends — chains compared with independents 361 

Retail prices as reported by the marketing laws survey 365 

Advertised and substitute brands 368 

Substitute brands and resale price maintenance 379 

Price lines 382 

CHAPTER in 

Distributive Margins 386 

Methods of distribution 386 

Wholesale and retail margins 388 

The range of margins 388 

Pharmaceutical: 

"A" 388 

"B"_. , 390 

Drug sundry ^ , 392 

Toiletries: 

"A" 393 

"B" .- 395 

"C" _ - 396 

Cosmetic: 

"A" 397 

"B" .___ --_ 398 

"C" 399 

Summary for eight products 400 

Margins allowed by a large drug manufacturer 402 

Mark-ups for cosmetics 403 

Mark-ups in California 404 

Summary , 404 



X TABLE OF CX)NTENTS 

SCHEDULE OF TABLES AND CHARTS 

PART I 

TABLES 

Page 

1. Median change in price and quantity available for consumption 

1929-32, for 111 commodities, classified according to durability 38 

2. Selected indexes of prices, wages, costs of distribution, farm taxes, 

and mortgage interest, 1913-38 49 

3. Changes in size of chocolate bars 73 

4. Prices and quality grades for specified brands of canned foods 77 

5. Extent of consumer brand preference for prepared foods _ 79 

6. Comparison of wholesale prices of identical substances sold under 

proprietary and nonproprietary names 81 

7. Comparison of retail prices of drugs, cosmetics, and foods with the 

costs of their ingredients 82 

8. Relation of price flexibility to importance of brand preference 86 

9. Comparison of quoted prices for sulphuric acid with prices actually 

paid by a large buyer 99 

10. Average retail value and sales of selected electrical appliances 112 

11. Saturation of the market 118 

12. Market saturation and sales i 118 

13. Average expenditures by families • of employed wage earners and 

clerical workers, by economic level 130 

14. Distributive margin of electric refrigerators 144 

15. Distributive margin of electric washing machines •__ __ 144 

16. Distribution of sales and average value of electric washing machines 

by price lines — 1938 -. 144 

17. Distributive margins 145 

18. Replacement sales as a percent of total sales of electric refrigerators. _ 148 

19. Estimated durability of electric refrigerators 149 

20. Retail published list prices of electrical refrigerators — 1939 and 1940. 155-156 

21. List prices of electric refrigerators, 1938 — principal companies 162 

22. Percent of concentration, 1937 163 

23. Cash value on trade-ins 163 

24. Average expenditures by families of employed wage earners and 

clerical workers by economic level 164 

25. Flexibility of commodity prices measured by various criteria^ 172-189* 

26. Flexibility of commodity prices measured by various criteria ranked in 

ten groups for each criterion in order of increasing flexibility 190-210 

27-44. Correlation tables of commodities distributed according to their 

ranks by two criteria of wholesale price flexibility 211-228 

27. Percent of decline, 1929 to 1933, compared with percent of recovery, 

1933 to 1937 211 

28. Timing of predepression peak, 1929 to 1931, compared with timing of 

depression low, 1932 to 1934 212 

29. Timing of predepression peak, 1929 to 1931, compared with post- 

depression peak, 1936 to 1938 213 

30. Timing of depression low, 1932 to 1934, compared with post depression 

peak, 1936 to 1938 214 

31-34. Frequency of change compared with amplitude of cyclical move- 
ment 215-218 

35. Frequency of change compared with timing of predepression peak, 

1929to 1931 219 

36. Frequency of change compared with timing of depression low, 1932 to 

1934 220 

37. Frequencv of change compared with timing of postdepression peak, 

1936 to 1938 221 

38. Amplitude of cyclical movement compared with timing of predepres- 

sion peak 222 

39. Amplitude of cyclical movement compared with timing of depregpion 

low, 1932 to 1934 223 

40. Frequency of change compared with change per change 224 

41. Amplitude of cyclical movement compared with change per change,.. 225 



TABLE OF CONTENTS XI 

Page 

42. Peak month, 1929 to 1931, compared with average change (index 

points) per change, January 1926 to April 1929 226 

43. Frequency of change compared with aggregate change less net change. _ 227 

44. Amplitude of cyclical movement compared with aggregate change less 

net change 228 

45. Distribution of commodities according to differences in rank under 

various criteria of wholesale price fl exibility 228 

46-68. Correlation tables of commodities distributed according to their 

ranks by two criteria of wholesale price flexibility 229-241 

46. Frequency of change, 1926 to 1929, compared with frequency of change, 

1926 to 1933_._. 229 

47-48. Two measures of amplitude of cyclical movement compared 230-231 

49. Amplitude of cyclical movement compared with change per change 232 

50-51. Two measures of amplitude of cyclical movement compared 233-234 

52-53. Frequency of change compared with amplitude of cyclical move- 
ment 235-236 

54. Frequency of change compared with timing of predepression peak, 

1929to 1931 237 

55. Frequency of change compared with change per change 238 

56. Frequency of change compared with aggregate change less net change. 239 

57. Amplitude of cyclical movement compared with aggregate change less 

net change 240 

58. Change per change compared with aggregate change less net change. _ 241 

59. Distribution of retail prices of girdles, foundation garments, and bras- 

sieres 244 

60. Distribution of retail prices for wash frocks 245 

61. Distribution of retail prices for women's medium-quality dresses 246 

62. Distribution of retail prices for women's cheap dresses 246 

63. Distribution of retail prices for girls' cotton dresses 247 

64. Distribution of retail prices for women's hose .. 247 

65. Distribution of retail prices for girls' anklets 247 

66. Distribution of retail prices for men's work shirts 248 

67. Distribution of retail prices for printed percales 249 

PART II 

TABLES 

1. Geographic price structures for selected chemicals, summarized 321 

2. Zone prices and zone differentials — selected chemicals 322 

3. Prices of electric refrigerators 337 

PART III 

TABLES 

1. Retail prices of nationally advertised analgesic tablets, June 1929 to 

June 1939 356 

2. Retail prices of nationally advertised drug sundry, March 1935 to 

March 1939 358 

3. Retail prices of nationally advertised shaving article, March 1935 to 

March 1939 359 

4. Retail prices of nationally advertised dentifrice, March 1935 to 

March 1939 359 

5. Retail prices of nationally advertised liquid laxative, March 1935 to 

March 1939 359 

6. Retail prices of standard liquid liaxative, July 1936 to March 1939 360 

7. Retail prices of nationally advertised analgesic tablet, June 1929 to 

March 1939 362 

8. Retail prices of nationally advertised drug sundry, March 1935 to 

March 1939 362 

9. Retail prices of nationally advertised shaving article, March 1935 to 

March 1939 363 

10. Retail prices of nationally advertised dentifrice, March 1935 to 

March 1939 363 

11. Retail prices of nationally advertised liquid laxative, March 1935 to 

March 1939 _ 364 



XII TABLE OF CONTENTS 

Pago 

12. Retail prices of standard liquid laxative, July 1936 to March 1939 365 

13. Retail prices of nationally advertised analgesic tablets 366 

14. Retail prices of a drug sundry 366 

15. Retail prices of nationally advertised shaving article 367 

16. Retail prices of nationally advertised dentifrice 367 

17. Retail prices of nationally advertised liquid laxative 367 

18. Retail prices of nationally advertised cold remedy 368 

19. Retail prices of analgesic tablets, nationally advertised brand and 

substitute brands, in chain and independent stores — June 1939 371 

Retail prices of drug sundry, nationally advertised brand and substi- 
tute brands, in chain and independent stores — June 1939 372 

Retail prices of shaving article, nationally advertised brand and substi- 
tute brands, in chain and independent stores — June 1939 372 

Retail prices of liquid laxative "A," nationally advertised brand and 

substitute brands, in chain and independent stores — June 1939 373 

Retail prices of cold remedy, nationally advertised brand and substi- 
tute brands, in chain and independent stores — June 1939 373 

Retail prices of vitamin product, nationally advertised brand and sub- 
stitute brands, in chain and independent stores — June 1939 374 

Retail prices of liquid laxative "B," nationally advertised brand and 

substitute brands, in chain and independent stores — June 1939 374 

Retail prices of oral antiseptic, nationally advertised brand and sub- 
stitute brands, in chain and independent stores, June 1939 375 

Retail prices of ahalgesic tablets, nationally advertised brand and 

distributors' brands charged by two mail order houses 376 

Retail prices of a drug sundry, nationally advertised brand and 

distributors' brands, charged by two mail order houses 377 

Retail prices of liquid laxative "A," nationally advertised brand and 

distributors' brands, charged by two mail order houses 377 

Retail prices of liquid laxative "B," nationally advertised brand and 

distributors' brands, charged by two mail order houses 378 

Retail prices of liquid laxative "A," nationally advertised and substi- 
tute brands, in chain and independent stores — June 1939 379 

32. Comparison of full list prices with contractual minimum prices 383 

33. Distribution of retail prices quoted by drug stores for 13 items selling 

between 10 and 50 pents 385 

34. Wholesale and retail margins for nationallv advertised pharmaceutical 

"A" - --- 390 

35. Wholesale and retail margins for nationally advertised pharmaceutical 

"B" 392 

36. Wholesale and retail margins for nationally advertised drug sundry 393 

37. Wholesale and retail margins for nationally advertised toiletry "A" 395 

38. Wliolesale and retail margins for nationally advertised toiletry "B" 396 

39. Wholesale and retail margins for a nationally advertised toiletry "C".. 397 

40. Wholesale and retail margins for rationally advertised cosmetic "A".. 398 

41. Wholesale and retail margins for nationallv advertised cosmetic "B"._ 399 

42. Terms of sale for cosmetic "C" . 400 

43. Wholesale and retail mark-ups for 8 nationally advertised products. 401 

44. Maximum and minimum retail mark-ups for 132 products sold by a 

large drug manufacturer — group I 403 

45. Maximum and minimum retail mark-ups for 28 products sold by a 

large drug manufacturer — group II ^ 403 

46. Maximum and minimum retail mark-ups allowed by 12 cosmetic 

manufacturers on their varicus price lines 404 

47. Retail margins on products in the drug trade in California under the 

California fair trade law, July 1936 ^ 405 

48. Minimum retail margins on selected well-known advertised drug 

products in California under the California fair trade law, July 1936. 406 



TABLE OF CONTENTS 



XIII 



PART I 



CHARTS 

Page 
I. sensitive and insensitive prices. Supported by statistical data on 

p. 2')2 in appendix III . 24 

II. Wholesale prices of selected commodities: Eggs, cotton goods, and 

rayon. Supported by statistical data on p. 253 in appendix III. 25 

III. Wholesale prices of selected commodities: Phosphate rock, anthra- 

cite, potatoes, potash salts, and electric refrigerators. Sup- 
ported by statistical data on pp. 254-255 in appendix III 26 

IV. Change in average wholesale price and quantity available for con- 

sumption, 111 commodities — 1929 to 1933. Supported by 

statistical data on pp. 255-256 in appendix III 39 

V. Farm products: Prices and production. Supported by statistical 

data on p. 256 in appendix III 41 

VI. Wholesale prices of 30 basic commodities, industrial production and 
reciprocals of price dispersion. Supported by statistical data on 

p. 257 in appendix III 44 

VII. Indexes of wholesale price dispersion and industrial production. 

Supported by statistical data on p. 258 in appendix III 46 

VIII. Automobile tires: Wholesale price and average life of automobile 

tires. Supported by statistical data on p. 258 in appendix III_ 65 
IX. Retail prices of men's dress shirts. Supported by statistical data 

on p. 259 in appendix III . 84 

X. Breakfast cereals: Prices and margins. Supported by statistical 

data on p. 259 in appendix III 85 

XI. Wholesale prices of selected foods (products classified into quartiles 
according to consumer buying habits). Supported by statistical 

data on pp. 259-260 in appendix III 87 

XII. Electric refrigerators: Number sold and retail value; average reali- 
zation at retail and wholesale price index. Supported by statis- 
tical data on p. 261 in appendix III 113 

XIII. Electric washing machines : Number sold and retail value ; average 

realization at retail and wholesale price index. Supported by 
statistical data on p. 261 in appendix III 114 

XIV, Vacuum cleaners: Number sold and retail value; average realiza- 

tion at retail and wholesale price index. Supported by statistical 

data on p. 261 in appendix III 115 

XV. Electric ranges: Number sold and retail value; average realization 
at retail and wholesale price index. Supported by statistical 
data on p. 262 in appendix III ■ 116 

XVI. Sales and saturation: Electric refrigerators, vacuum cleaners, 
power washing machines, and electric ranges. Supported by 

statistical data on p. 262 in appendix III 119 

XVII. Household equipment ownership by income groups, electric refrig- 
erators, 1935-36. Supported by statistical data on p. 263 in 

appendix III 122-123 

XVIII. Household equipment ownership by income groups, power washing 
machines, 1935-36. Supported by statistical data on p. 263 in 
appendix III 124-125 

XIIX. Household equipment ownership by income groups, vacuum 
cleaners, 1935-36. Supported by statistical data on p. 263 in 

appendix III 126-127 

XX. Household equipment ownership by income groups, radios, 1935- 

36. Supported by statistical data on p. 264 in appendix III. . 128-129 

XXI. Income residuals after primary expenditures by income groups, 
1935-36. Supported by statistical data on p. 265 in appendix 
III 132-133 



LETTER OF TRANSMITTAL 



U. S. Department of Labor, 
Bureau of Labor Statistics, 

Washington, June 20, 1940. 
Hon. Joseph C. O'Mahoney, 

Chairman, Temporary National Economic Committee, 

United States Senate, Washington, D. C. 

My Dear Senator: I wish to submit for the record this study of 
Price Behavior and Business Policy, which has been prepared by the 
staff of the Bureau of Labor Statistics for the Temporary_ National 
Economic Committee. It is intended primarily as a background for 
the deliberations of the Committee on matters where prices are in- 
volved. Most of the report was written when our attention was 
focused on peacetime conditions. Although it considers price prob- 
lems in a peacetime economy, it provides several guideposts for legis- 
lative policy — guideposts which, it should be noted, are equally ap- 
plicable in the midst of mobilizing our resources for a great defense 
program or even in wartime. 

It is a major objective of our national policy to keep the American 
economy on as even a keel as possible in order to sustain production 
and employment. In attaining this objective, whecher in peacetime 
or in wartime, prices play an all-important role as a kind of economic 
governor, like the governor on an engine. If any change is made in 
the governor, it affects the operation of the engine — it may speed it 
up, slow it down, or interfere in a variety of ways with its efficient 
operation. 

This report illustrates, first, the variety of outside forces which 
affect this governor of the economic system, because of the great 
variety of market situations which confront American business and 
the many different ways in which changes in prices affect the internal 
operations of industry — in particular, production and employment. 
This analysis suggests the following guides to policy: 

If any action is taken to influence or, more important, to regulate 
prices, any such action, to be successful, must allow a wide degree of 
flexibility and permit variation between industries and between 
products. It is dangerous to assume that a single price policy can 
have universal application. It clearly cannot. 

Further, any agency charged with influencing or regulating prices 
cannot confine its attention to prices alone, since prices are an integral 
part of the industrial mechanism. Responsibility for marketing, for 
production, and for employment is implied in responsibility for prices. 

This study also suggests that industry can accomplish a great deal 
toward conscious improvemont of its operations by d^irect and un- 
biased analysis of its price and marketing problems. Some of the 
:broad pricing problems confronting business are illustrated by the 



XVI LETTER OP TRANSMITTAL 

recent history of a number of industries manufacturing electrical 
household equipment which, after a phenomenal expansion during the 
last 15 years, appeared in 1939 to have reached a point of near- 
saturation of their markets in the upper and middle income groups. 
They may follow one of two courses: Reduce prices and thus enlarge 
their markets in the lower income groups, or gear production largely 
for replacement and assume that families with low incomes will rely 
on the used-model market. Recent (1940) developments in the elec- 
trical refrigerator industry suggest that if less expensive models are 
introduced and sales of those models are pushed, the market will 
broaden and the volume of production and employment can be main- 
tained or increased. 

Another major objective of our national policy is to maintain and 
increase America's standard of living. To do this requires not only 
the smooth functioning of production but also the steady flow of 
goods to the ultimate consumer, at prices at which they can be sold 
m volume. Here, again, the level of retail prices is the key to the 
situation. Prices, in their turn, are influenced by the nature of retail 
markets and the margin which distributors require. Attention in the 
field of prices has hitherto been limited largely to wholesale prices. 
In our opinion, msufficient attention has been given to retail prices 
paid by the ultimate consumer. 

This report indicates that there are certain important rigidities in 
retail prices, which prevent them from being reduced freely, and to 
which this Committee may well direct its attention. I refer to the 
so-called fair-trade laws which have been enacted by 44 States and 
to the Miller-Tydings Enabling Act which legalizes resfile price main- 
tenance contracts in interstate commerce. I refer also to the Unfair 
Practices Acts which are on the statute books of about half the States 
and which, while purporting merely to prohibit sales below cost, seem 
to lend themselves to highly restrictive activities. Further, in some 
lines of trade, particularly certain drugs, there appear to be unduly 
wide margins between the cost of ingredients, the sale price at whole- 
sale, and the price to the consumer. 

This report shows that in recent years, both in wholesale and retail 
markets, businessmen have more and more preferred to base sales 
appeal on factors other than price, such as quality, style, appearance, 
advertising, brand names, and trade-marks. This trend limits still 
further the effectiveness of any form of regulation dealing with prices 
directly. At the same time, it makes it imperative that the consumer 
should be given every opportunity to know exactly what it is that he 
is buying; that ho should be afforded every facility to learn wiiat a 
can of food contains or what fabric has gone into a garment. Con- 
sumer education and clearer standards for consumers' goods are im- 
portant in order that the American public may be put in a position 
to expend its purchasing power wisely, an end whicii is desirable both 
from the point of view of the standard of living of the people and 
the maximum employment of men and materials 

This report consists of three parts. Part I is a general description 
of various aspects of business price policy and of their consequences 
to the economy. Part 11 is a detailed description of one phase of 
business price policy; namely, geographic price structures, such as 
basing point systems, zoning systems, and the like. Part III is a 



LETTER OF TRANSMITTAL XVII 

discussion of retail prices with concrete analysis of distributive margins 
in the drug industry. 

Much of the information upon which this report is based was com- 
piled from published and unpublished data in the files of the Bureau 
of Labor Statistics. In addition, extensive information was available 
in various publications, including those prepared by other Govern- 
ment agencies. The study of the electrical equipment industries is 
based largely on a field survey by representatives of the Bureau and 
was made possible by the cooperation of leading manufacturers and 
distributors. 

These studies of prices were prepared under the general direction 
of Aryness Joy, assistant to the Commissioner of Labor Statistics and 
director of Temporary National Economic Committee Studies for the 
Bureau, Edward S. Mason, professor of economics at Harvard Uni- 
vei*sity, has served as economic consultant iiT their planning. This 
monograph was written by Saul Nelson and Walter G. Keim, with 
the assistance of Laura Mae Brown, John M. Blair, and William C. 
French, Jr. 

There follows, for the convenience of the Committee, three brief 
but somewhat more extensive summaries describing the matters dealt 
with in parts I, IF, and III, respectively. 

Respectfully submitted. 

ISADOR LUBIN, 

Commissioner of Labor Statistics 



247149—41 — No. 1- 



SUMMARY 

Part I — Price Behavior and Business Policy 

Part I of this report on Price Behavior and Business Policy is con- 
cerned broadly with the way in which the poHcy decisions of business- 
men in the field of price affect the functioning of the economy. It was 
not primarily designed to present specific legislative recommendations 
but rather to present factual background and to serve as a guide to 
policy. .It is evident from the analysis that no simple single approach 
to prices as such will solve the problem of increasing and maintaining 
industrial activity. The problem is far too complex. 

Part I is concerned with two fundamental issues. The first is the 
problem of price flexibility, which arises from the tendency of the 
prices of some commodities, notably farm products, to fluctuate far 
more freely and frequently than the prices of others. The effect of 
these discrepancies upon the course of business activity and employ- 
ment has been a subject of much controversy. The second concerns 
the efforts of businessmen to direct competitive effort into channels 
other than price, a trend which has had important effects upon the 
economy. Following the general discussion of these issues, market 
trends in some of the electrical household equipment industries are 
appraised as affording concrete illustrations of many of the policy 
problems confronting business concerns and the economic implications 
of their decisions. Part I also includes three appendices, largely 
statistical in content, bearing upon the same issues. 

The body of the report consists of the following four chapters: 

Chapter I. Price Behavior and Business Policy. — In the everyday 
conduct of their affairs, businessmen are constantly required to make 
decisions regarding their sales policies; that is to determine the 
character and variety of the goods which they are to produce, the 
price and other terms and conditions under which the goods are to be 
offered for sale, and the type of sales appeal which can most effectively 
be used in finding a market. These decisions in the aggregate have a 
far-reaching effect upon the national economy. 

Commodity prices are to varying degrees influenced by day-to-day 
decisions of this kind. The prices of most farm products and of some 
industrial commodities are arrived at in markets where so manj^ 
buyers and sellers operate that no one buyer or seller has any appreci- 
able influence on the resulting price. In the case of most manufactured 
goods and some raw materials, the situation is quite different. The 
manuf6,cturer of steel, of automobiles, of corn flakes or of proprietary 
drugs, for example, has a very real voice in deciding the price at which 
he will sell. No concern has unlimited latitude in determining price 
poHcy; even a monopolist must reckon with the competition of sub- 
stitute products. In general, the amount of discretion available to 
any business concern in setting prices depends upon many factors, 
fiuch as the nature of its product, the availability of satisfactory 

XIX 



XX SUMMARY 

substitutes, the number and size of its compeUtors_ and its relations 
with them, and the impact of law and administrative governmental 
action. 

In this respect, concerns selling articles which are in fact different 
or which consumers believe to be different from those sold by their 
competitors are at a distinct advantage over those whose products are 
in all respects standard. For example, it is obviously impossible for 
a single seller of such commodities as iron ore, copper ingot, or sulfuric 
acid to maintain for any appreciable period of time a price substan- 
tially different from that quoted by all other sellers in the same market. 
On the other hand, where buyei"s for any reason prefer the products of 
one seller to those of another, they will be willing to pay some premium. 
It is not essential that such differences represent intrinsic physical dif- 
ferences of utilities; the important point is the buyer's psychological 
appraisal, the beliej that a difference exists which makes one product 
more desirable than another. If a product has acquired outstanding 
prestige, it is unnecessary for its producer to follow all the ups and 
downs of the general market. In such fields as packaged medicines, 
where it is particularly difficult for the average buyer intelligently to 
compare the merits of similar products, wide differences in price are 
maintained for long periods of time between merchandise which is 
virtually identical in all but name. 

Because of the close relationship between prices and profits, busi- 
nessmen are traditionally eager to exercise a substantial degree of con- 
trol over the prices of their products. In addition they usually favor 
price stability as a means of facilitating business planning. Price 
stability may be achieved in many ways. Within limits and for cer- 
tain products it may be attained by emphasizing quality, services, 
brand names, advertising, etc. But the accentuation of product dif- 
ferences cannot of itself shield any concern completely from price com- 
petition and there are many markets in which it is not applicable. 
Consequently, more direct schemes to achieve control over prices re- 
main common. These devices includ(; price leadership, conventional 
arrangements within an industry such as basing-point systems, uniform 
cost-accounting systems, patent pools, restrictive patent licensing, and 
outright collusion. 

Chapter II. Price Flexibility. — The techniques described above have 
made the prices of many products relatively stable. On the other 
hand, there are many business concerns which make no effort to avoid 
price competition and there are many markets which cannot be effec- 
tively controlled. Partly as a result of this situation, there are wide 
differences between the price behavior of different commodities; some 
change infrequently and narrowly, others move more freely and widely. 
These discrepancies are particularly evident during periods of economic 
upheaval. During the 1929-33 depression, for example, while the 
prices of such products as copper and hides showed extreme declines 
of over 70 percent, the prices of other items such as agricultural imple- 
ments and anthracite coal scarcely fell at all. This tendency of some 
prices to be flexible and others to be relatively "rigid" raises the first 
basic issue with which the report is concerned. Although flexibility 
relates to periods of upturn as well as those of do^^•ntu^n, it is the latter 
aspect which has received most attention in recent years and which is 
accordingly empha.sized in this report. 



SUMMAR1 XXI 

While these differences in price behavior are in no sense new, there 
is evidence that the far-reaching teciinological and other changes of 
recent years combined have materially altered the structure of many 
markets and that as a result inflexible prices play a somewhat more 
important role in the economy today than was true too, generations ago. 

It has been argued that the decline of production and employment 
in many lines during the downturn of 1929-33 would have been less 
drastic if price readjustments had been greater. Although this is no 
doubt true in certain cases, the relationship existing between price 
and production for any specific commodity is extremely complex and 
it is unlikely that uniform flexibility of prices, even if it were attain- 
able, would itself turn the tide of depression and bring about recovery. 
Prompter readjustments during the initial phases of a business de- 
cline might retard the downturn, but the effect of practicable price 
reductions after the recession has become pronounced is clearly 
limited. 

It is particularly important to recognize that any appraisal of this 
issue of price sensitivity must consider the economy as an interde- 
pendent whole. The effects of price changes must be considered in 
combination with each other and with the behavior of noncommodity 
prices such as services, rents, wages, interest rates, and taxes, as 
well. 

Moreover, wholesale commodity prices are only part of the picture. 
Prices paid by ultimate consumers are often the key to whether sales 
and hence production and employment increase. It is well known 
that price movements on retail markets are usually narrower than at 
the wholesale level. Moreover, any policy looking toward increasing 
the flexibility of wholesale prices as a means of achieving recovery 
would be of very limited value if at the same time the rigidity of 
retail prices is increased by the enactment of such legislation as the 
so-called Fair Trade Acts. 

It is apparent that the problem of price flexibihty will not yield to 
any simple solution. No common remedy to induce gTeater flexi- 
bility in price — were that clearly desirable — can be devised. How- 
ever, there is little doubt that rigid prices which are maintained at 
unduly high levels through collusive restraints of trade impair the 
functioning of the economy, and that insistence upon certain broad 
standards of business conduct such as those prescribed in the anti- 
trust laws may constitute a distinct step toward the achievement of 
the goal of sustained employment and production. 

Chapter III. Nori'price Competition. — Since differences in consumer 
acceptance yield individual concerns a distinct degree of freedom in 
determining the price of their products, it is not surprising that there 
should be constant efforts to create or accentuate such differences 
through emphasis upon such elements as quality, performance, and 
style, supplemented by the use of trade-marks, brands, and adver- 
tising. There is today a widespread belief in business circles that 
competitive efforts should be directed toward these nonprice aspects 
of competition almost to the exclusion of price, that sales campaigns 
should emphasize quality, service, and performance and should avoid 
price cutting as a competitive technique. This raises the second 
basic issue treated in the report. 

It seems reasonably clear that the change in competitive emphasis 
has not been entirely undesirable. Thus it is probably true that the 



XXII SUMMARY 

increased attention paid to quality and performance has served to 
stimulate technical research. Certainly the automobile, the refrig- 
erator, and the tractor are more satisfactory products today than 
they were some years ago. Undoubtedly technical advances would 
have occurred even if competition focused upon price, but it is at 
least arguable that centering attention upon quality stimulated its 
improvement. Conversely, there is some, evidence that excessive 
emphasis upon price may lead at times to undesirable degradation of 
quality. 

On the other hand it must be recognized that emphasis upon 
quality has often served to divert eflFort from programs designed to 
produce cheap but satisfactory merchandise to meet the needs of 
lower income groups. It has been argued, for example, that the pro- 
duction of cheaper automobiles or refrigerators, stripped of all luxury 
features, could serve a useful purpose in expanding the potential mar- 
ket for these products. 

One of the most serious objections to many forms of nonprice com- 
petition is the manner in which they complicate the buyer's problems 
of selection. Price is a universal measure and the significance of a 
price difference is readily imderstood by any buyer. The appraisal of 
differences in content or quality, or the translation of collateral terms 
of sale into price equivalents, is much more diflficult, particularly for 
the average untrained consumer. Consequently, when the policy of 
distinguishing one's product from a competitor's is revealed not in 
any real betterment of quality but in the multiplication of unneeded 
gadgets and superficial eyecatchiug features, there may be a distinct 
loss of competitive efficiency. 

When price competition is suppressed through collusive or coercive 
tactics it seems particularly pernicious, judged by any social or eco- 
nomic standards. All these schemes have the disadvantage of sub- 
stituting for a direct price cut, which the consumer wants and can 
measure, some substitute of uncertain value which he may well forego. 
If but a small fraction of these economically useless expenditures were 
translated into reductions in the price level, the gain in public pur- 
chasing power and the resulting stimulus to production and employ- 
ment might be material. 

Chapter IV. The Electrical Equipment Industries — An Illustrative 
Case. — The recent history of a number of industries manufacturing 
electrical household equipment such as refrigerators, washing ma- 
chines, and vacuum cleaners presents a number of these policy issues 
in concrete terms. These are all relatively new industries which have 
experienced their major growth during the past two decades. Until 
recently their sales problems have been simple. Their sales were 
constantly expanding under the influence of improved technology 
and lower prices. By 1939, however, the market for original equip- 
ment among the upper and middle income groups had become largely 
saturated while prices had not yet been reduced to a level at which 
members of the lower income groups could participate actively in the 
market for new equipment. The consequences of this situation were 
illustrated by an abrupt fall in the sales of electric refrigerators dur- 
ing the 1937-38 recession in contrast to the relative stability of sales 
between 1929 and 1933. 



SUMMAKY KXIII 

During 1939, therefore, manufacturers of these products were faced 
with the need for reorienting sales policies to meet these changing con- 
ditions. Two avenues of sales expansion were possible; development 
of the replacement market among consumers who had already pur- 
chased equipment together with improved facilities for the resale of 
used equipment taken in trade, and expansion of the market among 
those consumers who had previously been unable to afford to buy. 
At the time this report was being prepared (in the autumn of 1939), 
it was suggested that these ends might be achieved by price reductions 
based partly upon economies of manufacture, but more importantly, 
upon a less costly system of distribution and also by the development 
of a coordinated policy for handling trade-in equipment on replace- 
ment sales. 

Since the beginning of 1940, the refrigerator manufacturers, at 
least, have begun to adjust their policies along th-se lines. Prices, 
which were changed but little between 1933 and 1937, have been 
sharply reduced for certain models of medium size; economies have 
been sought in both manufacture and distribution and, it is reported, 
sales are running above those of last year. These developments 
clearly indicate the possibility of expansion in production and em- 
ployment through the reconsideration of business sales policies, and 
emphasize the need for common consideration of problems of this 
character by business and government. 

Appendix I presents a number of different measures of price flexi- 
bility which have been developed to assist research in that field. 

Appendix II is a detailed treatment of one phase of nonprice compe- 
tition ; the observance of so-called price lines in the markets for many 
consumer goods. 

Appendix III includes the statistical tables supporting the several 
charts presented in part I. 

Part II — Geographic Price Structures 

Part II of the report on Price Behavior and Business Policy treats 
one specific aspect of business price policy. It consists of a descrip- 
tion of geographic price structures for a wide variety of commodities; 
that is, of the way in which the delivered prices of these commodities 
vary from point to point in relation to differences in the costs of ship- 
ping the product from its origin to its destination. 

In the sale of most commodities, conventional practices have devel- 
oped with regard to the manner in which freight charges are related to 
the delivered price. Some sellers maintain a uniform price at their 
plants to all buyers regardless of their location. Others quote uni- 
form delivered prices in all markets or within defined geographic zones. 
Still others vary their prices systematically or unsystematically in 
order to meet or undersell their rivals in all markets in which they wish 
to do business. Some of these practices, notably basing-point systems 
and zone systems, may result in greatly limiting or eliminating price 
competition in the markets for the commodities affected. 

These types of geographic price structure, particularly the basing- 
point system, have consequently been the subject of much controversy 
in discussions of the problems of monopoly and competition in indus- 



XXIV SUMMABY 

trial markets. Legislation has been proposed to the Congress which 
would have the effect of prohibiting the use of basing-point systems. 
There has not been, however, any general survey of the extent to 
which different types of geographic price structures are actually en- 
countered in the American economy, nor of the considerations which 
favor the development of one or another type of practice. Such 
information seems needed for an adequate general appraisal of the 
relationship of basing-point systems, zone systems, aijd other schemes 
of freight equalization, to the pattern of competition within an 
industry. 

Among the problems with which the Temporary National Economic 
Committee is immediately confronted is whether the existing anti- 
trust legislation is adequate to cope with geographic pricing practices 
which may seem to impair the efficacy of price competition. This 
volume is designed to yield a sunamary of the facts needed for a general 
appraisal of these practices and to serve as background for any legis- 
lative proposals which may be made. It describes pricing structures 
of a wide variety of commodities, industrial, agricultural, and extrac- 
tive. It does not present conclusions or recommendations. 

Pa-et III — Prices and Price Margins in the Drug Trade 

Retail prices — the prices paid by the ultimate consiuner — are of 
primary importance in determining the standard of living, the 
demand for goods and services, and the amount of work provided 
and material resources used in their production. Retail prices 
are in turn closely dependent upon distributive margins; that is upon 
the spread between prices in wholesale and in retail markets. Part 
III deals with retail prices and price margins for products handled by 
the drug trade, such as drugs, toiletries, and drug sundries. 

Because of the difficulty encountered by the average consumer 
in comparing the merits of rival drugs and toiletries, competition 
between manufacturers has centered largely upon advertising, trade- 
marks, and attractive packaging. At the same time, it is to the 
manufacturer's advantage to do all that he can to enlist the active 
sales cooperation of the retailer in pushing his particular product. 
As a result many manufacturers have adopted the policy of guarantee- 
ing attractive margins to wholesalers and to retailers by fixing mini- 
mum resale prices for their products under the provisions of state 
resale price-mauitenance statutes (the so-called fair-trade laws). 

Where resale prices have not been fixed in this manner, there is 
usually a very wide variation between the prices charged the con- 
sumer by different druggists for the same product. Aggressive 
price cutting by some retailers apparently has had a tendency to 
cause retail and wholesale prices to decline over a period of years. 
The wide spread between the prices charged by the manufacturer of 
these products and the cost of their ingredients makes such progres- 
sive reductions possible. 

Where minimum resale prices have been legallj^ established, the 
prices charged by different retailers fall into a much narrower range 
and in some cases may approach complete uniformity. TJie absence 
of aggressive price cutting may also make it unnecessary for the 
manufacturer to readjust his prices to progressively lower levels. 



SUMMARY XXV 

The data indicate that the prices of nationally advertised brands 
of drugs and toiletries are usually materially higher than those of 
virtually identical merchandise which is tmbranded or which bears a 
distributor's private label. 

The terms under which manufacturers sell these products to whole- 
salers and under which drug wholesalers resell to retailers are often 
very complex, involving various forms of quantity and cash dis- 
counts, free deals, and advertising allowances which are illustrated 
here. Consequently, the gross margin or mark-up of the wholesaler 
and retailer will vary not only for different kinds of products, but for 
the same product depending both upon the conditions under which 
he purchases and the price at which he sells. 

In general, however, . the wholesaler's gross margin or mark-up 
on the sale of most drugs, toiletries, and drug sundries approximates 
15 percent, while that of the retail drug^st approximates 33 percent 
of their respective selling prices. Margins are usually narrower for 
popular nationally advertised articles which are often used as price 
leaders, and somewhat wider for slower-moving merchandise for which 
prices are rarely featured. 



PART I 
PRICE BEHAVIOR AND BUSINESS POLICY 

BY 

SAUL NELSON and WALTER G. KEIM 

ASSISTED BY 

LAURA MAE BROWN and JOHN M. BLAIR 



PART I 

PREFACE 

The behavior of commodity prices is of central importance to the 
fimctioning of the economy and is the key to many of the problems 
wdth which the Temporary National Economic Committee is primarily 
concerned. Part I of this study of Price Behavior and Business 
Policy comprises a general analysis of the relation between commodity 
price behavior and the policy decisions of businessmen. The four 
chapters consider in order: 

1. Price behavior and business policy. — The manner in which the 
policy decisions of businessmen affect the behavior of commodity 
prices and the character and variety of goods produced for con- 
sumption. 

2. Price flexibility. — The relationship between the behavior of prices 
and the cyclical upswings and downswings of business activity, with 
emphasis on the influence of the flexibility or rigidity of commodity 
prices upon the level of employment and the utilization of material 
resources. 

3. Nonprice competition. — The extent to which businessmen, by 
their sales policy decisions, have- directed competitive effort into 
channels other than price, and the significance of various aspects of 
nonprice competition in determining the general standard of living. 

4. The electrical equipment industries — An illustrative case. — An 
analysis of the conditions influencing the markets for certain kinds of 
electrical household equipment, as a specific illustration of the factors 
considered by businessmen in their price policy decisions, and the 
consequences of such decisions to the economy. 

There are also three appendices, including: 

Appendix 1. A detailed presentation of various measures of price 
flexibility and an analysis of their significance and relationships. 

Appendix 2. A description of the practice of selling by "price lines." 

Appendix 3. Statistical tables supporting the charts in part I of 
the report. 

Part I was prepared by Saul Nelson and Walter G. Keim, with 
the assistance of Laura Mae Brown, John M. Blair, and Wilham C. 
T'rench, Jr. Joseph W. Lethco was in charge of the clerical staff and 
Sybil Archer of the editorial and stenographic staff for these studies. 
Jesse M. Cutts of the Wholesale Price Division provided much of the 
basic material and consulted with the Staff. ^ 

Chapter IV, dealing with the electrical appliance industries, could 
not have been written were it not for the helpful information and 
advice given by many members of these industries and the materials 
provided by the Bureau's Retail Price Division; the buyers of various 
department stores located in Washington, D. C made available 
much of the material relating to "price lines." 

> The Bureau of Labor Statistics has prepared for the use of the Temporary National Economic Com- 
mittee a series of mimeographed volumes on specifications for wholesale price m which list and describe all 
•Of the wholesale price data collected by the Bureau. These volumes proved particularly useful la the 
preparation of this report. 

3 



CHAPTER I ' 
PRICE BEHAVIOR AND BUSINESS POLICY 

During recent years, attention has been focused upon the behavior 
of commodity prices as constituting at least one of the factors which 
contributed to the unprecedented severity and duration of the de- 
pression which began in 1929, and of the persistent failure to utilize 
the Nation's economic resources effectively during the past decade. 
Specifically/ it has been contended that some of the price policies 
followed by businessmen have been undesirable from the point of 
view of the national economy; that these policies materially aggravated 
the severity of the downturn between 1929 and 1933; that they re- 
tarded the pace of recovery between 1933 and 1937, and that they 
again were a factor in the recession of 1937-38. 

The joint resolution of the Senate and the House of Representatives 
creating a Temporary National Economic Committee enjoined the 
Committee with the duty of investigating "the matters referred to in 
the President's message of April 29, 1938" including, among others, 
"the effect of the existing price system and the price policies of in- 
dustry upon the general level of trade, upon employment, upon long- 
term profits, and upon consumption." 

Much of the problem is implicit in the very phrase "price policy." 
To say that a businessman has a price policy necessarily means that 
he has some degree of latitude in determining the prices of the com- 
modities he has to sell (or perhaps of those he wants to buy). In 
many sections of the economy, of course, no such latitude exists. The 
farmer, as an individual, for example, can have no price policy with 
regard to the wheat or cotton he produces. He is so insignificant a 
factor in the total market that he must simply accept the price as 
he finds it. The prices of most farm products and of some industrial 
commodities, (e. g., cotton goods) are arrived at by the interaction 
of so many buyers and sellers that no one buyer or seller has any 
appreciable influence upon the result. 

In the case of most manufactured products and some raw materials, 
on the other hand, the individual businessman can exercise some 
discretion in determming the price of his wares. The manufacturer 
of steel, of automobiles, of corn flakes, or of proprietaiy drugs has a 
very real voice in deciding the price at which he will sell. The extent 
of this discretion varies widely; it is generafly, though not necessarily, 
greater where competing sellers are few than where they are many. 
Thus, a manufacturer of milk bottles probably has substantially 
greater control over the price of his product than does a producer of 
furniture. There are often important differences within any given 
industry; the leading producer of gypsum plaster may to a large 
extent control its price merely by virtue of its dominant size, while 
smaller competitors must take the market as they find it. No con- 

' Ch. I was prepared by Saul Nelson. 
, 4 



CONCENTRATION OF ECONOMIC POWER 5 

cern has unlimited latitude in determining price policy; even a "mo- 
nopolist" must reckon with the competition of substitute products. 

For obvious reasons most business concerns seek in many ways to 
increase their degree of control over prices, sometimes by methods 
which constitute restraint of trade in the old-fashioned "trust-busting" 
sense. However, control may also be extended in many other ways 
which violate neither the letter nor the spirit of the Sherman or 
Clayton Acts. Far-reaching changes in technology and in market 
structure during the past generation have materially widened the 
area of discretion available to individual firms. The increasing differ- 
entiation and complexity of manufactured goods offered for sale, 
together with the widely expanded influence of national advertising 
have contributed to this effect. In many industries, moreover, the 
nature of the manufacturing process automatically restricts the field 
to huge aggregations of capital and discourages the entry of new 
concerns. The effect of these changes, together with some of the 
tactics used by business concerns in their efforts to influence the 
movement of prices, will be considered below. 

However, before proceeding to such an analysis, it should be 
emphasized that the formulation of price policies (with the term 
"price" used in its narrow sense) is only one phase of a much broader 
area in which the discretion of individual business concerns may be 
exercised. To look at price alone is to oversimplify the problem. 
The character of the commodity which is offered for sale and all the 
surrounding terms of the transaction must also be considered. Price 
is merely a focus for all the complex questions involved in industrial 
management and industrial markets. 

In the automobile industry, for example, before the individual 
manufacturer can set a price for his product, decisions must be reached 
on many other points. One of the most important is the selection of 
the income group to which the car is designed to appeal. There may 
be an alternative between improving the quality of an automobile 
whose retail price will approximate $700 or $800, or producing a 
much cheaper model to sell for $400 or $500. Quality improvement, 
in turn, may emphasize performance, or riding comfort, or appearance, 
or possibly the multiplication of minor eye-catching features. The 
practice of introducing annual model changes represents an important 
polic}'- decision, based presumably upor the desire to stimulate fre- 
quent replacement; it has been argued that less frequent model changes 
would yield manufacturing economies and lower new car prices, 
thereby increasing original sales at the possible expense of retarding 
replacements. Such decisions as these are factors in setting the 
practical limits within which prices may be fixed. 

In planning their general sales strategy, many concerns face a 
broad choice between emphasis upon price appeal and the expenditure 
of large funds for advertising. In the field of drugs and cosmetics, 
particularly, there are wide differences between the prices of virtually 
identical products. Some of these depend upon extensive advertising 
for their popularity, others are pushed by dealers because they yield 
high distributive margins, still others are offered to the consumer 
at low prices. These techniques may not be of equal social and 
economic desirability; yet from a purely business point of view each 
has been rewarded with a degree of success. If the decision is to 



5 CONCENTRATION OF ECONOMIC POWER 

stress advertising, other questions arise. Effort may be concentrated 
upon giving the consumer accurate information as to the nature and 
use of the product, or the appeal may be primarily emotional, with 
little or no attempt to present reliable information. In any event 
price, as such, is in part the result of a decision on advertising policy. 

These are but a few of the choices which business men must make 
in planning their sales policies. As in the case of price policy narrowly 
understood, the degree of discretion varies but it is never unlimited. 
The tactics of rival concerns and the preferences and prejudices of 
consumers must always be considered. Such limits of discretion 
establish the framework within which business sales strategy must 
be planned. The broad objectives of this strategy may now be 
considered. 

In a competitive economy, it is axiomatic that the policy decisions 
of individual business concerns are primarily directed toward in- 
creasing profits. It is much more difficult to generalize with respect 
to the strategy selected to achieve this end.^ Nevertheless, the 
evidence seems to warrant several observations. 

Because of the intimate relationship between prices and profits, 
businessmen are traditionally eager to increase the degree of dis- 
cretion which they can exercise with regard to the price structure. 
They are understandably reluctant to permit the course of prices to 
be determined entirely by the impersonal forces of the market. Often, 
though not necessarily, this implies a striving toward price stability; 
toward relatively infrequent changes in price as a means of facilitating 
business planning. 

The tactics by which control over price can be achieved are pro- 
foundly affected by the nature of the commodity mvolved. In the 
case of some products, such as wheat or ingot copper, buyors do not 
generally recognize any difference between the wares of rival sellers. 
These will be referred to for convenience as "standard" commodities. 
The absence of any form of buyer preference means that no individual 
seller can, for any appreciable period, charge a significantly higher 
price for his product than is being quoted by his rivals. There may 
be exceptional cases in which a concern controls so large a share of 
the total supply of the product that buyers cannot satisfy their re- 
quirements without patronizing it; under such circumstances it is 
conceivable that price differentials can be maintained. In general, 
however, it is clear that individual sellers of standardized products 
cannot effectively maintain independent price policies. The formula- 
tion of price policies and the achievement of price stability for goods 
of this kind requires, in one form or another, the participation of all 
or most competing producers. 

However, for many, perhaps most, manufactured goods a different 
situation prevails. Buyers of such items as automobiles, or dresses, 
or aspirin, for example, do not generally consider the merchandise 
offered by competing sellers to be equally desirable in all respects. 
The difference between rival merchandise may relate to inherent physi- 
cal characteristics involving such factors as quality, performance, 
style, or taste. However, buyer preference may exist without such 

' One of the many considerations Involved may be the relative emphasis placed by business coneerrn 
upon Immediate profits from quick turnover, profits over the Intermediate term, and profits over a long 
term of years. 



CONCENTRATION OF ECONOMIC POWER 7 

physical differences; trade-marks, brand names, or the prestige of the 
manufacturer or distributor may be the significant elements. The 
important point is the buyer's psychological appraisal; the heliej that 
a difference exists which makes one product more desirable than 
another at the same price, or that the payment of a premium for one 
as compared with another is warranted. Commodities of this kind 
may be termed "differentiated." 

There is, of course, no sharp line of demarcation between "stand- 
ard" and "differentiated" products, but rather an insensible gradation. 
The difference between two makes of automobiles is probably more 
apparent to the buyer than that between two makes of tires, yet it is 
clear that in the latter case, too, such differences are by no means a 
negligible factor in the market. Brand prestige- is more important 
for aspirin than it is for canned vegetables and, in turn, more for canned 
vegetables than for sugar; yet even in the case of sugar, brands play a 
definite role in differentiating the product of one seller from that of 
another. Moreover, in the case of products apparently "standard," 
such as steel rails, there may be such differences in promptness of 
deliveiy or perhaps in incidental services rendered as would result in 
the creation of buyer preferences. 

For the purpose of the present discussion, however, this distinction 
between markets in which buyer preference is imimportant and those 
in which it plays a significant role is useful; although the lack of any 
sharp dividing line should be constantly borne in mind. The existence 
of buyer preferences, however achieved, yields to the individual seller 
an important degree of latitude in formulating his price policy without 
constant reference to the actions of his rivals. It is not necessary for 
n manufacturer whose product has acquired outstanding prestige to 
follow all the ups aiul downs of the general market for similar commod- 
ities. A number of illustrations of this situation are assembled in 
chapter III of this report (pp. 75-90) . For example, the retail price for 
a nationally advertised brand of men's business shirts showed prac- 
tically no change between 1929 and the present, while the prices of 
less known brands meeting similar specifications declined materially. 
In such fields as packaged medicines, v/here it is particularly difficult 
for the average buyer intelligently to compare the merits of similar 
products, wide differences in price can be maintained for long periods 
between merchandise which is virtually identical in all but name. 

Since product differentiation increases the area of price discretion, 
it is not surprising that business concerns should strive to create or 
accentuate differences — intrinsic or apparent — between their products 
and those of their rivals. During recent years there has, in fnct, 
been a distinct tendency for competitive strategy to emphasize 
elements other than price. 

In addition to the greater latitude in formulating price policy 
which this teclmiquc yields, it often seems expedient for other reasons 
to base sales appeal upon nonprice factors. As a competitive w(>apon. 
price reductions are double-edged. A company which reduces prices 
in order to obtain business must anticipate the likelihood that its 
competitors will follow its lead; that any aiivantage it gains mny be 
no more than momentary. Most price reductions can be duplicated 
exactly; if one concern reduces its prices by five pcrccnl and its rivwls 
follow the same course their relative position in the market may be 



24714y— 41 -No 1- 



g CONCENTRATION OF ECONOMIC POWER 

unaltered. Changes in quality features are more difficult to duplicate 
quickly or precisely, and the competitive advantage they yield may 
Avell be more lasting. 

In addition, producers of rival commodities are far less likely to 
i-esent improvements in quality than direct reductions in price. The 
latter often lead to price wars, the former rarely. During the last 
20 or 30 years there has been intensive and very effective propaganda 
conducted by trade associations and by some business concerns de- 
signed to convince businessmen generally that price competition is 
somehow sordid and should be eliminated. There is today a wide- 
spread belief in business circles that cempetitive effort should be di- 
rected toward the nonprice aspects of competition almost to the exclu- 
sion of price ; that sales campaigns should emphasize quality, service,, 
and performance and should avoid price cutting ^ as a competitive 
technique. 

The accentuation of product differences cannot of itself shield any 
concern completely from the impact of price competition. The 
degree of protection afforded is greater for some products than for 
others, but it is never absolute. Moreover, wherever buyers are 
equipped to compare the merits of rival products intelligently, price 
differences cannot be ignored. This is particularly true in industrial 
markets; institutional buyers are usually more skilled than domestic 
consumers in comparing merchandise and price retains major force 
as a sales weapon. In the case of raw materials and semimanufac- 
tured goods it is often difficult to create any convincing appearance 
of product differentiation. 

Consequently, the effort of businessmen to cushion the force of 
price competition cannot rest with the attempt to shift emphasis to 
nonprice channels. More direct schemes to achieve control of price 
behavior remain conmion. It is not within the scope of the present 
discussion to describe these devices in detail, but a few illustrations 
are pertinent. 

The extreme case, of course, is that of the outright monopoly whose 
latitude in price policy formulation is limited only by the possibility 
that expenditures will be diverted to other products. However, 
such situations are extremely rare in the United States. Almost as 
complete a degree of control may be achieved through such devices 
as patent ])ools or rigid licensing agreements, such as apparently 
prevail in the glass container * and plasterboard industries. 

In the absence of such conditions, concerns in various industries 
have at times resorted to collusive agi-eements for maintaining prices 
or sharing markets. The technique known as price leadership may 
represent an effort to achieve similar results without overt violation 
of the antitrust laws. This means that some one concern in an indus- 
try, usually outstanding in size or prestige, regularly initiates all 
changes in price and that its competitors consistently follow its lead." 
Conventional arrangements within an industry such as basing point 

> The term "price cutting" is here used in the sense commonly used by businessmen; i.e. price reductions 
for the purpose of gaining direct competitive advantage. Price reductions reflecting actual manufacturing 
economies are not in equal d sfavor. 

« See Temporary National Economic Committee Hearings, Part 2, pp. 377-834. 

« It should be pointed out that market situations which have the outward appearance of "price leadership" 
may also be accompanied by activities whose .«tatus under the antitrust laws is more (luestionable. For 
example, the followingletter written by H. A. Dorenbusch, general sales manager of the Newport Rolling 



CONCENTRATION OF ECONOMIC POWER 9 

systems, by reducing the importance of plant location as a competi- 
tive element, presumably facilitate the maintenance of such price 
understandings.' The same principle applies to what are laiown as 
base-price systems, under which the prices of many different products 
are determined by the application of a generally accepted schedule of 
extras and deductions to a nominal base price. Both of these practices 
are observed in the steel industry. By reducing the points at which 
variation may occur, the formulation of price policy is simplified and 
the maintenance of price uniformity between rival producers facili- 
tated. Other practices designed to achieve similar ends which may be 
used separately or in conjunction are open-price systems which permit 
each concern to know what its competitors are charging and uniform 
cost-accounting systems whereby all concerns base their pricing policies 
upon identical or similar methods of calculation. 

Naturally all of these devices work more smoothly where competing 
sellers are few than where they are many.^ For example, in an indus- 
tr}^ consisting of only five concerns it is usually simpler to obtain 
general observance of the prices set by the "leader" than if there were 
a hundred concerns. Even a single company of relatively small size 
which elects to cut prices rather than to conform with the level quoted 
by most of its rivals may prove to be a serious disrupting influence. 
Although there are many ways in which more or less direct coercion 
can be applied to prevent such defections, these are not always satis- 
factory or free of danger. Consequently control is easier to exercise 
in industries in which technological requirements make huge amounts 
of capital necessary for successful operation. The number of concerns 
in such industries is necessarily limited and the entry of new enter- 
prise difficult. Price stability is also promoted because established 
concerns are less likely, to resort to aggressive price cutting as a means 
of expanding their share of the market than new companies which are 
seeking to win a place for themselves. 

In summary, there is evidence that business today, as in the past, 
seeks to avoid the full impact of price competition. Frequent price 
fluctuations are commonly regarded as inexpedient; some degree of 
price stabihty is preferred. Such stability may be achieved by various 
forms of agreement or understanding within industries such as patent 

Mill Co , to the president of that company, on August 17, 1935, suggests that price leadership is occasionally 
implemented by more positive methods: 

"Mr. A. K. ANDREWS, 

Footes Bay, Ontario, Canada. 

"Dear Mr. A. K.: It was not definitely decided until late last evening to put into effect for fourth quarter 
a one-price policy allowing the galvanized sheet price to remain at $3.10 per 100 pounds for No. 24 gauge base 
f. o. b. Pittsburgh. A few of the larger interests such as Weirton and Inland were in favor of reducing the 
price to $3 base for No. 24 gauge f. o. b. Pittsburgh but this was finally defeated and.it was agreed.to>llow all 
prices to remain the same as now in effect. 

"The announcement of no further jobber allowance after October 1 will be made by Continental on Tues- 
day of next week after which all mills can announce likewise. We, of course, in the meantime will notify 
our people which no doubt will be conducive of causing an influx of jobber business for shipmont prior to 
October l. 

"It is my intention to discuss this with Mr. Little this morning so that we will be prepared to take care of ■ 
the rush that we like others will no doubt have during the month of September. 

"I discussed the automotive situation with Noll Flora, secretary of the National Association of 'Fl-it 
Rolled Steel Manufacturers, last evening and he informed me that while some little tonnage wa= pT'.ced 
several weeks ago, nothing more has been done and that all the mills are holding firmly to their prices s'ld are 
expecting that additional tonnages will have to be placed soon." (Temporf'-y National Econoinc Com- 
mittee, Hearings, Part 27, morning session, January,.30, 1940.) 

• See I art II of this volume. 

' But the mere force of business custom may be responsible for generalinaint^^nance of pricia [sracticos in 
otherwise highly competitive industries, such as the garment trades, whpre cc.^ip^tition is on sf yle and other 
nonprice factors. 



IQ CONCENTRATION OF ECONOISIIC POWER 

controls, collusive aiTangemcnts or perhaps by the price leadership 
technique. The multiplication and accentuation of differences 
between rival products, by diverting competition from price channels, 
has also yielded individual concerns greater latitude in determining the 
prices of their wares. 

These trends are specific examples of the manner in which sales 
policy decisions of business concerns affect the structure of the market. 
More generally, it is clear that the orientation of business policy has 
important consequences for the functioning of the economy. It 
influences the pattern and behavior of prices, the amount and variety of 
goods produced, the level of employment and the standard of living of 
the population. It is in the light of these effects upon the general 
well-being that basic issues of public concern arise. 

Two of these basic issues have been selected for analysis in this 
report. The first relates to the effects of business price policy deci- 
sions, as reflected in the behavior of commodity prices, upon recession 
and recovery. The second concerns the economic implications flov/ing 
from broad choices of competitive strategy, particularly as expressed 
in the trend toward nonprice competition, upon the manner in which 
economic resources are used, and upon the general standard of living. 

These issues necessarily overlap, since the behavior of prices is 
importantly affected by the direction which competition takes. Con- 
versely, prices and price movements in the abstract have little signifi- 
cance. It is idle to inquire merely whether a particular price is high 
or low, whether it fluctuates freely or infrequently, whether its long- 
term trend is up or down, or even whether it reflects impersonal market 
forces, price policy decisions, or perhaps monopoly control. The 
behavior of the prices of any commodity is significant only when it is 
related to its broad economic setting. 

Nevertheless, it is useful to examine these two problems separately, 
though their related character must be borne in mind constantly. 
This is done in the two chapters immediately following. In the final 
chapter the issues are once more brought together; the character and 
implications of the policy decisions confronting the members of a group 
of industries are examined in some detail. 



CHAPTER IP 
PRICE FLEXIBILITY 

SUMMA.RY 

Prices of difTcrent commodities respond quite differently to changes 
in market conditions. Tliis is particularly apparent during periods of 
violent economic upheaval, when the entire price structure is being sub- 
jected to powerful unsettling influences. During the 1929-33 depres- 
sion, for example, while the prices ^ of such commodities as copper or 
hides showed extreme declines of over 70 percent, the prices of other 
items such as agricultural implements and anthracite coal scarcely 
fell at all. Prices in the (irst category are called flexible, or sensitive; 
those in the second rigid, inflexible, or insensitive. 

These difl'erences in price behavior have man}' causes. Some are 
peculiar to the commodities in question; for example, the extreme 
decline in the price of rubber during the depression was at least 
partly due to the devaluation of the pound sterling, while the increase 
in the price of hops between 1929 and 1933 may bo traced to the 
legnlization of beer. In addition, however, more general considera- 
tions, such as intrinsic differences in market structure, play an 
im])ortant role. It was pointed out in the preceding chapter that the 
prices of different com.moditJes are influenced in varying degrees by 
the price policy decisions of business concerns. It is probably true 
that prices are most flexible v/here individual producers enjoy little or 
no discretion in determining their price policies and that outstand- 
ingly rigid prices usually occur whore a high degree of latitude in 
price policy formulation is available. Presumably this reflects the 
general preference of business concerns for relatively stable prices 
and the fact that business price policy is directed accordmgly. 
^\^lether or not such policy decisions necessarily denote the presence 
of "inonopoly" in the sense implied in the antitrust laws, there is 
little doubt that the development of restrictive trade practices of 
many kinds aimed directly or incidentally at achieving price stabiliza- 
tion have decreased the fluctuations of prices of certain commodities. 

These difl'erences in price behavior between different t3'pes of 
commodities are in no sense new phenomena. It has long been ob- 
served, for example, that the price movements of manufactured goods 
are in general narrower than those of agricultural products. Never- 
theless, there is evidence that the far-reaching technological changes 
of recent years have materially altered the structure of man}' markets 

' Ch. n was prepared by Raul Nelson. Walter O. Keim devised the Index of price dispersion and con- 
tributed to tbe sections on Price Relationships and Prices and Production. Joseph W. Lethco assisted In 
preparinf; the statistical data. 

> In this discussion the term "price", unless otherwise noted, Is used to signify wholesale price and par- 
ticularly wholesale price as reported by the Bureau of Labor Statistics. The Bureau's wholesale prices 
are generally those received by the producer or manufacturer of the item in question; freixht to destination 
may or may not bo Included. Wholesale price in this sense docs not mean the price paid by retailers to 
wholesalers. 

11 



12 CONCENTRATION OF ECONOMIC POWEll 

and that, as a result, inflexible prices play a somewhat more important 
role in the economy today than was true a generation ago. 

There has been much controversy regarding the economic accompa- 
niments of these differences in price behavior. This controversy has 
centered about the effects of price rigidity upon the economy during 
periods of general business depression; little or no attention has been 
devoted to the problems arising during booms. It has been contended 
that, in general, the decline in production and employment during 
periods of recession is considerably more marked in those industries 
whose price structures are rigid than in those whose prices are flexible. 
Especial stress has been placed upon the plight of the farmer; upon the 
contrast between the sustained production and falling prices which 
characterized the products which he had to sell, and the curtailed 
production and sustained prices of those industrial products which he 
had to buy. 

It has been argued that the decline in production and employment 
in many lines during the dowxiturn of 1929-33 would have been less 
drastic if price readjustments had been greater. Similarly, decisions 
by business concerns to increase the prices of certain products during 
the winter of 1936-37 may have played a role in checking recovery, 
particularly in the construction industry. Although this is no doubt 
true in certain cases, the analysis presented in this chapter emphasizes 
the fact that the relationship existing between price and production 
for anv specific commodity is extremely complex and that it is im- 
possible to conclude that uniform flexibihty of prices even if it were 
possible would turn the tide of depression and bring about recovery. 
For example, there is a numerous class of products for which isolated 
changes in prices are unlikely to be reflected in material changes in 
consumption. Thus demand for any building material is determined 
largely by the general rate of building activity. A reduction in the 
price of building tile taken alone, for example, would probably have 
so small an effect upon the total cost of building that its demand would 
not be appreciably stimulated thereby. Similar instances of "joint 
demand" occur in almost every field. The sale of buttons or of yarn 
depends upon that of apparel; the demand for spark plugs in part 
upon that for automobiles, etc. Isolated changes in the prices of such 
individual commodities can have little or no effect upon the cost or 
price of the finished product and consequently upon their own sales, 
though in combination with similar changes in the prices of related 
products their cumulative effect may be very considerable. 

Moreover, there are certain distinct limitations to the extent to 
which price reductions might be expected to stimulate the sales of 
certain kinds of product during periods of severely curtailed purchasing 

f)ower. This is particularly true of those products which are not abso- 
ute necessities of life or whose purchase can be postponed, such as 
durable goods. For example, sales of agricultural machinery during 
1932 had declined to 18 percent of their 1929 level. In all probability, 
reduced prices would have stimulated sales somewhat. However, the 
decline in sales was largely due to the fact that the income of most 
farmers had fallen so low that it was completely earmarked for ex- 
penditures that would brook no postponement such as taxes, interest, 
food, fuel, seed, and the like. There was nothing left over for pur- 
chases which could be delayed a year or two, and machinery generally 



CONCENTRATION OF ECONOMIC POWER 13 

fell into this latter class. It is possible that prompter price readjust- 
ments for those products during the initial phases of a business decline 
might retard the do^vntu^n, but the effect of practicable price reduc- 
tions after the income of the farmer has already declined materially 
is clearly limited. Similar considerations apply to many other pro- 
ducts such as automobiles, furniture, jewelry, and, even in a more 
limited degree, to clothing. 

The structure of the economy imposes another serious limitation 
upon the benefits which might be derived from greater declines in 
prices which are more or less inflexible during a depression period. It 
has been argued that the disturbance of market relationships would be 
minimized if all prices rose and fell freely in response to changing 
economic conditions. It is contended, for example, that if the prices 
of what the farmer had to buy had fallen about as sharply as did the 
prices of the things he had to sell, the effects which flowed from the 
contraction of his purchasing power could have been largely avo'ted. 
However, this would have been completely true only if all prices had 
been equally free to move; that is, if wages, interest rates, utility rates, 
the prices of services, rents, depreciation, taxes, and so on had all 
fallen together.^ Moreover, it assumes the absence of long-term loans 
and mortgages which require fixed servicing regardless of price trends. 
In other words, increased sensitivity of commodity prices alone can 
only have limited (though perhaps significant) effect unless these other 
types of noncommodity prices are also flexible. 

All these factors must be accorded due weight in orienting public 
policy to deal with the problem of recovery insofar as it is related to 
prices alone. Thus it remains to define the objectives of public policy 
in relation to prices. So far, there has been a notable lack of any 
concrete suggestions for a cooi'dinated approach to governmental 
action with regard to price policies.^ Although it is no doubt true 
that the extreme disparities in price behavior exhibited since 1929 
materially aggravated the recession and retarded recovery, there is 
no evidence to show that it would be desirable — even if it were pos- 
sible — for all prices to be equally sensitive to changing business 
conditions. 

It may well be that by attacking monopolistic prices which are in 
any event objectionable, the flexibility of the prices of the products 
affected can be increased. But it is particularly important that the 
limited character of the benefits which could be derived from inducing 
isolated price changes be recognized. 

It is apparent, therefore, that any appraisal of this issue of price 
sensitivity must consider the economy as a generally interdependent 
whole. Although there are certain broad sectors of the economy — 
e. g., the construction industry — which may for some purposes be 
considered independently of other sectors, it must be recognized that 
a commodity by commodity approach to the problem is of little value. 
The effects of price changes must be considered in combination with 
each other and with the behavior of noncommodity prices as well. 
It must also be recognized that changes in price will themselves 

• Of course there is no implication that these declines should be proportional. 

« A set of general principles was prepared by an interdepartmental committee and announced by Presi- 
dent Roosevelt on February 18, 1939; these dealt with objectives rather than methods. 



24 CONCENTRATION OP ECONOMIC POWER 

affect the income of producers and thereby alter the aggregate na- 
tional purchasing power — as well as its distribution. 

Moreover, it should be emphasized that wholesale commodity prices 
are only one part of the picture. Price movements on retail markets 
are usually narrower than at the wholesale level. In some fields 
price rigidities are introduced and aggravated by the present system 
of distributing goods from producer to consumer as indicated in 
chapter III. Much recent legislation — both State and national — 
has had as a major or incidental objective the protection of traditional 
channels of distribution against the impact of newer methods of 
selling. This is true, for example, of chain-store taxes, resale price 
maintenance laws (the so-called Fair Trade Acts), the Unfair Prac- 
tices Acts ^ and antidiscrimination laws such as the Robin son-Pa tman 
Act. If the effects of price rigidities upon the economy are harmful, 
it would seem desirable to avoid the enactment and administration 
of legislation of this Idnd. 

Finally, it must be observed that the approach to the problem of 
sustained employment and production via the study of the flexibiUty 
of prices, v/hile it brings to hght certain industrial practices which may 
bo in need of correction, emphasizes again that each commodity must 
be considered in relation to its market. Although certain broad 
standards of business conduct, such as those prescribed in the anti- 
trust laws, may be generally required, and although the enforcement 
of such standards may materially affect the behavior of certain prices, 
yet it is evident that no one common remedy to induce greater flexi- 
bility of all prices — were that end clearly desirable — can be devised. 

The following analysis coucems that aspect of the problem upon 
v.'hich the discussions of recent years have centered — the effect of 
price rigidity upon production and employment during periods of 
recession or of low business activity. If the rate of industrial activity 
should advance rapidly, it may become necessaiy to center attention 
upon price 'increases rather than price decreases. There may be sub- 
stantial advances, for example, in certain flexible prices which have 
been at relatively low levels, and at the same time, there may be also 
marked increases in prices of less flexible commodities, particularly 
those whose extreme rigiditj'' during the past decade reflected the 
presence of some degree of price control. Should this happen, ques- 
tions of public policy might well focus upon types of price adjustments 
which are conducive to sustained recovery in business, rather than 
upon those which might be expected to check a decline in business 
activity. In the case of some products, moreover, it may become 
necessary to consider prices and price relationships primarily in terms 
of the speedy progress of a defense program, regardless of their 
broader impact upon the economy. 

THE NATURE OF THE PROBLEM 

In the preceding chapter it was pointed out that the prices of 
different commodities are, to varying degrees, subject to the influence 
of policy decisions by businessmen. For some products, such as corn 
or cotton, the number of buj'^ers and sellers in the market is so great 
that such individual pohcy decisions can exercise no more than an 
infinitesimal effect. For other products, including most manufactured 

' state laws prohibiting sales by distributors at less than Invoice cost, plus certain specified mark-ups. 



CONCENTRATION OF ECONOMIC POWER 15 

goods and some raw materials (e. g., sulfur), where the number of 
buyers and sellers is smaller, the influence of policy decisions may be 
considerable. For convenience in reference, prices in the former group 
have often been called market prices and those in the latter group 
policy influenced prices.^ Of course policy influenced prices are not 
immune to market influences; presumably the seller is guided by his 
appraisal of market conditions in fixing his quotation. However, 
the adjustment of prices to changing market conditions is less direct 
and less immediate. 

The connotation of the term "policy influenced" implies that the 
individual seller (or buyer) has a degree of leeway in foimulating his 
price policy; that he can exercise some control over his segment of the 
market. However, it is important to recognize that such control is 
not necessarily synonymous with monopoly power in the sense implied 
in the antitrust laws. Thus, it has been pointed out (see ch. I, p. 6-8) 
that the seUers of differentiated products bearing distinguishing names, 
trade-marks or brands may frame their price policy without the need 
of constant reference to the prices quoted by rivals. Devices that 
have been recognized as collusive or monopolistic may enlarge the 
area of price control, but they are not essential to it. 

It is important to emphasize that "policy influenced" is a relative 
rather than an absolute concept. There is no sharp division, no 
•dichotomy, in the universe of prices, but rather a gradation. In the 
case of most commodities, there is a constant interplay between price 
policy decisions and the influence of immediate market conditions. 
The relative importance of these two factors is constantly shifting; 
for example, prices which may largely reflect price policy decisions 
during a normal market may be largely market determined either 
during an extreme seUers' market when buyers are vigorously bidding 
against each other for goods, or during a buyers' market when dis- 
tress induces sellers to offer wide concessions to obtain business. 
Moreover poHcy influenced prices may be, and frequently are, altered 
to meet the needs of the individual transaction. Even ia the case of 
such commodities as steel, usually considered an extreme example of 
price administration, indirect rebates and concessions have been 
granted where the pressure from buyers has been sufficiently great. 

Despite these reservations, the distinction is not without meaning. 
The prices of such commodities as automobiles or steel, on one hand, 
and of wheat, on the other, are determined by different processes. 
And, although the process of determination implies no necessary type 
of price behavior, yet these differences are, in turn, frequently reflected 
in the beha\'ior of their respective price quotations.* In general, it 
may be said that market prices are constantly adjusting to every 
change in market conditions, with no single buyer or seller able to 
affect their level appreciably. In contrast, the day-to-day course of 
policy influenced prices displays no such constant adjustment. A 
common iUustration of this latter kind of price making is the automo- 

' Policy influenced prices, denoting those whose behavior is importantly influenced by business policy 
decisions, have often ijeen referred to in the past as "administered" prices. However, Mr. Gardiner Means, 
who seems to have originated the latter term, uses it in a connotation somewhat different from that here 
Imputed to policy influenced prices. According to Mr. Means— 

"A price can be classed as an administered price if it has been set and held constant for a period of time 
covering successive transactions." 

Mr. Means has called attention to this difference in usage. In view of the confusion which may result 
from employing the same term to denote two distinct concepts, the phrase "policy influenced" has been 
used in this report in place of "administered." 

' The term "quotation" Is used advisedly, since these often remain at unchanged levels even though 
unreported concessions or rebates are modifying actual prices. 



IQ CONCENTRATION OF ECONOMIC POWER 

bile industry in which the producer sets the wholesale price for eacli 
model at the beginning of the production year and maintains it at 
that level for many months or for the entire model year. 

These differences in price behavior are particularly noticeable during 
periods of severe economic upheaval, when the markets for virtually 
all commodities are subject to violent unsettling influences. Thus 
during the general downswing of 1929-33 the prices of some com- 
modities (e. g., cotton, oats, steel scrap) fell more than 60 percent; 
the prices of others (e. g., salt, steel rails, cigarettes) remained rela- 
tively stable; some, such as the price of gypsum plaster, actually rose 
to higher levels than prevailed at any time between 1926 and 1929. 
During the subsequent recovery from 1933 to 1937 the picture was 
reversed ; the rise of prices was roughly proportional to their previous 
decline. 

Some relationsliip, subject to very numerous exceptions, may be 
traced between the manner in wliich commodity prices behaved and- 
the process dominant in their determination. Although no attempt 
was made to classify products directly according to the relative impact 
of policy decisions upon their price structures, it seems broadly true 
that "market" prices (as defined on p. 15) fell farthest and recovered 
most; in other words they were most flexible or sensitive. Prices of 
commodities whose market structures make probable some degree of 
policy control in general moved less widely; they tended to be rigid, 
inflexible, or insensitive, though in some cases at least they apparently 
showed less resistance to the rise than to the decline. 

This contrast in the behavior of the wholesale prices of different 
commodities, reflecting their difTerential responsiveness to changing 
market conditions, has received much attention during recent years.^ 

* A list of some of the princijial recent works'on (he subject follows. 

BOOKS AND DOCUMENTS 

!Nrenn'5, Gnrdiner C, Industrial Prices and Their Relative Inflexibility (74th Cong., 1st scss., Doc. No. 
13, 1935). 

Mills, Frederick C, Prices in Recession and Recovery, National Bureau of Economic Research, 1936. 

Burns, Arthur R., The Decline of Competition, McGraw-Uill, 1936. 

Tintiier, Gerhard, Prices in the Trade Cycle (in United States of America obtainable from G. E. Stechert 
& Co., New York City), 1935. 

Kreps, Theodore J., Economic Problems in a Changing World, a symposium, chs. VIII-XV, Farrar and 
Rhiuehart, 1939. 

The Structure of the American Economy, National Resources Committee, June 1939. 

ARTICLES 

Mason, Edward S., Price Inflexibility, Review of Economic Statistics, May 1938. 

Means, Gardiner C, Notes on Inflexible Prices, American Economic Review, Supplement XXVI, No. 1, 
March 1930. 

Tucker, Riifus, The Nature and Afeaning of Rigid Prices, The Journal of Political Economy, October 
1937; The Reasons for Price Rigidity, American Economic Review, March 1938. 

Humphrey, Don D., The Nature and Meaning of Rigid Prices, The Journal of Political Economy, 
October 1937. 

Oalbraith, J. K., Monopoly Power and Price Rigidities, Quarterly Journal of Economics, IN^ay 1936. 

Douglas, Paul H., What Shall We Do About Monopoly Prices?, Journal of the Society for the Advance- 
ment of Management, March 1937. 

Wood, Ralph C, Dr. Tucker's "Reasons" for Price Rigidity, American Economic Review, December 
1938. 

Stevens, W. H, S., Has Competition Declined?, Journal of Marketing, .Vpril 1939. 

J^ederer, Einil, Price Dislocations versus Investments, Social Research, May 1938. 

Wallace, Donald H., Monopoly Prices and Depression, Explorations in Economics, Notes and Essays 
Contributed in Honor of F. W. Taussig, p. 349, 1936. 

Singer, H. W., The Inflexibility of the Price System, paper before the Manchester Statistical Society, 
January 11, 1939. 

Bachman, Jules, Price Flexibilify and Changes in Production, National Industrial Conference Board 
Bulletin, February 20, 1939. 

PAPERS 

Proceedings of the Academy of Political Sc«ience, January 1939, Monopoly and Competition in Industry 
and Labor. 

American Economic Association, American Statistical Association, and American Association tor Labor 
Legislation, Papers on Price Policy, December 1938. 



CONCENTRATION OF ECONOMIC POWER 17 

The sharp decline experienced by the prices of certain commodities 
during depression has been contrasted with the apparent stabihty or 
rigidity of others. It has been suggested repeatedly that the presence 
of Wese rigid prices has interfered materially with the process by 
which each economic maladjustment might otherwise automatically 
induce its own swift cure. The persistent underutilization of our 
economic resources since 1929 has been accordingly attributed, at 
least in part, to the prevalence of these rigidities,® or to the failure of 
Government policy to take account of their existence. 

In brief, these arguments may be summarized as follows: 

(1) The prices of the commodities on our markets may be divided 
into two fairly distinct categories, depending upon the process domi- 
nant in their determination. Where immediate market forces are 
uppermost, prices tend to be flexible, or highly responsive to changing 
economic conditions. Where businessmen have a degree of freedom 
in determining price policy, prices are usually more rigid or less sensi- 
tive to immediate market forces.'" 

(2) These discrepancies in price behavior, while not precisely new 
phenomena, have for a variety of reasons been accentuated during 
recent years. 

(3) Certain consequences have ensued from this development, 
including particularly: 

(a) The "automatic forces" which classical economists presumed 
would regulate the economy have been impair.ed "because the con- 
ditions which once promoted the easy and equitable operation of such 
forces have ceased to exist." " The failure of "natural" recovery to set 
in during the depression has been attributed at least partly thereto. 

It has been contended that where prices are inflexible the burden 
of adjusting to changing conditions necessarily falls upon production 
rather than upon prices and that, as a result, manufacturing activity 
and employment are curtailed far more sharply during periods of 

' Thus to Prof. Henry C. Simons, "The existence of extreme inflexibility in large areas of the price struc- 
ture was one of the primary factors in the phenomenon of severe depression. This inflexibility increases 
the economic loss and human misery accompanying a given deflation and causes deflation itself to proceed 
much further than it otherwise would." (Prof. Henry C. Simons, A Positive Program for Laissez Faire, 
University of Chicago Press, p. 14.) 

'0 Thus, according to Gardiner C. Means, "• * • the widespread presence in our economy of inflexible 
administered prices" * • • had "produced highly disrupting effects in the functioning of the economy" 
• • • and was • • * "largely responsible for the failure of a policy of laissez faire • • * there 
are two essentially difTerent types of market in operation — the traditional market in which supply and 
demand are equated by a flexible price and the administered market in which production and demand are 
equated at an inflexible administered price. In the first type of market economic adjustments are brought 
about primarily by fluctuations in price. In the second type of market economic adjustments arc brought 
about primarily by changes in volume of production, while price changes are of secondary significance in 
producing adjustment. 

"The difference between market prices and ndministered prices is clear. A market price is one which 
is made in the market as the result of the interaction of buyers and sellers. The prices of wheat and cotton 
are market prices as are many other agricultural products. This is the type of price around which tradi- 
tional economic theory has been built. 

"An administered price is essentially difTerent. It is a price which is set by administrative action and 
held constant for a period of time. We have an admini'^tered price when a company maintains a posted 
price at which it will make sales or simply has its own prices at which buyers may purchase or not as they 
wish. Thus, when the General Motors management sets its wholesale price for a particular model and holds 
that price for 6 months or a year the price is an administered price. Many wholesale and most retail prices 
are administered rather than market prices. For administered prices the price is rigid, at least for a period 
of time, and sales (and usually production) fluctuate with the demand at tlio rigid price." (Mean--. Gardi- 
ner C, Industrial Prices and Their Relative Inflexibility (74th Cong., 1st sess., S. Doc. No. 13).) 

" Thus, according to an extensive analysis of the Canadian economy, conducted during 19.34 and lOS.'i by 
a Royal Commission, "It is, furthermore, a tracjie delusion that the solution for these economic problems 
can be left to automatic forces, because i he conditions wtiich once permit led the easy and equitable operation 
of such forces have ceased to exist. These conditions presupposed two things, first, an economic system 
composed of small Independent units, no one of which counted in that system for more than an element in 
a statistical average; second, the free appearance and disappearance of these units and their free entry into 
and withdrawal from the market. With the growth of imperfect competition, however, these conditions 
no longer exist. Nor can we assume any longer that this monopolistic tendency is a merely incidental in- 
trusion into a system predominantly and naturally competitive." (Report of the Royal Commission on 
Price Spreads, ch. II, p. B.) 



Ig CONCENTRATION OF ECONOMIC POWER 

recession than would be true if prices fell more rapidly. "Necessary 
(price) readjustments are therefore concentrated, on the flexible sec- 
tions of our economy where their effect is intensified by rigidity in 
other sections."'^ 

(6) At the same time the discrepant behavior of different kinds of 
prices during periods of recession is alleged to create serious price un- 
balances between various sections of the economy, destroying normal 
exchange relationships, and thereby causing distress both among buy- 
ers whose purchasing power is impaired tind among sellers whoso 
markets are narrowed. 

(4) Public policy must take cognizance of these effects of price in- 
sensitivity and must in one or another manner strive either to reduce 
their incidence or else to compensate for their consequences. Such 
action forms a necessary part of any program designed to achieve and 
maintain a high level of productive activity. 

These contentions and inferences have been vigorously debated. 
Most of the attacks upon their validity seem to have centered upon 
questioning what seems largely a side issue; namely, that the existence 
of Inflexible prices is largely a new phenomenon. It is argued that 
these conditions have always existed, that they are an essential part 
of the structure of our economy and that the basic causes underlying 
the unsatisfactory character of current adjustments must be sought 
elsewhere. ^^ 

13 1.« • • all these circumstances unbalance modern economicsociety in thesense thatnotallofitsparts 
adjust themeelves at the same speed or in the same degree to any influence that makes itself felt at any one 
point. Necessary readjustments are therefore concentrated on the flexible sections of our economy, where 
their effect is intensified by the rigidity in other sections. When different parts of a glass tumbler oipand 
or contract at different rates, the whole glass may bo cracked. If the economic structure is in part flexible, 
and in part rigid, any strain may lead to complete collapse." (Ibid.) 

• ••••«• 

And, according to a subsequent publication of which Dr. Means was coauthor, "Wherever the new typo 
of industrial unit has introduced the factor of administration, it has substituted human judgment for auto- 
matic processes. Where administration has a hand in determining price it undermines ihe central mech- 
anism of automatic, flexible prices upon which the old economy relied for its adjustments. Where it affects 
the character of competition, it modifies the structural framework within which economic activity is carried 
on. Whereitaffectsthenaturcorresultsof profit seeking it perverts the old economy's central drive * • *. 

"The disastrous effect of this type of price upon the automatic mechanism of the old economy cannot be 
overstated. According to laissez faire assumptions, there can be no general oversupply of goods or unem- 
ployment of people because prices will adjust until everything which anyone is willing to sell is sold and 
until everyone willing to work is employed. But when adjustments are made through volume of production 
instead of through price the result is very different. When a drop in demand is met by cutting down pro- 
duction, workers are laid off. If this is the general reaction throughout industry, there is no place for these 
workers to go for new jobs even if they are willing to take lower wages, since wages like other forms of prices 
are commonly administered, particularly in the concentrated industries. Without jobs, they cannot buy, 
and their unemployment leads to a further drop in demand for products. If adjustment is aealn made by 
dropping production instead of by lowering price, the effect is only to make matters worse by laying off 
more people and thereby reducing demand still further. Such a process can go on until industry is virtually 
at a standstill and unemployment is widespread. In place of the reactions that were automatically set in 
motion to restore a balance under the old conditions of flexible prices, the opposite reactions here tend to 
make the situation progressively more grave." (The Modern Economy n Action, by Caroline F. Ware 
and Oardiner C. Means, ch. II, pp. 18, 22-23.) 

'3 Thus, Don D. Humphrey reaches the conclusion that rigid prices are not a unique characteristic of 
current conditions but that they were present also during the entire period between 1890 and today. (The 
Nature and Meaning of Rigid Prices, 1890-1933, by Don D. Humphrey, The Journal of Political Economy, 
vol. XLV, No. 5, October 1937.) 

Similarly, Rufus S. Tucker in a recent article wrote: "It is obvious that the two kinds of prices have 
been sharply differentiated for at least a century. In fact, that differentiation was commented on by 
Adam Smith in 1776 when he wrote 'that the price of linen and woolen cloth is liable neither to such fre- 
quent nor to such great variations as the price of corn, every man's experience will. inform him.' And the 
extent of that differentiation was apparently greater in 188t and 1879 than in 1933. In fact, the published 
prices do not show the whole of it, for it is a well-known fact that since 1929 some of the 'administered' 
products have improved in quality and size to such an extent that the Bureau of Labor Statistics price 
quotation is misleading. Their price has in effect gone down more than the quotation would indicate." 
(The Essential Historical Facts About tJensitive and Administered Prices, by Rufus S. Tucker, The 
Annalist, February 4, 1938, pp. 195-196.) 

This last point is criticised by Gardiner O. Means on the ground that it does not take into consideration 
the offsetting factor of improvement in the techniques of production which tend to save both macerials 
and labor: "Surely the engineering force which has improved goods so greatly has not failed to bring about 
improvements in technique in productjon so as to sive both materials and labor. When improvements 
in technique of production are offset against improvements in cost of production, is it any reason to think 
that the price figures published by the Bureau of Labor Statistics would be altered in a significant manner 
by adjustment for both factors? This is a matter which certainly should be investigated, but I doubt if 
the ret effect of a full adjustment would significantly alter the relational picture I have presented." 
(Gardiner C. Means, Notes on Inflexible Prices, The American Economic Review, Supplement, March 
1936,> 



CONCENTRATION OF ECONOMIC TOWER 19 

That there is some force in these contentions is undeniable. Never- 
theless, it does seem probable that the relative importance of insensi- 
tive prices in our econom}^ has increased materially during the past 
half century. In the first place, the character of the commodities 
on our markets has been undergoing a constant change. An ever 
larger share of the national income goes for the purchase of manu- 
factured products. ^^ Moreover, the degree of processing to which 
goods are subjected seems to be continually increasing. Automobiles 
replace buggies; packaged and processed foods arc substituted for 
the more staple items purchased by the housewife of an earlier day; 
clothing is bought ready-made instead of being fabricated at homo 
from piece goods or yarn, and so on ad infinitum. Since it is generally 
conceded that the price of manufactured goods shows typically less 
flexibility than that of raw materials it may well be inferred that 
the area of inflexibility is increasing. 

At the same time, the intensity of price competition in many lines 
has been reduced through the operation of forces described in the pre- 
ceding chapter. Increasing differentiation between the products of 
rival concerns, changing business mores, and high capital require- 
ments for entry into business have all played a role in shiftmg com- 
petitive emphasis to nonprice channels. Although statistical evi- 
dence is difficult to assemble, it seems probable that this changing 
pattern of business relations has reduced the apparent flexibility of 
the prices of a great number of commodities. 

It may be concluded, therefore, that a materiall}^ larger sector of 
the price universe must be classed as insensitive today than was true 
in the earlier years of the twentieth century. Consequently, the 
undoubted fact that certain prices have always been less flexible than 
others does not negate the possibilit,y that recent economic trends 
have aggravated the disparity. Nor is it necessarily pertinent that, 
as Tucker points out,^^ the degree of divergence in behavior between 
those prices which were then flexible and those which were then 
inflexible was as great formerly as today. The widening area of price 
inflexibility may have transmuted what was once an incidental 
phenomenon into a more serious unsettling influence. Moreover, it 
is possible that changes in surrounding economic circumstances have 
intensified the impact of types of price behavior whose influence was 
hitherto obscured. The relevancy of historical comparisons is clearly 
limited. Under the circumstances, the contention that price inflexi- 
bility has long existed does not eliminate the desirabilit}'- of reapprais- 
ing its efl'ects in tlie light of current conditions. 

The disagreement as to assumptions is reflected in the discussion 
of programs for action. Those who dismiss the entire subject as 
unimportant suggest that the efforts of government can more profit- 
ably be expended in other directions. Unanimity is lacking even 
among those who feel it essential that steps be taken to deal with the 
problem presented by inflexible prices. Some contend that inflexible 

'* Thus Ralph C. Wood writes, "Neither Gardiner C. Means nor Dr. Tucker • • • has mentioned 
that the relative importance of many flexible priced products, notably agricultural products, have greatly 
declined. The decline is apparent in all the series which may he deemed most relevant, physical volume 
of output, value of oul put, and number of employees. Conversely, the relative impoi tance of many inflexi- 
ble priced products has preatly increased. • • • Common ubservntion powerfully suggests that the 
expanding area and changing components of the industrial scene lia ve magnified the in.portance of inflexible 
prices and hence have increased the rigidity of the prices in some very fundamental ways." (Ralph O. 
Wood, Dr. Tucker's Reasons for I'rice Rigidity, American Economic Review, December 1938.) 

'• Tucker, op. cit. 



20 CONCENTRATION OF ECONOMIC POWER 

prices should be made more flexible so as to allow a laissez faire policy 
to work;^^ others accept price inflexibility as largely inevitable and 
suggest that instead the fluctuations of flexible prices be somehow 
minimized, or that other techniques for insuring recovery and main- 
taining full employment be devised/^ including perhaps monetary 
controls. 

Nor does any clear-cut solution seem, as yet, to be available. It is 
the purpose of the present chapter to present a brief survey of some 
of the aspects of this issue of price flexibility. It is designed as a 
preliminary exploration of the field rather than as a thorough analysis 
of the problem; it marshals the salient facts and suggests some of the 
attendant questions of public policy. 

THE MEANING OF FLEXIBILITY 

Any appraisal of the significance of price flexibility to the functioning 
of the economy must necessarily proceed from a definition of just 
what is meant by flexibility. The problem of definition may be 
approached in two ways; either by examining the external character- 
istics of price behavior only, or by considering such behavior in its 
relation to the nature of the economic forces to which prices may be 
expected to respond. Up to a certain point both approaches will 
lead to a similar separation of issues. 

An examination of the behavior of many price series over a period 
of time may disclose four difl'erent kinds of movement: 

(1) Casual variation. — An irregular, nonpersistent short time varia- 
tion, following no clearly recurrent pattern, and unrelated to the 
movement of the general price index. For purposes of reference, this 
will be called casual variation. 

(2) Seasonal variation. — A regularly recurrent ))attern of variation 
with an annual periodicity. For example, successive years may show 
a fairly predictable fall in the price during the snring and summer, 
followed by a rise of similar proportions during the fall and winter. 
Such variation may be termed seasonal. 

(3) Cyclical variation. — The Dohavior of the specific series in 
question will usually reflect, to a greater or less extent, the broad 
swings of the general price index. Thus most prices participated in 
the general price decline between 1929 and 1933, and in the general 
price upswing between 1933 and 1937. Such swings may be con- 
veniently called cyclical.'* 

(4) Secular variation. — The series may have a specific, persistent 
long-term trend of its own, independent of the movement of the gen- 
eral price level, and extending over a considerable period of time. 
Such a trend is commonly termed "secular." 

i« This viewpoint Is advanced by Robbins, "In order that recove -y may be assured and future dislocation 
minimize'l. it is necessary not only that flexibility should be restored to the prices of different kinds of labor 
but that flexibility should also be restored in other markets." (The Great Depression, MacMillan, 1935, 
p. 189.) 

" This appears to be the opinion of Means, "Finally, I want to make it clear that in pointing both to the 
fact and the importance of inflexible administered prices I am not saying that the inflexible administered 
prices are wrong. They seem to me inherent in modern technology. Nor am I saying that inflexible prices 
should have come down during the depression. According to the rules of the laissez faire game, they could 
not be expected to come dowtu' (Notes on Inflexible Prices, loc. cit.) 

!• This terminology does net necessarily imply any postulates regarding the nature of the business cycle. 



CONCENTRATION OF ECONOMIC POWER 21 

Those kinds of price variation may be considered manifestations of 
similarly distinguishable economic forces. Thus casual variations re- 
fleojt shoi't-term changes in market conditions. Seasonal price move- 
ments grow out of concurrent regular fluctuations in demand or supply. 
The cyclical swings of a price series are the more or less direct conse- 
quences of, or accompaniments to, broad changes in the rate of general 
business activity. Secular trends are the expression of basic long-term 
modifications of such factors as production costs, consmner require- 
ments, or market structures. 

Where business policy decisions are a factor, the nature of the varia- 
tion will be affected by the goals of business strategy. For example, 
piices may be varied over the short-term in order to obtain some imme- 
diate competitive advantage. Regular seasonal changes may be intro- 
duced for the purpose of maintaining uniformity of production sched- 
ules or shifting the burden of carrying inventory. The extent of 
cyclical variation — or its avoidance — may be governed largely by the 
effort t© minimize losses duiing periods of severely curtailed demand. 
Over the long-term, price policies and the response of prices to changes 
in costs and markets may be governed by -such factors as the relative 
emphasis upon large volume or unit profits, as well as by the rate at 
which it is considered expedient to replace old machinery and obso- 
lescent methods by newer or more efficient equipment and techniques. 

These four aspects of price behavior necessarily overlap, as do the 
forces to which they represent responsiveness. Nevertheless, it is pos- 
sible to consider separately the economic consequences and problems 
of public policy flowing from each of them. 

The precise role of casual price variation— responsiveness to forces 
which persist for not more than a few months at a time — is difficult 
to appraise. In some cases short-term price changes, particularly if 
they are considerable7in extent, may have important consequences 
upon the amount and direction of spending and upon the use of pro- 
ductive resources. Thus sharp price increases, even though very tem- 
porary in character, which occur during the initial stages of recovery 
from depressed conditions may have very serious repercussions; this 
may have been true, for example, of the short-lived price increases 
during the late spring and early summer of 1933. Promptness of 
response to important changes in conditions may be important; thus 
immediate price reductions during the initial stages of recession may 
ward off the need for later and more drastic adjustments. In many 
cases, however, whether or not the price of a commodity remains at 
a stable level for a day, or a week, or even a month, or whether it 
fluctuates to a limited extent about such a level during this period, 
seems of minor consequence in its effects upon the orderly functioning 
of the economy. 

In all probability, seasonal price variability is not a fundamental 
issue. Whether the course of any specific price is or is not subject to 
regukrly recurring, predictable seasonal fluctuations is likely to have 
little ultimate effect either upon the total income of the producers of 
the commodity or upon the total amount which consumers must pay 
for it. In other words, seasonal price behavior can play no more than 



22 CONCENTRATION OF ECONOMIC POWER 

a limited role in determining the distribution of purchasing power and 
of productive resources between various alternative uses.^® 

The significance of responsiveness of commodity prices to long- 
term or secular trends next arises. To what extent do the prices of 
different commodities reflect, over a period of years, changes in the 
costs of production due to technological improvements, to alterations 
in the character or availability of raw materials, to modifications in 
the nature of the labor supply, and so on? To what extent is the price 
of a commodity responsive to fundamental changes affecting its de- 
mand, as for example, changes in consuming habits or in standards of 
living, or possibly in the technical uses to which it may be put? 
These are questions of fundamental importance to the functioning of 
an efficient economic s,ystem. Price trends over the long term are 
the factors which ultimately determine the allocation of the nation's 
resources of men and materials to different uses, and the general stand- 
ard of living and well-being of the community .^° However, "sensi- 
tivity" or "flexibility" has usually been discussed in relation to short 
run and cyclical influences; consequently this question of responsive- 
ness of commodity prices to long-term influences, despite its impor- 
tance from the point of view of public policy, will not be considered 
at this point in the analysis. 

Finally, there is the problem central to the present discussion ; that 
is the degree to which specific commodity prices reflect the broad up- 
swings and downswings of wholesale commodity prices in general. 
The problem may be formulated alterDatively as one of price respon- 
siveness to what are usually termed cyclical influences, that is, to 
major changes in the rate of business activity. It is this aspect of 
price sensitivity, particularly in relation to periods of downtiu-n, which 
has been the focus of most discussion ai]d analysis in recent years. It 
should be noted that economists have generally accorded emphasis to 
the behavior of prices during the great depression of the years 1929 
to 1933 and also to their action during the recession of 1937 and 1938 
and have given less attention to the behavior of prices in periods of 

" Qenerally speaking, those prices which show a regular pattern of seasonal variation are affected by one 
of two sets of influences. The first of those reflects natural forces over which man has little or no control, 
for example, seasonal changes in the production of such commodities as milk, or butter, or fresh vegetables. 
The prices of most of these products are liigher in the winter than in the summer because of inevitable differ- 
ences in cost, such as storage charges or extra transportation expenses. In such cases, therefore, price varia- 
tion merely reflects seasonal variation in supply and in costs. 

Another type of seasonal price variation results from the more or less deliberate policy of industry— 
frequently representing the crystallization of custom — designed to even fluctuations in demand, and perhaps 
to permit the industry to operate more efl3ciently. This is true, for example, in the case of anthracite coal, 
where rates are systematically lowered during the summer in order to stimulate purchases during what 
would otherwise be a slack period. This custom is designed to reduce the burden of seasonal inventory 
which the industry would otherwise have to carry. It seems quite probable that this kind of policy is reason- 
ably calculated to improve the genernl functioning of the economy. In some cases, of course, a pattern of 
seasonal price variation which was originally well-grounded and economically desirable may become some- 
what distorted because of the intrusion of irrational elements. The price of styled apparel, for example, 
seems to follow a fairly predictable seasonal pattern. Regardless; of thrir original basis, however, seasonal 
changes in style, as they appear in our modern markets, seem to be far less matters of necessity than of cus- 
tom. Frequently, the pattern has become quite illogical. The desire to be the first to display a new mode 
has been so exploited that seasons are rushed to a very marked extent. S[iring apparel, fcr example, is 
regularly purchased in January, February, or March, rather than in Ajjrilor May. As a result, cold weather 
in January, instead of stimulating the sale of winter apparel, may actually act as a deterrent to the production 
of spring linos. 

There may be some industries which do not now reflect any di.stinct pattern of seasonal price variation and 
in which such variation might conceivably tend to .stimulate sales during otherwise dull periods, thus per- 
mitting the more efhcient use of productive machinery. For example, it is conceivable— though far from 
certain — that seasonal variations in the demand for, say, electric refrigerators might be reduced if prices were 
slightly lowered during the winter and correspondingly raised during tlie spring. 

io Of course, the mere fact th.>it the price movements of a given commodity adequately reflect secular in- 
fluences Is only one criterion. Responsiveness to change is no guarantee that the level may not, at all timee 
be out of line. 



i 



CONCENTRATION OF ECONOMIC POWER 23 

recovery and boom, such as the years of the last war or the period 
1922-29. 

Striking differences are apparent in the behavior of, prices of dif- 
ferent commodities during these periods. For example, chart I depicts 
three distinct kinds of price behavior. The price of sulphur, it will 
be seen, proved to be entirely inflexible. It changed not at all from 
the year 1926 to the year 1938. In contrast, the price of wheat is 
typical of the behavior of most highly flexible prices. It declined 
sharply from 1929 to 1932-33, recovered rapidly until the spring of 
1937 and then again declined sharply. Intermediate between these 
extremes is the price of brick, which may be classed as semisensitive. 
It responded to the general broad upswings and downsvyings of business 
but its response was far more limited than that of the pries of wheat. 

A few examples of the behavior of specific prices may illustrate the 
relationship between these four kinds of influences which affect prices, 
and indicate that price "flexibility," as such, can have no meaning 
unless its specific nature is considered. 

Chart II shows monthly variations in the price of eggs in New York 
since 1926. Marked swings from month to month reveal sensitivity 
to immediate or casual market factors. A distinct seasonal pattern 
is also apparent, with lows in the spring and summer, and highs in the 
late fall and winter. Responsiveness to cyclical influences is re- 
flected by a marked decline in price from 1929 to 1932-33 and again 
from 1936 to 1937. Finally, there seems to be a broad downtrend 
during the entire period ; the recovery highs were distinctly lower than 
the corresponding predepression figures. 

The price of cotton goods (chart II) exhibits a different pattern, 
though it, too, is usually classed as very flexible. It is highly respon- 
sive to cyclical forces and there is some evidence of a persistent long- 
term downtrend. On the other hand, casual variations are minor and 
there is no apparent seasonal movement. 

Rayon (chart II) experienced a major secular doAvntrend between 
1926 and 1932; during the latter part of this period the influence of 
the genei'al cyclical recession may have been superimposed to aggra- 
vate the decline. Secular influences probably persisted to limit the 
extent of recovery between 1932 and 1937. A fairly sharp decline (22 
percent) between 1937 and 1938 may well have been largely cyclical 
in nature concurrent with the general downswing of that period. 

In some cases there may be marked secular movement with little 
if any sensitivity to the general level of business activity. Electric 
refrigerators, phosphate rock and potash salts (chart III) illustrate 
this situation. Yet these prices differ among themselves in other 
important aspects. Refrigerators had a sustained downtrend in price 
extending over many years, reflecting improved technology and 
widening markets. In contrast, price reductions for phosphate rock 
and potash salts were apparently averted for a long period, until at 
last the accumulated force of improved methods and lower costs was 
reflected in each case in abrupt price cuts of over 40 percent.^^ None 
of these three commodities shows much casual variability, while potash 
salts displays a distinct and consistent seasonal pattern. 

" For a discns5lou of te^-hnological changes In tlie production of phosphate rock, see rhojspbato Rock 
Mining, 1880-1937, Works Progress Administration, National Research Project, and Department of tha 
Interior, Bureau of Mines. In the case of potash salt^ne*- scurccs of supply were an important factor. 



247149— 41— No. 1- 



24 



CONCENTRATION OF ECONOMIC POWER 




CONCENTRATION OP ECONOMIC POWER 
Chabt II 



25 



INDEX 
160 



140 
120 
100 
80 
60 
40 
20 
140 
120 
100 
80 
60 
40 
20 

140 
120 



WHOLESALE PRICES 

OF SELECTED COMMODITIES 

1926=100 
EGGS, FIRSTS, NEW YORK 



COTTON GOODS 



RAYON 



100 1- 
80 
60 
40 



20 



^ 


1 


1 




A 


i 




1/1 


i 




% 


^^ 


Wi 






^^ *tr i 

! 1 








1 






1 












^ 






"\_ 






^ 


^-V^-U/v -V 









1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 



INDEX 

160 



140 

120 

100 

80 

60 

40 

20 

140 

120 

100 

80 

60 

40 

20 



140 

120 

100 

80 

60 

40 

20 





UNireO STATES BUREAU OP LASOP STATISTICS 



26 



CONCENTRATION OF ECONOMIC POWER 



</> 


(0 


Li.1 


b 




< 


h- 


(/) 


O 


X 
(A) 


o 


^ 


:e 


O 
0. 



o 
o 



- 




•v. 






- 




f 






- 




C, 




- 


- 




V 






O 1 

9 ' 


:s 


I- 








-s c; 












S5 r 


> 










"Si "J 


N. 










- Ij 


^ 








' 


I 


ii. 








- 


- 










- 



- 






) 




- 


o 

J 




r 


r / 


- 


- 


^ 




- 



o 

LU 

O 
LU 

-J 
LJ 
CO 



CO 
LU 
O 

Q:: 
Gl 

LU 

-J 
< 
CO 
LU 




wOOOOOOOO 





- 




,. .... J 




1 . 


i 


- 


c 






^ 


- 










- 


s 


- 


A 






. 


o 












- 


i ^ 

8 O 
s < 
I a: 


- 


c 






- 


o 


1 






LJ 


I 

-o 
o 

'i 


3 








- 


-o 
o 


( 


> 






- 


T 


-2 










_ 


= X 


.<J> 


J—' 








. 


Q. 














s t- 




v^ 










(0 


- 










- 


" ^ 


- 


f 








- 


O 














s < 
i 




^ 










X 


























• 


- 








- 


2 

i 


- 


f 








- 



o o 



CONCENTRATION OF ECONOMIC POWER 27 

The price of anthracite coal (chart III) has remained within a 
much narrower range during the period between the summer of 1926 
and the present time than any of the other prices shown. However, 
it shows many month-to-month clianges and a distinct seasonal swing. 
Over the entire period, secular influences are revealed in a steady 
downtrend. Yet the depression as such seems to have had but little 
influence; the failure of prices to recover since 1933 makes it probable 
that the 1929-33 decline was part of a long-term readjustment rather 
than a specific response to the contraction of general business activity 
during that period. 

Finally, the prices of some commodities are subject to such powerful 
specific forces that the influence of broader economic trends is com- 
pletely overshadowed. This is illustrated by the price of potatoes 
(chart III). Between 1930 and 1933, potato prices roughly paralleled 
the behavior of other highly sensitive prices, although the downswing 
was somewhat delayed and the upswing extremely rapid. However, 
this parallelism may have been largely fortuitous; the chart shows at 
least three other price swings of approximately equal intensity which 
bear little or no relation to the trend of the general price level or to the 
rate of business activity. 

These few illustrations indicate the need of relating the problem 
to a specific market setting. The economic significance of differences 
in sensitivity cannot be appraised until the question "sensitivity to 
what?" has been answered. Accordingly, it should be emphasized 
that the following discussion is concerned chiefly with the "cyclical" 
aspects of price behavior, or with the responsiveness of prices to 
broad changes in the rate of business activity. 

THE MEASUREMENT OF PRICE FLEXIBILITY 

The distinction between measures of behavior and oj responsiveness. — 
Up to this point it has been possible to treat the problem alternatively 
as relating either to the external characteristics of price behavior, or 
else to the responsiveness of prices to market forces. Howevej', when 
the possibilities of measuring flexibility are examined, it becomes 
necessary to distinguish between the two courses. 

(1) The behavior of the price of any commodity can be considered 
in relation to the specific economic forces affectmg its market. 

(2) The movement of the price may be examined on a purely be- 
havioristic level, independently of the specific forces aft'ecting its 
market, but in relation to the pattern of behavior for other prices. 

Of these two approaches the former is in many ways the more mean- 
ingful. The behavior of any price cannot be fully appraised except 
in the light of a detailed analysis of the factors affecting the market 
for that commodity. Although it is true that during major upswings 
or downswings of business the prices of almost all commodities are 
subject to forces acting in the same direction, the intensity of such 
forces varies very materially for different kinds of product. In some 
cases the specific forces may even overshadow the more general, caus- 
ing anomalies of price behavior which cannot be explained by the 
examination of prices alone. Judgment as to what constitutes eco- 
nomically desirable behavior for the price of any commodity must, 



28 CONCENTRATION OF ECONOMIC POWER 

therefore, be conditioned by the forces affecting its particular market, 
and cannot depend exclusively upon comparison with the course of 
other prices. 

There is another important reason for measuring flexibility as a 
function of the factors affecting each individual market. Responsive- 
ness to changing conditions often takes the form of modifications in 
the character of the product rather than in its price as such. A pro- 
gressive improvement in quality is in some ways equivalent to a 
reduction in price. For example, there has been a marked improve- 
ment in the operating efficiency of mechanical refrigerators over a 
period of years. This is, in turn, reflected in a material decrease in 
current consumption per unit of refrigeration. If the consumer is 
interested in purchasing not a refrigerator per se but rather a certain 
amount of refrigeration, this improvement in efficiency cannot be- 
ignored. In other cases quality betterment or quality degradation 
may not be as readily translatable into price terms, but these changes 
are nevertheless significant. Consequently it is only part of the 
story to say that a price is "rigid" merely because it shows little change 
in level, without first examining modifications in the product itself.'^'^ 

.However, there are very serious practical difficulties in the way of 
developing the sort of relational measures of flexibility which are 
implied above. An analysis of the relevant market factors, product 
by product, for all the items included in the Bureau of Labor Statistics 
wholesale index, for example, or even for a properly representative 
selection of such items, is a herculean undertaking. Such studies 
would have to go far beyond the scope usually assigned to investiga- 
tions of sensitivity. Thus chapter IV of this report contains an 
extended analysis of the markets for electrical household equipment; 
yet much more data would be needed as a basis for appraising the price 
responsiveness of the products considered. Moreover, it is not at all 
certain that statistical techniques could be devised to express such 
analyses in uniform quantitative terms which would permit a com- 
parison of the results for different kinds of products. 

For the time being, therefore, and because most of the discussion of 
the subject has followed similar lines, the alternative procedure has 
been adopted in this chapter; that of measuring price flexibility by 
examining the behavior of prices without reference to the specific 
market forces at work, but in relation to the behavior of other com- 
modity prices. The significance of such measures is twofold. Similar- 
ities or disparities in price behavior have important economic signifi- 
cance and consequences in their own right. For example, they exert 
a marked effect upon the exchange relationships between different 
groups of producers. Thus diversities in trend between the prices of 
farm products and manufactured goods directly influence the effective 
purchasing power of fanners. Such effects may be inferred from an 
examination of how prices act without reference to why they so act. 

Secondly, during broad upswings and down^swings of business the 
prices of most commodities are subject to powerful forces acting in 
the same direction ; for example, almost all markets experience a cur- 
tailment of demand during recession and an expansion of demand 
during recovery. To the extent to which there is such similarity 

" The relationship between price and quality changes Is discussed at more length In ch. Ill of this report— 
Nonprlce Competition. 



CONCENTRATION OF ECONOMIC POWER 29 

between the forces acting upon the prices of different commodities, 
price behavior as such may be considered a guide to price responsive- 
ness. 

Almost all of the efforts which have been made thus far to prepare 
statistical analyses of price flexibility have been content with this 
sort of external approach. Measures have been applied to each price 
series without relation to the specific market factors affecting its 
behavior. Thus the frequency with which different prices changed 
and the relative extent of their declines during the depression of 
1929-33 have been compared directly without any correction for differ- 
ences in basic market characteristics. Because of the importance 
attached to them in current analysis the different forms of such 
measures are examined in detail below. The lunitations just discussed 
apply to all of them and must be constantly borne in mind in their 
interpretation. 

The specific measures utilized. — There are three general criteria of 
flexibility which have been applied to prices. ^^ These are — 

(1) The frequency of price movement. 

(2) The amplitude of price movement. 

(3) The timing of price movement. 

All of these have been utilized at various times in previous studies 
of price behavior. Before describing these, and other measures 
which have been developed in the course of the present study, it is 
pertinent to examine the economic significance of each. 

The frequency with which any particular price changes (e. g., the 
number of monthly quotations which show changes from the imme- 
diately preceding monthly quotations during a given period — see 
criteria A and B, appendix I) — has restricted usefulness as a measure of 
flexibility. Assuming the accuracy of the data, it may serve as some 
index of the responsiveness of the price to casual, very short-term 
forces. 2^ To an extent it will also reflect seasonal variations. How- 
ever, the very fact that this measure reflects both casual and seasonal 
variations limits its value as a measure of either separately. Fre- 
quency of change is obviously unsuited to measure seasonal flexibility 
because of the extent to which it is influenced by casual movements. 
Conversely, regular seasonal fluctuations in the price of such commodi- 
ties as anthracite coal or potash salts result in a fairly high frequency 
of change in their monthly price quotations; yet their sensitivity to 
casual market factors is but slight. Conceivably, the use of seasonally 
adjusted indexes might compensate for the latter defect. 

" The principal statistical measures of price flexibility which have been devised are presented below under 
the names of their formulators: 

Frederick C. Aii7/4.— Frequency of Change; Amplitude of Movement; Measure of Price Dispersion; Meas- 
ure of Displacement; Timing of Cyclical Phases. 

Oardiner C. A/eans.— Frequency of Change; Amplitude of Change (Percent change 1929 to 1932); Devia- 
tion Measured from Trends (Average 1929-37) to 1932. 

Oerhard Tintner— Frequency of Monthly Price Changes; Amplitude of Change; Respo:ise to the Average 
Cyclical Movements. 

Edtcard S. Mason.— Average Amplitude of Price Change (by 8-ycar periods). 

Don I himphre!/.— Frequency of Price Change; Amplitude of Change. 

'« Limitations related to the time intervals for which data have been tabulated m.ust not be ignored. Thus, 
if frequency is based upon a comparison of successive monthly prices, it will be difliicult or impossible to 
distinguish between those prices which change from minute to minute, such as wheat or cotton, and those 
whose level usually remains stable for days or perhaps weeks, such as print cloth. Yet these two are in many 
ways dififerent kinds of markets. 



30 CONCENTRATION OF ECONOMIC POWER 

Frequency of change,^' then, measures directly only sensitivity to 
short-term influences; not to cyclical or secular forces. It is of value 
in analyses of the latter only to the extent to which correlations be- 
tween these different aspects of sensitivity may be found to exist. 

The measurement of cyclical flexibilitv may be approached directly 
by examining the extent to which particular prices changed during 
periods of general business upheaval. The percentage by which 
prices declined from 1929 to 1932-33, the percentage of recovery 
from 1932-33 to 1937, or perhaps a combination of both these move- 
ments would fall into this class, (See measures C to I in appendix 
I.) Here again there are certain complicating factors other than 
those inherent in the character of the data. One of these is the fact 
that secular trends may be operating during the particular period 
investigated with the result that cyclical movements are exaggerated 
or perhaps obscured. Thus, to attribute the sharp decline in the 
prices of electric refrigerators or rayon during the depression purely 
to the influence of the drop in general business activity would ignore 
the influence of powerful technological forces and widening markets 
to which the behavior of these prices seems largely attributable. 
Nor can the effect of seasonal forces be neglected. For example, in 
the case of eggs the difference between the 1929 high and the 1933 
low is attributable in good part to normal seasonal variation ; cyclical 
factors account for only a part of the movement. Moreover, other 
specific market forces are often present; the influence of a drought, 
a bumper crop, or a war scare might affect any computation designed 
to determine the sensitivity of agricultural products. 

Probably seasonal variation could be allowed for,^® but it is difficult 
to devise techniques to compensate for secular or short-term forces of 
the kind described. 

The timing of price movements, e. g., the month during which a 
sustained uptrend or downtrend began, is adapted to measuring 
certain aspects of cyclical flexibility (see measures J to L, appendix 
I). However, the apparent speed of responsemay agam be obscured 
by noncyclical factors; secular, seasonal, or even casual." 

The reliability of all of these measures of flexibility is of course 
conditioned by the accuracy of the data upon which they are based. 
The Bureau of Labor Statistics indexes of wholesale prices have been 
very generally utilized in computations of this kind. Limitations on 
their validity for this purpose have been recognized by the Bureau 
and have also been analyzed by the National Resources Committee ^* 
in connection with its inquiries into prices. It has been pointed out 
that price changes are not always fully or promptly reported. The 

" In all this it is assumed that frequency of change is measured for reasonably short time intervals— e. g., 
not exceeding monthly. Obviously frequency computed for, say, yearly intervals would have a quite 
different meaning. 

'• This might be done by comparing annual average prices only, or by basing the measure upon the same 
month of each year, or by introducing a seasonal correction into the price index. Two such measures have 
been developed inr"the course of the present study and are presented in appendix I (measures H and I). 

" It is also fiossible to devise measures which combine two or more of the above criteria. For example 
If all the changes in price experienced by a commodity during a given interval be added together (regardless 
of whether any specific movement be up or down) the result is a measure of aggregate mov^ent which 
Includes elements of both frequency and anii)litude (measure N, appendix I). Another possibility is the 
computation of the average amount by which a price changes, when it does change (measure M, appendix 
I). Such measures as these seem most closely related to responsiveness to casual, or seasonal forces. They 
are, however, also subject to the same general kind of objection that it is difficult to distinguish between 
diverse overlapping movements. 

" The Structure of the American Economy, pt. I, National Resources Committee, June 1939, appendix I, 
pp. 173-185. 



CONCENTRATION OF ECONOMIC POWER 31 

frequency of price change for many commodities is materially greater 
than would be inferred from an examination of successive nominal 
monthly quotations. Measures of amplitude are subject to the 
difficulty that price reductions during depressions often take the form 
of secret rebates or indirect concessions, rather than of outright cuts 
in quoted prices. 

It seems apparent, therefore, that measures of flexibility based upon 
comparisons of price quotations must not be regarded as mathemat- 
ically accurate. The overlapping influences to which prices are sub- 
ject and the difficulties in the way of obtaining accurate price quota- 
tions constitute serious obstacles to their reliability. Nevertheless, 
some of the statistical relationships observed in an analysis of these 
measures are so marked and so consistent that they cannot be con- 
sidered purely fortuitous. 

MEASURES OF FLEXIBIIJTY COMPARED 

Currently, a great deal of attention has been devoted to the fre- 
quency of price change as a correlative of cyclical flexibility.^^ As 
pointed out earlier, frequency of price change is not of itself a direct 
measure of responsiveness to cyclical influences. However, there 
seems ample evidence that those prices which change most frequently 
also tend to decline farthest during a depression, and that those which 
change least often, usually remain most stable. 

Much of the work in this field has been done by Gardiner C. Means. 
In a report prepared for the Secretary of Agriculture and published as 
a Senate Document,^ he examined 750 of the Bureau of Labor Statis- 
tics indexes of wholesale prices; These items were divided into 10 
groups depending upon the frequency with which monthly price 
quotations changed. Average monthly prices for each of these groups 
were computed and a fairly consistent relationship demonsirated 
between frequency of price change and the extent of decline during 
the 1929-33 recession. 

Subsequently, the analysis was refined and carried further. The 
National Resources Committee study of The Structm-e of the American 
Economy ^^ depicts the average price trend for five frequency groups 
for the period from 1913 to the- present. The correlation between 
frequency of change and amplitude of cyclical movement holds for 
the upswing from 1933 to 1937 and for the 1937-38 downswing, as 
weU as for the initial depression break. It is also apparent, though 
to a lesser degree, for price movements during the* war boom of 1915 
to 1919 and the subsequent primary deflation of 1919 to 1921. 

In the course of the present study exploratory work was also done 
in the direction of developing alternative measures of flexibility. 
Various criteria were employed; some relating primarily to shorter 
term factors and others designed to reflect the impact of cyclical forces. 
They included frequency of change, aggregate movement and average 
amomit of price change during a period of relatively high business 

" An exhaustive statistical study of the relationship of price movements to the business cycle, which in- 
cludes data on price movements for the United States, England, Germany, Holland, Austria, and Russia, 
is fo he found In the Austrian publication, Prices in the Trade Cycle, 1935, by Gerhard Tintner, translated 
and obtainable from G. E. Stechert & Co., New York 3ity. 

*" S. Doc. No. 13, 74th Cong., 1st sess., Industrial Prices and Their Relative Inflexibility, January 17, 1935. 

»i Op. cit., p. 140. 



32 CONCENTRATION OF ECONOMIC POWER 

activity (1926-29); several measures of amplitude of swing between 
1929-33-37; and timing of price change at three critical turning points. 
These are described in detail subsequently. Comparison of the results 
derived shows again that all of these measures are distinctly related 
(see appendix I). In some cases the correlation is higher than in 
others, but the evidence seems sufficient to demonstrate the point. 
It may be assumed, therefore, that there are certain underlying influ- 
ences whose' effect upon the responsiveness of prices to different kinds 
of forces shows a degree of consistency regardless of the measures 
applied. 

A particularly striking relationship is observed between frequency 
of price change and amplitude of cyclical movement. (The Pearsonian 
coefficient of correlation between these two measures for 615 price 
series is+.77.)^^ It may be inferred, consequently, that sensitivity 
to cyclical forces is distinctly related to sensitivity to shorter term, 
casual influences.^^ This conclusion holds despite the fact that none 
of the measures used can be trusted to portray the effects of either of 
these factors exclusively. 

FACTORS AFFECTING I RICE BEHAVIOR 

The explanation most frequently advanced for this relationship 
between frequency and amphtude of price movement draws upon the 
distinction between "market" and "policy influenced" prices made 
earlier in this chapter.^* It has been pointed out that the behavior of 
prices is importantly influenced by the role which policy decisions 
play in their determination. Gardiner Means showed that if all 
wholesale price series are grouped in accordance with frequency of 
price change, a marked U -shape distribution results; that is, on the 
basis of this measure they are either highly flexible or quite inflexible. 
The great bulk of the series changed either less than 24 times or more 
than 80 times during the 96-month period upon which the comparison 
was based. In other words, the price quotations of most commodities 
change either once or more almost every month or else not oftener 
than three times per year. 

This tendency of prices to vary either very often or rarely is strik- 
ing, even after all due allowance has been made for the inherent in- 
accuracies of the data. Two essentially different kinds of price 
behavior seem involved. It may be reasonably inferred that most 
prices whose quotations change at short intervals are of the "market 
dominated" variety and that those whose frequency of change is at 
the other extreme are, to some extent, affected by price policy decisions 
of individual firms or groups of firms. 

In other words, there is a strong presumption that a price which 
changes infrequently is a "policy influenced" price. If the rigidity 
is extreme, the presence of monopoly or of monopolistic practices may 
be suspected. However, there is no necessary relation between price 
rigidity and monopoly, if "monopoly" is used to denote collusive or 
coercive devices for restraining competition, or the complete domina- 

M See appendix I, p. 170. The criterion of frequency is the one developed by the National Rgsources Com- 
mittee; that for depression sensitivity was developed by the present study. The former relates to the 
number of monthly changes between 1926 and 1933; the latter to amplitude of movement between 1929-33-37. 

" This assumes a degree of similarity between the cyclical forces acting upon diHeront products.. During 
a movement so broad as that between 1929 ani 1937, however, such an assumption seems warranted. 
• »* See pp. 13-15. 



CONCENTRATION OF ECONOMIC POWER 33 

tion of a market by a single concern. While there is a distinct ten- 
dency for prices subject to such monopolistic controls to change infre- 
quently, it by no means follows that prices which change infrequently 
are necessarily monopoHstic. Moreover, elements of monopolistic 
<;ontrol (still used in the sense above specified) may be present even 
though the pattern of price behavior is of the kind usually associated 
with market domination. 

It may clarify the issue to allude briefly again to the Influence of 
product standardization upon price behavior.^^ Some commodities — 
e. g., electrolytic copper, pig iron of a defined composition, 66° sulfuric 
acid — are of such character that the buyer has little or no reason for 
preferring the product of one seller to that of another; the same observ- 
ation applies to commodities purchased on specifications. Under 
such circumstances, appreciable price differences between rival sellers 
in the same market cannot long exist. This applies with particular 
force to nominal or published price quotations. Secret rebates or 
concessions may be overlooked; but any open price cut made by one 
seller is almost inevitably met by his competitors ia short order. 

In cormnodities of this kind, if price quotations remain stable for 
extended periods, it may be reasonably assumed that all competing 
producers are avoiding price changes, at least nomiually. This com- 
monly reflects the existence of some kind of modus Vivendi in the 
industry, whether it be based upon the domination of a single concern 
or upon coercion, collusion, or price leadership. 

In the case of differentiated products, where the merchandise 
offered by competing sellers is not readily interchangeable, buyers are 
accustomed to distinguish between the commodities offered by rival 
sellers. Whether buyer preference be based upon intrinsic physical 
differences or merely upon intangible factors such as brand prestige is 
not material to the discussion. The important point is that factors 
other than price are involved in the buyers' selection. Under such 
•circumstances, each seller is to some extent relieved from the necessity 
of meeting immediately eveiy change in the prices quoted by his rivals. 
The precise degree of this immunity necessarily varies with a large 
number of factors, such as the nature of the commodity, the relative 
€ase or difficulty which buyers face in making objective comparisons 
.between competing items, the extent to which an advertising cam- 
paign has been successful in persuading the public of the unique 
qualities of specific brands, and so on. Moreover, the immunity is 
never more than partial. If price differences between similar items 
become excessive, buyers will ultimately tend to shift their patronage.** 
Nevertheless, it is apparent that each seller may, for months or longer, 
ignore changes in his competitors' prices. Consequently, infrequent- 
price changes for products of this kind do not necessarily carry the 
same implications as those suggested for standard commodities. A 
modus Vivendi may oxist, but the apparent price behavior is quite 
compatible with its absence. 

Frequency of price change, th(3n, is not only a direct measure of 
sensitivity to casual market influences, but also a symptom of the 
relative influence of immediate market conditions and of price policy 

'• Although this point has already been considered (See oh. I, pp. 6-8), it is reviewed here for clarity. 

" Yet in some fields, the tolerance is very great. Thus widely advertised drug products frequently sell 
for three to five times as much as their unadvertised equivalents and sometimes the differential is even 
wider. See for example pp. 80-81 and also pp. 308-379, bolow. 



34 CONCENTRATION OF ECONOMIC I'OWEU 

decisions upon the manner of price determination. This may throw 
some light upon the correlation previously referred to between fre- 
quency of change and cyclical price sensitivity. In very general terms 
it may be assumed that prices with high frequencies of change, whose 
movements closely follow the shifting moods of the market, declined 
furthest during the depression and rose most during recovery. Prices 
whose infrequent changes reflect some degree of latitude in price 
policy formulation, declined on the whole less sharply and rose less 
abruptly. 

However, this generalization is subject to numerous exceptions. 
If the Bureau of Labor Statistics wholesale price series be ranged in 
order of percentage of decline during the depression, the result is a 
continuous distribution. This contrasts with the sharp discontinuity 
of distribution observed in the frequency analysis. It is clear that 
there are not two distinct classes of price responsiveness to cyclical 
influences, but rather an insensible gradation. Specific conditions 
may even cause flexible prices to move against the general trend. 
Thus, hops ^^ whose price may be classed as "market determined," 
showed material price increases between 1929 and 1933, while the 
price of potatoes — also a "market" price — showed only a slight 
decrease. In contrast, many prices normally classed as "policy 
influenced," e. g., petroleum and carbon black, showed very sharp 
declines during the same period. 

The tendency of the "administered" groups of prices to decline loss 
sharply during the depression than the "market-dominated" prices, to 
the extent to which it holds, is due to a wide variety of factors. 
These have been the subject of much attention during recent years and 
are far too numerous and complex to discuss here in detail. They are 
summarized below. 

(1) To some extent "market" prices on the one hand, and "adminis- 
tered ' prices on the other, relate to dift'erent kinds of commodities. 
The former are typical of raw materials and particularly of agricultural 
raw materials, while the latter are more commonly associated with 
manufactured products. It has long been observed that the price of 
raw materials tends to fluctuate somewhat more widely than is true of 
manufactured products. Many explanations have been suggested; 
some emphasizing dift'erences in cost structures, while others contrast 
the large number of farmers selling any specified product with the 
more concentrated industrial markets. 

Thus, it is frequently contended that the prices of manufactured 
goods are relatively rigid because their costs of production contain 
a larger proportion of inflexible cost elements (e. g., labor, interest, 
depreciation) than is true of agricultural products. Moreover, for 
the small-scale farmer the cost of labor may represent to a considerable 
extent the cost of his own and his family's efforts rather than actual 
money expenditure. However, this explanation does not appear 
adequate. The farmer is by no means free of inflexible cost elements; 
mortgage payments and taxes are obvious examples. It seem^ much 
more significant that the manufacturer is freer to express his costs in 
a price policy, whereas the farmer within a given season can do nothing 
but harvest his crops, if they will yield anything beyond the cost of 

«' The very sharp Increase in the price of hops during 1933 probably reflected the legalization of beer, but 
even the 1932 level was higher than that prevailing In 1929. 



CONCENTRATION OF ECONOMIC POWER 35 

harvesting. It may well be, therefore, that too much stress has been 
laid upon the nature of manufacturing costs as an explanation of the 
relative inflexibility of the prices of manufactured goods. For any 
particular commodity at any given time, the relationship between 
costs and prices is far less precise and immediate than such reasoning 
would imply. In the first place, it is rarely possible to determine 
with accuracy exactly what the cost of producing a given article is. 
In most industries there is a large proportion of indirect or overhead 
costs, whose computation and allocation to specific products involves 
a large number of assumptions. An outstanding problem arises from 
the fact that costs vary shar])ly with sales volume. Consequently, 
any calculation of costs must start with an estimate of what sales 
will be and it is obvious that any estimate of future sales may vary 
widely from reality. If sales are larger than expected, the calculated 
cost may materially exceed the actual; if sales fall short of the esti- 
mate, the calculated cost w411 be too low. Moreover the price charged 
will itself affect costs, since a lower price may stimulate sales and 
thereby result in cost economies. In short, cost accounting is not an 
exact science and cost estimates are only one of the elements which 
a concern must consider in framing its pricing policy.'^ Rigid prices 
cannot be explained simply by referring to "rigid" cost structures. 

(2) Those sellers or groups of sellers who have a degree of freedom 
in determining price policies are necessarily guided largely by con- 
siderations of individual advantage. Their primaiy concern as 
businessmen is with their own profit prospects; they cannot bo ex- 
pected to weigh the effect of each of their actions upon the general 
economy. Then, too, dictates of immediate expediency often out- 
weigh longer term considerations, particularly during periods of acute 
stress. Stable prices have many apparent advantages; not only to 
sellers but often to-industrial buyers as well. Planning is facilitated. 
The mechanical cost of announcing a price change for products having 
a wide distribution is often a serious deterrent.^'' Moreover, there is a 
fear that prices, once reduced, are difTicult to raise again when con- 
ditions alter; buyers may protest less against a stable price than against 
a ten percent increase, following a ten percent cut. 

(3) In general, the individual seller can expect to benefit from a 
price cut only if the volume of his sales is thereby increased by an 
amount sufficient to augment his net profits or reduce his loss. This 
postulates a very considerable increase in consumption as price 
declines — e. g., a high degree of elasticity of demand. There are 
many industries in which consumption docs not increase materially 
when price declines — i. e., demand is notably inelastic.*" This is 

>'Tho difRculty of dctormining iiricc on the basis of cost computations was amply deraonsfrated under 
N. R. A. Many codes contained provisions prohibiting sales below cost but the complexities Involved In 
measuring costs precisely made it necessary to resort tn highly arbitrary definitions of cost elements In order 
to render enforcement practicable. Where such arbitrary definitions were rejected by N. R. A. officials, 
the code provisions became virtually meaningless. 

'• J. K. Oalbraith quotes an observation made by Means to the effect that the expensc<nvolvcd in making 
a price change under modern conditions is an incentive to holding price constant. "A concern with Nation- 
wide sales outlets must make certain that dealers are informed of the change; it must distribute new price 
schedules and provide safeguards against 'leaks' as well as risk a temporary cessation of business in case 
there is such a 'Icnk.' It must also recast its advertising to acquaint the public with the change. All of 
the.'e things cost money and all of this expenditure Is avoided if prices arc allowed to stay where they are." 
(J. K. Oalbraith, loc. cit.. p. 470.) 

<" The drmnnd curve for in'Iivdual concerns may, of course, bo quite elastic in the sense that material 
shifts in patronage can be Induced by cutting prices below the level quoted by competitors. Flowevcr, 
there is a tendency among businessmen to consider such advantages purely ephemeral, because of the 
probability liiat such reductions will almost immediately be met or bettered, with no significant increase in 
volume for the industry as a whole. Consequently, for some purposes, elasticity as related to Iha total 
market for a product is more significaui than elasticity for the Individual concern. 



36 CONCENTRATION OF ECONOMIC POWER 

true particularly of those industries whose product is merely a minor 
component part of a finished article manufactured by others, of whose 
total cost they comprise but a small part. Thus the consumption of 
cement depends upon the rate of construction activity, the demand 
for spark plugs is dependent upon the sale or use of automobiles, and 
so on. Consequently an isolated change in the price of such com- 
modities cannot be expected to exercise any appreciable influence 
upon their demand. Sometimes price reductions may even cause 
buyers to postpone purchases in the hope of further reductions and 
reduce the volume of activity until price stability is achieved. It may 
be true, however, that businessmen as a group tend to underestimate 
the degree of elasticity characterizing their respective markets. In 
any event when purchasing power is curtailed during a depression, 
businessmen are likely to favor maintaining price as the technique 
best adapted to minimize losses. The reduction of prices in an effort 
to increase volume often seems to them as, at best, an uncertain 
adventure at a time when undue hazards should be avoided.^^ 

(4) The propaganda conducted by trade associations and others to 
convince businessmen of the undesirability of cutting prices has 
undoubtedly affected business psychology. ^^ Price cuts are often 
shunned as unethical even when material advantages can be antici- 
pated from a lower price level. ''^ (This does not relate only to the 
ephemeral advantages which a firm might obtain by cutting prices 
before its competitors, but also to those which might be retained after 
competitors had adjusted their prices to the new level.) Such price 
cutting as does take place usually takes the form of more or less secret 

«i T.J. Krcps suggests three reasons explaining why "rigid prices are the easiest prices." (1) "By changing 
and especially permitting prices to be lowered, producers increase the risi< that someone will try to 'get the 
jump' on the! rest and attract; customers by lowering or not raising prices with ensuing damages to the 
profits of all far greater than the temporary losses caused by restricted sales at maintained prices." (2) "If 
the number of sales outlets is large, the complexities of introducing price changes and of getting them ac- 
cepted by the buying publiC; in addition to the distribution of new price schedules, will cost money and 
bother so easily saved by 'letting good enough alone.' " (3) "Sound business policy demands that producers, 
especially in periods of slack demand, minimize their risks and conserve their working capital. Acceptance 
of low sales volume is not only easier but may mean smaller inventory losses due to fluctuating prices." 
(Economic Problems in a Changing World, a symposium, Farrar & Rhinehart, 1939, pp. 281-282.) 

«» Notice of this propaganda and dissent to it was recorded in a recent issue of the business journal. Ad- 
vertising and Soiling. , 

"During the past few months a number of business papers and trade associations , have conducted a cam- 
paign against manufacturers and middlemen who practice price cutting. 

"It must be admitted, from the immediate point of view, that this campaign may prove profitable. It 
may slow down price declines and thus allow sellers an oppnrtpnity for gradual litjuidation of their stocks 
at higher prices. Any such campaign, however, is definitely to be condemned from the social point of 
view and even from a long-run view point of manufacturers and middlemen. 

"In view of increasing unemployment and wage cuts, the maintenance of prices at the present time must 
mean a further decrease iti the consumption of goods This in turn w ill lead to a further contraction in 
employment— this to a still greater fall in consumption— more unemployment— and so on. 

"The present pleading to maintain prices is a clear cut expression of the policy of industry to adjust Itself 
to decrease in demand by cutting production rather than by reducing prices. Such a policy leads to a 
longer period of economic maladjustment — and hence creates a longer period in which the ba<:inessman may 
lose money. If persisted in, it may lead to as complete a break-down as in 1932. 

"It needs to be emphasized that it is the price cutter who is paving the way te recovery. He is putting 
merchandise on sale at prices the public is willing and able to pay. This not only encourages more con- 
sumption but an immediately higher standard of living. It also results in reduced inventories in the 
hands of retailers — which, in turn, depletes inventorie;; in the hands of wholesalers and manufacturers • • • 

"For a real recovery, purchasing power must arise out of production rather than out of Oovernment 
speeding. 'The price policies adopted by manufacturers, wholesalers, and ret.iilers over the next few months 
will have much to do with how far the Oovernment will be forced to go with its spending program to stimu- 
late buying. Businessmen profess to fear Government spending. If they want to stop it, let them adopt 
adequate price policies. At the present time business leaders might clear the stage for such policies by 
checking indiscriminate condemnation of the price cutter. Th<'y might even find it to their long-run 
advantage to adopt price catting themselves." (Advertising and Selling, June 1938.) 

" This attitude relates primarily to price cutting for the purpose of obtaining some immediate competi- 
tive advantage, and not to price reductions reflecting cost economies due to such factors as changes in tech- 
nology. The latter variety of price reductions are generally considered perfectly ethical. 



CONCENTRATION OF ECONOMIC POWER 37 

concessions. When price competition cannot be avoided, this form 
seems to be considered more desirable than one in which the nominal 
quotations are affected. It probably has somewhat the same advan- 
tages which the undeclared war has in international politics. It is 
simpler to restore normal conditions when the fray has subsided; the 
subsequent elimination of miofficial concessions is likely to meet less 
buyer resistance than an increase in the nominal quotation.** 

PRICES AND PRODUCTION 

For such reasons as those just discussed, price reductions during 
periods of depressed business activity are likely to be materially smaller 
in those industries in. which individual sellers are able to exert some 
voice hi vletermining the course of prices, than in those in which imme- 
diate market influences are the dominant factor. 

In appraising the consequences of this behavior, there is probably 
no single phase which has been the subject of more discussion and 
controversy than its effect upon production during periods of economic 
recession. Basically, the issue is drawn in these terms. When for any 
reason purchasing power is severely curtailed, the market must make 
some adjustment to the reduced amount of dollars available for expen- 
diture. This adjustment will take the form partly of reductions in 
price and partly of contraction in sales. These two adjustments may 
be considered complementary. If the amount available for expendi- 
ture at any time be considered constant, then /or the economy as a whole 
it follows that a smaller adjustment in price will require a greater 
adjustment in output. 

As a very broad generalization, subject to allowance for such factors 
as changes in the amount of hoarding, this is undoubtedly true. In 
discussions of price flexibility, however, the issue is usually formulated 
in much more specific terms. It is argued that rigidities in certain 
areas of the economy cause the burden of adjustment in those areas 
to fall heavily upon production; that is, that the output of such com- 
modities, and employment opportunities in their production, are cur- 
tailed much more sharply than would be true if their prices were mo^e 
flexible.*^ However, this point of view has been vigorously challenged. 
It has been contended that price-production relationships are not as 
simple as this, and that during a severe depression the consumption 

" This has recently happened, for example, in the steel industry. During the spring and summer of 
1939 concessions estimated to average $6 per ton had been widely granted; after the outbreak of war inEurope 
these concessions were withdrawn, resulting in an important increase in actual prices paid for steel. Yet 
the companies in the industry were able to announce that price quotations were unchanged and thereby 
to escape much resistance and criticism. 

" Thus, according to Gardiner 0. Means, "One can make the broad generalization, having of course many 
exceptions, that for industries in which prices dropped most during the depression production tended to 
drop least, while for those in which prices were maintained the drop in production was usually greatest. 
Indeed, the whole depression might be described as a general dropping of prices at the flexible end of tho 
price scale and a dropping of production at the rigid end with intermediate effects between • • *. 

"The adjustment of production instead of price in the inflexible areas aggravates the initial price adjust- 
ment in the flexible industries by reducing purchasing power and throws the burden of further price adjust- 
ment on the flexibly priced commodities. This situation can be clearly seen in the effect of the depression 
upon agricultural prices and the destruction of the price relationship between agricultural and industrial 
goods. It is also seen in the fact that during the depression tho total income of all farmers and the total in- 
come of all industrial workers dropped in approximately the Fame pro[iortion, but the drop in farm income 
reflected a drop in pricrs while the drop of workers' income reflected primarily loss of employment." Indus- 
trial Prices and Their Relative Flexibility, op. cit., pp. 9 and 25.) 



38 



CONCENTRATION OF ECONOMIC POWER 



of many commodities would be stimulated little, if at all, by further 
price reductions.*® 

When the relationship between prices and production declines dur- 
ing recession is examined commodity by commodity, no strikingly 
consistent trend is revealed. Chart IV illustrates this relationship 
for 111 commodities*^ for the 1929-33 downturn. The percentage 
change in average annual price for each of these products is plotted 
against percentage decline in production, adjusted for imports and 
exports. The three sections of the chart distinguish between products 
on the basis of durability, showing three categories of goods — durable, 
semidurable, and nondurable. 

An examination of this chart reveals the following relationships: 

(1) Considering all the commodities together, there is some tend- 
ency for small declines in price to be connected with large declines in 
production and vice versa. (The Pearsonian coefficient of correlation 
is —0.32; the standard error of this coefficient is 0.09.) 

(2) For nondurable goods alone there is a similar broad tendency. 
(The coefficient of correlation is —0.44; standard error 0.12.) 

(3) For durable goods and semidurable goods considered separately, 
there is little if any evidence of such a relationship. (Coefficients of 
correlation are —0.12 and +0.01 respectively; standard error in each 
case 0.18.) 

(4) There was a marked tendency for increasing durability to be 
associated with smaller declines in price and greater curtailments of 
production. As shown by the following table, the median price de- 
cline for nondurable items was substantially greater than for the 
durable. The sLx-percent curtailment in production for the former 
group contrasts strikingly with the Gl -percent curtailment for the 
latter. 



Table 1. — Median change in price and quantity available for consumption 1929-32, 
for 111 commodities, classified according to durability 



Type of commodity 


Number 
of items 


Price 


Produe 
tion 


Durable -- 


31 
32 
48 


-21 
-27 
-33 


-61 




-16 




-6 







<' This point of view is expressed in a recent bulletin of the National Industrial Coufereneo Board: 
"An analysis of the available data indicates that no simple and clear cut relationship prevails between 
speciflc commodity price and production changes. Within very broad limits there is evident some tendency 
for inflexible-priced products to be accompanied by greater decreases in production than those which svere 
more responsive to the impact of outside forces But the relationship is not so close, nor so surely accounted 
for, as to warrant the general conclusion that sharp reductions for particular inflexible prices would have been 
effective in maintaining demand, and hence the output, for these products. Certainly it seems unlikely 
that this result could have been achieved in connection with capital goods, the demand for which is deter- 
mined largely by the outlook for future prefits rather than by the current cost of new capital equipment — 
especially during times of depression when the demand schedule for such goods become,s extremely inelastic. 
That factors other than price may be of paramount importance is indicated by the t<>ndency for durable 
goods to record the larger declines in production and for nondurable goods to show the smaller declines, 
regardless of the respective changes in price. The postponablc nature of the demand for durable goods is a 
familiar phenomenon which furnished a more logical explanation for the production behavior of many 
floods than does the extent of price decline." (Price Flexibility and Changes in Production, Conference 
Board Bulletin, vol. XIII, No. 5, February 20, 1039, p. 51.) 

*' The following basis was used in selecting these 111 commodities. The throe most heavily weighted 
items in each Bureau of Labor Statistics wholesale price subgroup were taken, except for some subgroups 
In which (lata were available for only one or two commodities. The purpose of this procedure was to insure 
a fairly representative sample covering all the sectors of industry for which wholesale price data were 
available. 



CONCENTRATION OF ECONOMIC POWER 
Chabt IV 



39 



CHANGE IN AVERAGE WHOLESALE PRICE AND 




QUANTITY AVAILABLE FOR CONSUMPTION 




111 COMMODITIES- 1929 TO 1933 

PERCENTAGE 
AVERSE PRICE DURABLE GOODS average reicE 







• 




V 




-10 


. 




-10 




-2Q 


* • ^ *. . 




-20 




-30 


. • 




-30 




-40 


• 




-40 




-50 


• 




-50 




-60 


. 




-60 




••70 


• 




-70 




80 




, 


-fin 




< 


-90 -60 -70 -60 -50 -40 -30 -20 -10 10 20 30 40 50 60 70 




AVERAGE 



PRICE SEMI-DURABLE GOODS averagemice 




■ T 


v-* 






, • 








-10 


• 




-10 




-20 


• 


• 


-20 




-30 


+ 


; 


-30 




-40 


• • , 




-40 




-50 


* 


* 


-50 




-60 




• 


-60 




-7 


• 


■ 


-70 




-80 






-80 




*^"c 


-90 -80 -70 -60 -50 -40 -30 -20 -10 10 20 30 40 50 60 7 







AVERAGE 



-10 


'^'^^ NON-DURABLE GOODS ^"^""^ 


E PRICE 


-10 




' ^ 


■ 




-2 


• 


• 


-20 




-30 


• * +. 


*• 


-30 




-40 


• 


/ 


-40 




-50 


• • • .* • 


•. 


-50 




-60 


• 


* 


-60 




-70 




- 


-70 




-80 







-80 




10 


-90 -80 -70 -60 -50 -40 -30 -20 -10 10 20 30 40 50 60 7( 

AMOUNT AVAILABLE FOR CONSUMPTION 


D 




-f INOtCATES THE POSITION OF -THE MEDIAN CHANGE FOR EACH GROUP OF COMMODITIES 




SOURCES PERCENTftSES COMPUTED BY THE BUREAU OF LABOR STATISTICS AND THE BUREAU OF AGRICULTURE 

US BUREAU OF LABOR STTATISTICS economics from data coulecteo by these and other government agencies . |j 





247149—41 — No. 1- 



40 CONCENTRATION OF ECONOMIC POWER 

Great caution must be used in inferring any causality from these 
relationships. The fact that there was a tendency for production to 
be curtailed more sharply for those commodities whose price declined 
less, does not necessarily imply that production fell because prices 
were maintained. Conversely, the fact that for durable goods (or 
equally for semidurable goods) taken as a separate group, there was 
no appreciable correlation between price and production for individual 
commodities, does not necessarily imply that the two were unrelated. 

Consider first the very sharp curtailment in the production of 
durable goods as contrasted with the well maintained output of non- 
durable commodities. It would be clearly erroneous to attribute this 
contrast entirely or perhaps even primarily to the correlative differ- 
ence in price behavior. Durable goods by definition are purchased to 
satisfy future as well as present wants; an automobile is bought to 
furnish not only immediate transportation but also transportation for 
years to come. But when purchasing power is sharply curtailed, con- 
sumers perforce ration their buying and emphasize nondurable com- 
modities such as foods required for immediate consumption. Certain 
necessities of life must be obtained whether their price be high or low. 
Rents and taxes and certain debts must be paid. If anything is left 
after thfese expenditures then, and only then, can purchasing power 
be utilized for optional or marginal uses, such as luxuries or postponable 
replacements of durable goods. This principle applies not only to the 
ultimate consumer but also to the industrial buyer, and the unat- 
tractiveness of investment further limits expenditures for capital 
goods. 

Thus, if a product is an absolute necessity, its consumption and pro- 
duction may remain stable even though its price fails to reflect the 
decline in general business activity. This is true, for example, of 
domestic salt; sales remained stable through the depression while 
prices, with the exception of one or two short flurries, tended mod- 
erately upward instead of downward. On the other hand, the con- 
sumption of items whose purchase could be postponed inevitably 
declined. Price reductions might cushion but could not prevent a 
drop in sales. Production of leather gloves, for example, dropped 58 
percent between 1929 and 1933, even though prices fell 35 percent. 
Similarly, the price of water closets fell 45 percent during this period; 
yet a concurrent 45-percent drop in production occurred nothwith- 
standing.** 

It happens that the severest price declines during the depression 
occurred in precisely those industries which produced the most urgent 
necessities of life, while the smallest declines were to be found among 
those commodities whose purchase could best be deferred. The prices 
of farm products, foods, and textile products all dropped more than 40 
percent between June 1929 and February 1933. During the same 
period the prices of metals and metal products, house-furnishing goods 
and building materials fell about 25 percent. To an appreciable 
extent, therefore, the fact that the production of the former group was 
curtailed much less severely than that of the latter, reflected differences 
not so much in their price behavior as in the needs which they are 
designed to satisfy and the way in which they are produced and manu- 
factured. The consumption of urgently needed items was maintained 

*• Specific forces undoubtedly influen ced the price behavior of these two commodities during this period. 



CONCENTRATION OF ECONOMIC POWER 



41 



primarily because the items were urgently needed and not because their 
prices as a rule declined. Conversely, consumption of items designed 
to satisfy postponable wants declined because they were postponable 
and not merely because their prices were maintained. 

Nor is it valid to attribute the maintenance of agricultural produc- 
tion wholly to the sharp drop in agricultural prices (see chart V) 
merely because the two were concurrent phenomena. In the first 
place, most agricultural products entered into finished goods, such as 
food or clothing whose purchase cannot be indefinitely deferred *^ so 
that a well-sustained level of sales was to be anticipated. Of perhaps 



Chart V 



FARM PRODUCTS 


PRICES AND PRODUCTION 


INOE)' 

140 






1926 

1 


= 100 














NOEX 

140 


»20 

100 

1 


— *^^^ 


=\ 




^'^ 


PRC 


DUCT 


ON 




^ 


/~" 


•^^ 




120 
100 


1 

I 80 

i 


; j 
i 






\ 




/ 


7- 


•^ 


h^ 


\ 




80 
60 
40 


1 

40 

1 


! ; 






V 


^ 


'\»i 


CE 










1 20 
























20 


1926 IS27 1928 1929 1930 1931 1932 1933 !934 1935 1936 1937 1938 1939 




1 SOOBCE - 1 

; a s euREAu of labor statistics proouction department of agriculture 1 



greater importance, moreover, is the supply side of the equation. The 
nature of the agricultural process and of agricultural markets is such 
that curtailment of production is difficult to achieve. For the small 
farmer, a sharp reduction in output simply means partial disemploy- 
ment for himself and his family. It is noteworthy that, for the past 
40 years, there has never been more than a 15-percent reduction in 
cotton acreage. 

It must be recognized then that for each individual commodity, price 
is but one of the factors determining its level of production. Post- 
ponability of demand must certainly be considered. The nature of 
the productive process is important. The effect of price changes upon 

*• This refers to entire classes of goods, not to substitution within classes such as the use of one kind of food 
In place of another. 



42 CONCENTRATION OF ECONOMIC POWER 

production is necessarily different, too, for products whose demand is 
joint than for those whose demand is independent. 

It is apparent, however, that any appraisal of the influence of price 
policies upon production must pay due regard to the interrelated 
character of the economy. The effect of a change in price for any 
single commodity upon its production is influenced by, and in turn 
influences, the markets for many other commodities. 

Thus, if it be assumed that the demand for some necessity of life is 
completely inelastic, its price may still have a material influence upon 
the amount of money consumers will have available for more optional 
expenditures. The production of these less urgently needed items 
would thereby be directly affected. For example, if the price of 
cigarettes had declined further during the depression, it is doubtful 
whether the consumption of cigarettes would have been materially 
increased. On the other hand, the savings realized by the consumer 
might have served to stimulate production in other lines. In this 
particular case the amount involved might be small, but the principle 
is significant. 

Considerations of this sort are not confined to the action of com- 
modity prices. It is estimated that about one-third of total consumer 
expenditures are for services of all kinds.^° Such items as rents, 
taxes, interest on mortgages, utilities, professional and business serv- 
ices therefore account for a very substantial fraction of the consumer's 
budget. Many of these must be classed as necessities, just as surely 
as food and clothing. Consequently, their prices, too, exercise a 
distinct effect upon the demand for and production of postponable or 
nonessential commodities. 

In the same way an appraisal of the effect of price changes upon 
the consumption of commodities subject to joint demand cannot rest 
upon an industry-by-industry approach. It is true that, all other 
things being equal, a change in the price of bricks or steel or cement 
cannot be expected to exert much influence upon the demand for these 
products. However, if the prices of aU buildiQg materials were reduced 
simultaneously there might be an appreciable increase in the volmne 
of construction and in the demand for each of these commodities. 
The effect would be enhanced still further if the costs of building 
financing *^ and of construction labor were correspondingly modified. 
Although an isolated change in any one factor cannot be of more than 
limited significance, a concurrent change in many factors would have 
a very far-reaching influence. 

It is for this reason that a mere plotting of price and production 
data, industry by industry, upon a correlation chart can yield little 
of significant value to the discussion. The effect of price changes for 
any single item is not spent exclusively in the market for that item. 
The economy must be considered as a synthesis and not as a series of 
unrelated compartments. 

A consideration of the effect of price changes "during the downswing 
on output and employment in the whole economy must, finally, take 
account of the relation of these price changes to changes in the volume 
of income and spending. It is sometimes assumed m the discussion 

•0 Simon Kuenets, National Income and Capital Formation, 1919-36, National Bureaa of Economic 
Research, p. 86. 

" Financing is the only sector of construction in which costs have been effectively reduced during 
recent years, oy such programs as the Federal Housing Act. 



CONCENTRATION OF ECONOMIC POWER 43 

of price and production relationships that the volmne of income and 
spending is independent of price changes. It follows on this assump- 
tion that any reduction in prices will lead-to an mcrease in output and 
probably of employment. But prices not only represent the cost of 
acquiring commodities' to those with incomes to spend; they also 
determine m part the incomes of those who have commodities or 
services to sell. A reduction in prices may lead *o such a reduction 
in spending as to leave the volume of output and employment and 
the national income in the whole economy substantially unchanged. 
Here again the relationship is mutual ; changes in the rate of spending 
will have material effects upon prices. 

The crux of the problem seems to be the relation of price changes 
to spending and investment. Although this relaJ^ion has not been 
fully studied, it appears that in some fields at least, pu^ ticularly in the 
case of durable goods, properly timed and coordinated price reduc- 
tions during periods of downturn would be desirable from the point 
of view of the general economy. For example, lower prices for rail- 
road equipment might lead to replacement and modernization pro- 
grams ; and simultaneous reductions in the various prices determining 
the cost of construction might lead to an earlier recovery of invest- 
ment in housing. It is no doubt true that reductions in the prices 
of construction materials would permit a public-spending program to 
make a greater contribution to output and employment, or alter- 
natively to make the same contribution with a smaller budgetary 
deficit. Consequently, governmental efforts to reduce prices of 
strategic commodities, and of such noncommodity items as financing 
costs, might be rewarded by an appreciable net stimulus to production 
and employment. 

PRICE RELATIONSHIPS 

In the preceding section the effect of price behavior upon production 
was considered in the light of the experience of individual industries 
or groups of industries, though the interrelated character of the 
economy was stressed. In addition it may be helpful to approach 
the problem from another point of view, by looking at the relation- 
ships existing among commodity prices generally. 

During periods of violent price movement, differences in the be- 
havior of individual prices necessarily result in marked changes in the 
relationship of prices to each other. This alters the exchange patterns 
existing between the different segments of the economy, as weU as the 
cost-price structures of individual industries. Changes in these rela- 
tionships maj'-, in turn, be expected to exert an important influence 
upon the demand for the products of specific industries, as well as 
upon the general rate of business activity and upon employment. 

It is evident from an examination of chart VI that the behavior 
of prices is closely related to the rate of business activity. Tliis 
chart shows three curves. One is the Federal Reserve Board Index 
of Industrial Production, which is a general indicator of the level of 
business activity. The second shows the movement of the average 
of 30 basic sensitive commodity prices. The third is a measure of the 
way in which commodity prices diverge from their predepression rela- 
tions to each other, as explained in more detail below. (See pp. 45-47.) 
Thus a decline in this index of price relationships registers a departure 



44 



CONCENTRATION OF ECONOMIC POWER 



o 

h- 
o 

o 
o 
q: 

Q. 

< 

a: 

I- 
co 

3 
Z 

cn 

o 
o 



o 
o 

o 
< 

CD 

>- 
I- 

oc 

X 



UJ 
O 

a: 

Q. 
UJ 

< 

CO 
UJ 

_J 
o 

I 



i!2 



o 

(/) 
a: 
lij 

Q. 

en 
o 

iij 
o 

CL 9 



cn - 

_J 
< 
o 
o 

q: 



o 

z 
< 











^^ 


r 


y 
















=^^ 


4 


> 












f» 




\ 

I- Z - 

o 










c; 


"^•^ 


^< 














^^^^_| v^ 


cr 












^^*^ 


a. 

Vt 














^^'''^^> 


o 














^ 


^^ 
















i- 


["^N^i 














o 


1 ^^3*^»»^, 














3 


x,^^* vVl *v.^ 












O 


(^ 1 


"^ 












o 
_ o: _ 

Q. 

ie 




_/i 














\> 




•^ 






« 


•I 


? 


Ul 

L o 


^ 












^ 


a. 










•«:: 


^ 


T" 
















\ 


^ 
^ 








! 
1 








^ 


1 






1 
1 
1 

1 





.^ «• i 



«32; 

o: o — £ 
uj "o i_ 

Q •• O 

2 - 5i~ 
= ^^; 

<n £ " e 
UJ H « o 

O " £ = 
lO e UJ , o 

? gsi> 

en z ^ V 



CONCENTRATION OF ECONOMIC POWER 45 

from the pattern of prices which prevailed during 1926, while a rising 
index denotes an approach to those relationsliips. 

It is apparent that all three of these curves are generally parallel. 
In other words, when industrial production declines sharply, the level 
of sensitive commodity prices falls and there is an ever-widening 
spread among wholesale commodity prices generally as compared 
with their earlier relationships. An increase in the volume of pro- 
duction ie associated with rising sensitive commodity prices and with 
a decreasing spread between prices in wholesale markets. 

It is far more difficult, however, to interpret the m^eaning of these 
relationships than to show that they exist. It is particularly im- 
portant to realize that wholesale commodity prices are only one part 
of the price system. The relationships between wholesale prices and 
other kinds of prices, such as retail prices or wages, rents, utility rates, 
etc., may be fully as significant for the functioning of the economy as 
the relationships between different groups of wholesale prices. 

However, it will simplify the analysis first to concentrate attention 
upon wholesale commodity prices. It seems axiomatic that certain 
price relationships are more conducive than others to the full function- 
ing of our economy. Adverse effects may therefore be anticipated 
when there are any drastic distortions from such relationships. Un- 
fortunately, it is very difficult to determine just what set of relation- 
ships is most desirable. If it be assumed that the pattern which pre- 
vailed between 1926 and 1929 was more conducive to full resource 
utilization, than that since prevailing, ^^ it may be useful to examine 
the departure or dispersion from the former pattern. Aluch analysis 
has been devoted to the development of such measures of price dis- 
persion in an effort to relate them to swings in general business 
activity. Frederick C. Mills has contributed much in the field, and 
other students of price analysis have also been concerned with price 
dispersion. 

Recently an index of dispersion has been developed by the Works 
Progress Administration.^^ This is based upon prices of the 45 com- 
modity subgroups included in the Bureau of Labor Statistics whole- 
sale index. The disparity between the price pattern for these 
subgroups existing at any time and that which prevailed during the year 
1926, is first computed. (The year 1926 is, therefore, the assumed 

'2 It may well be that some of the price relationships existing before 1929 contributed to the subsequent 
downturn. 

" Price Dispersion and Industrial Activity, 1928-1938. Works Progress Administration; February 1939. 
This publication also describes other work done in the field: "Frederick C. Mills has done the most ex- 
tensive work in the field (a). Among others who have investigated this aspect of price analysis, F. Y. 
Edgeworth utilized as the measure of dispersion the so-called modulus, which is the standard deviation 
multiplied by the square root of 2 (b). Wesley C. Mitchell made effective use of deciles (c). Dr. Silver- 
stolpe employed the mean deviation in his analysis (d). Irving Fisher has used the standard deviation 
computed from relative prices and from logarithms of relative prices (e). Norman Crump originally ex- 
perimented with the arithmetic standard deviation and the logarithmic deviation (f). His most practical 
compilations utilized the arithmetic coefficient of variation and a measure of the 'angle of deviation derived 
from the standard deviation and the arithmetic mean.' A. h. Bowley has made use of the 'mean percentage 
divergence,' a measure similar to. the mean deviation except that the variations which are averaged are the 
percentage deviations of individual relatives from their geometric mean (g). 

"(a) The Behavior of Prices, ch. Ill, see. IV, pp. 251-285. 

"(b) Memoranda in Papers Relating to Political Economy (I/ondon: Macmillan & Co., 1925), vol. I. 

"(c) Business Cvcles (University of California Press, 1913); and The Making and Using of Index Numbers 
(U. S. Department of Labor, Bureau of Labor Statistics Bulletin 284, 1921), pt. I. 

"(d) Dr. Silverstolpe's measures have been published in the Gotebergs Handels och Sjofarts-Tidning. 

"''e) The Making of Index Numbers, A Study of Their Varieties, Tests, and Reliability (3d ed., Boston: 
Houghton, Mifflin Co., 1927). 

"(f) The Interrelation and Distribution of Prices and Their Incidence Upon Price Stabilization, Journal 
of the Royal Statistical Society, 1924, vol. 87, pt. II. Mr. Crump's measures of dispersion are now published 
currently in the Financial Times of London. 

"(g) Relative Changes'in Price and Other Index Numbers, Special Memorandum, No. 5 (London and 
Cambridge Economic Se""ice, February 1924." 



46 



CONCBNTRATION OF ECONOMIC POWER 



— ii o 

^ UJ 



o 

=> 
o 
o 
or 

Q. 

< 



UJ 



q: 



< 



o 

UJ 
X 

UJ 

o 



O o 

si 



E- 












> 










A 


^ 










*•••* 




^ 








A 


E- 














"^-^ 


7 






-i 


E- 






^««i 


s 


.5" 












-E 


E- 




z 




? 


~^ 




7 








A 


E- 




q: 

UJ 

a. 
to 

UJ 


< 


> 




*•-, 


> 








-i 


^ 




a. 


>' 






z 
o 

O 

. a. - 


< 








-E 


- « 


S. 


> 








;- 


.^> 


"7^ 


, 


4 


E- 


^ 
<. 














• 




> 


A 


^ 




"\ 


\ 


\ 








, 1 


•5 . 


• s 


A 


E- 








^ 




^-' 

C 


y 


1 

f 

1 


iftii 
ill 


overage deviation in 1929 

The production indeies on the 1929 base « 
computed from the Federal Reserve Board in 
(1923-1925- 100.0) odjusted for seosono 
variotion. 

11 1 1 1 M 1 1 II 1 II 11 1 t II 1,1 I 1 1 1 1 11 i 1 t, 


E- 








i 


i — 






1' 

■s 

1 


=- 








<> 


t-; 






£ 
1 


: 










) i 






1 


1 ^ 



CONCENTRATION OF ECONOMIC POWER 47 

base.) The trend of this disparity or deviation is expressed in terms 
of index numbers, with the average deviation during 1929 being taken 
as 100." Chart VII depicts the behavior of this index for the period 
between January 1928 and July 193G, and shows also the trend of 
industrial production during the same period. The relationship 
between the two curves is striking. In general, increases in price 
dispersion, that is, a widening spread of prices, seem to be closely 
associated with decliaes in industrial production, while reduction in the 
degree of dispersion is apparently related to increases in productive 
activity. However, thiB existence of this close relationship does not 
necessarily imply causaUty, Distorted price relations undoubtedly 
impede business activity but it is also true that reduced activity tends 
to disturb price relationships. 

Since prices differ in their responsiveness to cyclical influences, it 
is inevitable that price patterns during boom and depression should 
vary markedly. During 1932-33 flexible prices were, by definition, 
much lower with respect to the inflexible than had been true in 
1928-29; by the winter of 1936-37 predepression relationships had 
been approximately reestablished; during the subsequent recession 
flexible prices again tended toward lower levels while the inflexible 
remained relatively stable. It is basically these shifts which the dis- 
persion index portrays. 

Partly these price movements, particularly for the flexible group, 
are the consequences of changes in the level of business activity. 

Partly it has been suggested, these shifting relationships are also 
to be considered causes of changes in business level; departure from 
pre-depression patterns may aggravate recession while approach to 
such patterns may accelerate recovery. 

There have been many efforts to explore the nature of this inter- 
action and much has been written about the manner in which changing 
price relationships affect productive activity. Many lines of causa- 
tion have been suggested, but two are commonly stressed. 

The first considers the exchange mechanism of the economy as a 
whole. If, at any given time, some pattern of exchange ratios is 
conducive to the full utilization of productive resources, it is argued 
that any drastic and rapid distortion of such ratios must act as a 
depressant. Especial emphasis has been placed upon what is undoubt- 
edly the most spectacular of these distortions; that affecting the farmer. 
Between 1929 and the trough of the depression, the ratio between the 
prices of the commodities which the farmer had to sell and those which 

" This index and its derivation are thus described in the Works Progress Adm'nistration publication just 
referred to: 

"The measure worked out in the course of the present investigation is calculated by weighting the varia- 
tions—which are the percentage deviations of individual relatives from their weighted mean — on a fixed 
base (the year 1926). 

"The index of dispersion ♦ • • is simply a measure of the spread among prices. For the most part, 
it represents the spread between raw materials and finished goods prices • • • although the calculation 
involves the prices of 45 subgroups of commodilies. The direction of the trend indicates whether prices 
are moving toward or away from their mean (the all-commodities level). 

"The computation of the index of dispersion involves, first, the calculation of the average percentage 
deviation which is the amount the price indexes differed from the m'ean price index (a) . In this method ,the 
average is obtained by weighting the percentage deviation for each subgroup by its value of production in 
1935. A weighted average deviation is then ^culated for each month. This monthly figure is divided 
by the 1929 average deviation to obtain the monthly index number of price dispersion." 

(a) The subgroup indexes of the Bureau of Labor Statistics have been used in the calculation of the 
average deviation. The subgroup, Structural Steel, was omitted, as it is included in the Iron and Steel 
subgroup. 



48 CONCENTRATION OF ECONOMIC POWER 

he wanted to buy declined by about 50 percent. Other things being 
equal, it might be assumed that his purchases were necessarily cur- 
tailed by about the same percentage. 

So far the argument is noncontroversial. However, the effect of 
such a contraction in the purchasing power of any single economic 
group upon the economy as a whole is very complex. Reduction in 
the price of farm products in relation to other prices influences the 
purchasing' power not only of the farmer but also of the nonfarm 
population. For example, if as a result of such a change in price 
relationships, the cost of foods and clothing to the industrial worker 
falls while his income remains the same, he will have a larger sum 
available for expenditure elsewhere. There are two sides to the 
equation. 

Nevertheless, there is strong reason for believing that the net result 
of a drastic decline in farm purchasing power upon the economy is 
undesirable, It is quite likely that a substantial part of the shift 
in purchasing power accompanying a sharp decline in farm prices 
constitutes a shift from hands which would spend to hands which, at 
least in part, hoard. It is not at all certain that all or even a major 
part of the reduction in farm prices would be passed on to the indus- 
trial worker in the form of low prices for the necessities of life. Much 
of the difference might be absorbed by intermediate groups such as 
manufacturers, distributors, and banks. Consequently it would not 
be rendered available for the immediate purchase of consumable goods 
in quantities sufficient to compensate for the reduction in the farmer's 
buying. In other words, the importance of the change in price rela- 
tionships does not lie so much in the relationships themselves, as in 
the shifts in purchasing power which they signify. Any sudden drastic 
change in the purchasing power of an important economic group may 
be expected to affect the economy materially; if the group involved 
is one which normally spends a major share of its income for consump- 
tion goods the effect is likely to be adverse. 

But, this is only one part of the stoiy. In view of the stress laid 
upon the influence of price disparities upon the farmer, it may be well 
to examine that situation more fully. Table 2 shows that the dis- 
parity between the prices of farm and industrial products was but one 
of the exchange problems affecting American agriculture during the 
depression. Prices of noncommodity items, such as mortgage inter- 
est, farm taxes, freight and utility rates are materially less sensitive 
to cyclical influences than even industrial commodity prices, yet a 
substantial share of the farmer's income is allocated to these inflexible 
noncommodity expenditures. 



A 



CONCENTRATION OF ECONOMIC POWER 



49 



Table 2. — Selected indexes of prices, wages, costs of distribution, farm taxes, and 

mortgage interest, 191S-S8 

[1910-14=100] 



Year 



a) 2 



Prices paid by 
farmers for com- 
modities used 
for— 



"5 
a o g 
t; '-'.2 



^ o. 









•O 


OS 






S 




<S 


B 




£ 

0) 


2 


at 


a 
S 

Q< 


3 

'1 


a 


a 


1 


s 


§ 

a 

IS 


o 


s 
a 














OS 


a 


E 


¥ 




S9 


;^ 


f^ 


05 


O 


fR 


103 


103 


100 


98 


104 


111 


101 


104 


100 


99 


105 


113 


103 


105 


100 


99 


105 


122 


113 


112 


100 


97 


110 


129 


141 


127 


101 


98 


129 


143 


177 


157 


115 


116 


159 


152 


207 


184 


129 


133 


174 


191 


242 


223 


147 


144 


202 


232 


155 


205 


164 


174 


190 


248 


151 


198 


IfS 


160 


175 


249 


169 


212 


153 


152 


177 


253 


173 


220 


153 


152 


180 


253 


176 


221 


152 


150 


185 


258 


179 


225 


152 


147 


192 


258 


179 


228 


152 


147 


190 


264 


179 


230 


151 


147 


190 


266 


180 


232 


150 


146 


198 


26S 


167 


232 


149 


144 


196 


264 


130 


222 


146 


143 


178 


241 


96 


197 


145 


142 


153 


209 


85 


192 


147 


136 


140 


179 


95 


213 


145 


133 


158 


170 


103 


221 


142 


134 


174 


172 


111 


224 


138 


132 


171 


173 


126 


243 


139 


127 


180 


179 


124 


247 


144 


134 


173 


W 



.a^^ 



1913.. 
1914.. 
1915.. 
1916.. 
1917.. 
1918.. 
1919.- 
1920.. 
1921.. 
1922.. 
1923.. 
1924.. 
1925.. 
1926.. 
1927.. 
1928.. 
1929.. 
1930.. 
1931.. 
1932.. 
1933.. 
1934.. 
1935.. 
1936. . 

1937 . 

1938 ». 



101 
101 
38 
118 
175 
202 
213 
211 
125 
132 
142 
143 
156 
145 
139 
149 
146 
126 
87 
65 
70 
90 
108 
114 
121 
95 



100 
102 
107 
124 
147 
177 
210 
222 
161 
156 
160 
159 
164 
162 
159 
160 
158 
148 
126 
108 
109 
122 
124 
122 
128 
122 



102 

99 
104 
124 
151 
174 
192 
174 
141 
139 
141 
143 
147 
146 
145 
148 
147 
140 
122 
107 
108 
125 
126 
126 
135 
124 



101 
100 
105 
124 
149 
176 
202 
201 
152 
140 
152 
152 
157 
155 
153 
155 
153 
145 
124 
107 
109 
123 
125 
124 
130 
122 



103 
107 
114 
125 
143 
166 
196 
221 
226 
234 
233 
236 
238 
235 
232 
227 
221 
214 
205 
195 
167 
149 
147 
144 
140 
(«) 



> Index of comRpsite wages in the United States, Federal Reserve Bank of New York. Converted from 
1926 base. 
1 Average of indexes of freight rates on wheat, livestock, and cotton, 1913=100. 
5 Prior to 1916, year beginning July 1, Interstate Commerce Commission. 

* Farm Economics, Cornell Agricultural College. 

• Preliminary. 

« Data not available. 



Source: Bureau of Agricultural Economics, 
tural Marketing Service. 



Farm wage rates and freight rates compiled by the Agrlcul- 



During 1932, for example, the price of farm products had declined 
about 55 percent from their 1929 level, while mortgage interest pay- 
able had been reduced by only 12 percent. The amount which must 
be paid in any year on long-term debts does not vary with changes 
in the prevailing rate of interest from year to year. It alters only as 
debts mature and are refunded, as creditors make voluntary adjust- 
ments to meet changing conditions, or as statutes are enacted to 
relieve acute distress. 

Consequently an increase in price flexibility for commodities bought 
by the farmer (e. g., fertilizer, agricultural machinery), could con- 
tribute only in a limited way to the solution of the farmer's purchasing 
problem. The benefit which he mjght derive from reductions in the 
prices of manufactured goods is limited by the fraction of his income 
which remains after essential expenditures for noncommodity items 
have been met. 

Moreover, it should be remembered that the farmer makes most of 
his purchases not on the wholesale but on the retail markets. The 
preceding discussion is centered about the behavior of wholesale prices 



50 CONCENTRATION OF ECONOMIC POWER 

largely because the body of wholesale price data available is much 
more comprehensive than that for retail prices. Yet a very substan- 
tial fraction, probably approximating 40 percent, of total consumer 
expenditures for commodities represents the mark-up of various whole- 
sale and retail distributors added to the manufacturer's wholesale 
price. In general, also, retail prices are somewhat less flexible than 
wholesale prices for the same commodities. It appears that in dis- 
cussions of the consequences of price rigidity too much stress has been 
laid upon the behavior of wholesale prices and insufficient attention 
has been devoted to the inflexibility of retail prices and distributive 
margins. ^ 

As far as the farmer is concerned, the most serious consequences 
of commodity price rigidity flow from the behavior of those items 
which are either essential for production of his crops or are necessities 
of life for his family. Thus, the cotton or tobacco farmer would benefit 
very materially if the behavior of the price of fertilizer were more 
closely parallel to the price fluctuations of what he has to sell. On 
the other hand, the existence of relatively insensitive prices for com- 
modities which constitute marginal or postponable expenditures af- 
fects him far less severely. 

Although the immediately preceding discussion has focused upon 
the plight of the farmer, essentially similar considerations apply to 
consumers generally. The impact of changes in exchange relation- 
ships upon various segments of the economy is, therefore, selective. 
Some commodity price rigidities may result in such shifts of purchasing 
power as to create serious impediments to the normal flow of exchange 
during periods of depressed business activity. In the case of others, 
the detriment to one group may be roughly balanced by the benefit 
to another, so that the net effect upon the economy as a whole is 
small. 

Cost-price relationships. — Essentially similar considerations apply 
to the second aspect of price unbalance which has received major 
attention — the disturbance of cost-price relationships industry by 
industry. It may be desirable to achieve a substantial degree of 
covariation between the price of any product and the cost of its pro- 
duction, particularly between the prices of finished goods and the costs 
of their raw materials. Assuming this to be so, noncommodity ex- 
penditures again constitute a basic limiting factor. Overhead costs 
per unit rise rather than decline as sales fall and production is cur- 
tailed. Were it conceivable that all administered prices behaved 
precisely as if they were market dominated, distortions would still 
remain between commodity prices and noncommodity prices. In 
some cases, at least, they might even become more serious. 

Consequently in appraising the effect of disturbed price relation- 
ships upon business activity and production, it cannot be too strongly 
emphasized that the problem goes far beyond the behavior of whole- 
sale commodity prices. Referring back to chart VI, it is apparent 
that the trend of industrial production is associated just about as 
closely with the behavior of sensitive commodity prices as it is with 
the index of dispersion which measures commodity price disparities. 
It may even be possible that the violent movement of the sensitive 
price group in relation to the pattern of fixed costs may affect the 
economy as seriously as the failure of inflexible commodity prices to 
parallel the movement of the flexible. 



CONCENTRATION OF ECONOMIC POWER 51 

CONCLUSIONS 

It has been shown that, within very broad limits, there was a 
tendency for production to fall less where prices fell more during 
the 1929-33 recession. Conversely, where prices were maintained 
production fell much more sharply. It has been emphasized that there 
were very many exceptions to this generalization. It has been 
pointed out moreover that the existence of this limited correlation 
does not of itself imply any causal relationship. 

For any individual commodity, price is but one, and not necessarily 
the most important, of the factors which affect its production. Thus 
the relatively sharp decline in the consumption of most durable goods 
between 1929 and 1933 was probably aggravated by the stability of 
their prices, but it seems likely that the postponable nature of their 
demand in combination with lower family incomes was of at least equal 
or of greater importance. With the spread of unemployment and a 
marked curtailment of purchasing power, the sale of goods whose 
purchase is relatively more postponable will usually decline regardless 
of price ; the sale of articles designed to satisfy wants which cannot be 
long deferred is likely to be fairly well maintained, again regardless 
of price. 

Moreover assuming any specific set of market conditions, or any 
given level of purchasing power, the effect of a change in the price of 
any commodity upon the purchases of that commodity may be slight. 
This is tantamount to saying that demand for many products, particu- 
larly during periods of depressed business activity, varies little regard- 
less of price. Among the most notable examples of such "inelastic 
demand" are products such as steel castings, which find no independent 
market but whose demand is part of a joint demand for some more 
complex finished goods of whose total cost they constitute but a small 
part.- In cases of tliis sort, isolated changes in price may have no 
discernible effect upon consumption whatever. Nor can isolated price 
changes during periods of curtailed purchasing power expect to influ- 
ence materially the sales of such products as absolute necessities of 
life or capital equipment for industries operating at fractions of their 
capacity. 

However, the price behavior of any single commodity has implica- 
tions ^ar broader than merely its relation to the production of that 
commodity. Assuming the extreme case of an article whose demand is 
absolutely inelastic, a change in its price may importantly affect the 
amount available for expenditure elsewhwere. Or, taking a typical 
case of joint demand, a reduction in the price of bricks alone may have 
little effect upon the consumption of bricks themselves, but if coupled 
with similar reductions in the prices of other building materials, its 
influence might be far reacliing. Similarly, a simultaneous cut in the 
price of electric appliances, electric power rates, and installation costs 
would probably have a very different effect on sales of electric equip- 
ment, even during a downturn, than woidd a reduction in equipment 
prices alone. 

In other words, if the demand curve for a specific product is in- 
elastic, a change in its price taken alone may have very Uttle direct 
effect upon its consumption, yet it may cause an appreciable shift in 
the position of the demand curves for other commodities. The cumu- 
lative effect of many such changes may be very considerable. Con- 



52 CONCENTRATION OP ECONOMIC POWER 

sequeixtly, in considering the implications of the disparate behavior 
of the prices of different commodities during downturn, it is essential 
that attention be directed upon the economy as a whole and not upon 
isolated segments of it taken separately. Moreover, it has been shown 
that LQ appraising the effects of different kinds of price behavior and 
in striving to form a judgment as to those best suited to promote 
recovery, it is necessary to consider not only commodity prices but 
also the behavior of the prices of many other items, such as wages, 
interest, rent, etc. 

Some attention has been devoted to the considerations which in- 
fluence busLuess firms in their decisions as to price policy. The 
horizon of each firm is necessarily limited. In framing policy it con- 
siders primarily the effect of its decisions upon its own profit and 
loss account. It would be unrealistic to expect any individual business 
to reduce its prices materially in the face of its belief — whether or 
not warranted — that such reduction would not be compensated for by 
an increase in sales. For example, the producer of a commodity 
subject to joint demand will not in the ordinary course of things reduce 
his prices any more than he must, unless he has some reasonable 
ground for expecting that the producers of related items entering into 
the same finished article wUl do so simultaneously. 

But although a broader view probably transcends the immediate 
horizon of the individual firm, it does not exceed the scope of public 
policy. It may be precisely in this field, too, that governmental 
action can be most profitably directed. In such a key sector of indus- 
try as building construction, for example, there is opportunity for 
a concerted approach. If means could be secured for simultaneous 
price reductions among all producers of important building materials, 
by labor, and by finftncial agencies to reduce the cost of financing, it 
might supply the incentive which is now lacking; insuring to each 
group that its own change of policy will be paralleled by such other 
changes as would in the aggregate exert an appreciable effect upon 
the market. 

The technique by which such a program could be effectuated is 
beyond the scope of the present discussion. Certainly, however, the 
interrelated character of the problem makes necessary some such 
interrelated approach. Attention would first have to be directed to 
determining those broad fields in which such efforts could be most 
profitably expended. 

Finally, it is evident that concern with wholesale commodity prices 
should not exclude consideration of retail markets. It has been 
pointed out that retail prices are, in general, less flexible than wholesale 
prices. If it be considered desirable that prices of certain commodities 
be reduced during periods of depressed business activity, it would 
seem at least equally important that such reductions extend to retail 
as well as wholesale markets. It is likely that some of the recent 
activities of Government are operating in the reverse direction. Thus, 
resale price maintenance legislation — the so-called "Fair Trade Acts," 
together with the Federal Miller-Tydings Enabling Act— have 
increased the rigidity of the prices of many trade-marked commodities. 
It is possible that the state "Unfair Practices Acts" and the Robinson- 
Patman Act have reduced the flexibility of distributive margins in 
certain markets. It may be well, therefore, for Government to 



\ 



CONCENTRATION OF ECONOMIC POWER 53 

reexamine its policy with regard to laws affecting the system of dis- 
tribution in the light of these considerations. 

All these suggestions obviously fail to go to the heart of the problem. 
They represent merely isolated approaches on a few scattered fronts. 
Despite the intensive analysis to which price inflexibility has been 
subjected during the past few years, no adequate proposals for any 
more comprehensive approach have emerged. There is little doubt 
that the behavior of prices intimately affects the rate of business 
activity. Nevertheless it seems equally evident that no simple, single 
approach to prices as such will solve the problem of increasing and 
maintaining industrial activity. The problem is far too complex. 



CHAPTER III » 
NONPRICE COMPETITION 

SUMMARY 

Price- is but one of the avenues— and not necessarily the most 
significant — through which competition expresses itself. It has been 
pointed out in chapter I that there are himdreds of other grounds 
upon which sellers may choose to compete, such as the offer of better 
quality, more elaborate service, more attractive guarantees, more 
convenient terms of payment, chromium plating, neon lights, cello- 
phane wrappings, better radio programs, etc. Reference has been 
made to the probability that the relative importance of all these 
latter devices for winning business, which may be collectively desig- 
nated "nonprice competition," has increased materially during the 
past generation, while the emphasis on the price aspects of compe- 
tition has correspondingly declined. 

This change in competitive emphasis has many implications. In 
the first place it inevitably alters the focus of government policy 
(Resigned to cope with the problems of monopoly and competition in 
industrial markets. The efficacy of any program based upon or 
directed toward the behavior of prices alone neglects elements of 
vital importance. ' 

More broadly the direction which competitive rivalry takes in- 
fluences in many important ways the amount and variety of goods 
which are produced for consumption and the standard of living of 
consumers generally. The efl'ect upon the well-being of the ultimate 
consumer is especially marked because many forms of non price 
competition are particularly significant in relation to retail markets 
• and to the everyday necessities of life. 

The analysis presented in this chapter is in no sense a complete 
survey of all forms of nonprice competition; it is confined to a few 
of the more significant. Nevertheless, it suffices to elicit the extreme 
complexity of the issues involved. 

Nonprice competition expresses itself through a wide variety of 
avenues. Perhaps the most important of these is the actual quality 
or content of the products involved. For example, little effort has 
been made during recent years to reduce the price of automobiles to 
the consumer. Instead, stress has been placed upon constant im- 
provement in quality, performance, and appearance. Automobile 
advertising reflects this policy, placing little emphasis upon price 
and much ^ upon distinctive mechanical features, economy, and 
beauty of line. The same observation applies to a greater or less 
extent to most other complex mechanisms such as radios, refrigerators, 

' Ch. Ill was prepared by Saul Nelson. Laura Mae Brown compiled the bulk of the material upon 
which the analysis is based, particularly with reference to the influence of business convention as exempli- 
fied by the institution of price lines. 

54 



CONCENTRATION OF ECONOMIC POWER 55 

oil burners, vacuum cleaners, and the like.^ In the case of refrig- 
erators, for example,, the retail prices of comparable models of 
competing makes are identical almost to the penny. 

Differences between rival products may represent very- real cor- 
responding differences of desirability or usefulness. In addition, 
however, there is an undoubted tendency to create the appearance of 
difference where no real intrinsic difference in physical utility exists. 
In developing and retaining a market, producers and distributors 
make strenuous efforts to distinguish their products in the public 
eye from those sold by their competitors. As a result, competition 
in quality often takes the form of adding minor eye-catching features 
bearing, at best, a remote relationship to the intrinsic utility of the 
product. Intensive advertising campaigns, describing the merits of 
such features, are frequently accepted by the public with somewhat 
more credence than their accuracy warrants.' Buyers may come to 
demand them with little or no regard for price relationships and to 
reject, as inferior, products not bearing them. 

Although nonprice competition is most commonly associated with 
the element of quality, it should not be concluded that this is its only 
aspect. Collateral terms of sale are often important. Among these 
are guarantees of service or performance. In the case of rubber tires, 
for example, guarantees of mileage, backed by appropriate provisions 
for allowance in case the product falls short of the guaranteed per- 
formance, probably exert a distinct influence upon the market. The 
provision of adequate facilities for service and replacement has received 
much attention in certain lines of business. Thus, an automobile 
purchaser must consider not only its first cost, but also the prices 
which he will be called upon to pay for inevitable rej!)airs. The sale 
of one line of agricultural implements has been distinctly handicapped 
by the lack of an adequate widespread service organization. 

The direction which competitive rivalry takes in any given industry 
is influenced both by the intrinsic nature of its markets and by policy 
decisions of the concerns comprising it. In some industries, for ex- 
ample, the nature of the product is such that elements of quality and 
style inevitably exercise an important influence upon the buyer's selec- 
tion. This is true, for example, in the apparel markets in which well- 
defined "price lines" have become recognized as the result of custom 
and convenience. Thus, there is a limited number of wholesale prices 
at which almost all women's medium-price dresses are sold These 
wholesale prices are, in turn, reflected in similar, though somewhat 
less rigid, lines in retail markets. As a result the focus of competition 
becomes the character of the garments which can be offered at the 
accepted price and not the price at which some specific garment should 
be quoted. 

In their decision to stress nonprice elements in sales strategy, busi- 
ness concerns are often influenced by the desire to avoid direct price 
competition with their rivals. This has been one of the major factors 
in stimulating the use of advertising and of distinguishing brands and 
trade-marks. Much effort has been devoted to persuading the pros- 
pective buyer that advertised and branded products have qualities 
which distinguish them in important ways from similar products sold 

2 In such lines as radios and refrifjerators, whose growth has been fairly recent, prices have been materially 
reduced as techniques of production improved. However, even In these cases sales emphasis at any given 
time usually centers upon features other than price. 

U47149— 41— No. 1 G 



56 CONCENTRATION OP ECONOMIC POWER 

by others. These efforts have been most successful in those fields in 
which consumers find it particularly difficult to form objective judg- 
ments of the quality and usefulness of the merchandise. The drug 
and cosmetic industry furnishes an outstanding example of the manner 
in which the effective use of these techniques can shield trade-marked 
products from direct price competition with similar merchandise; very 
wide price spreads exist between virtually identical products differing 
only in name. 

Business policy decisions to stress some form of nonprice competi- 
tion may represent a voluntary choice. However, concerns which 
prefer to compete on a price basis are sometimes forced to adopt what 
they consider a less satisfactory alternative because of pressure applied 
from without. Such pressure may result from Government regula- 
tion of price or perhaps from coercion by competitors. 

In general, businessmen have displayed much ingenuity in seeking 
some competitive outlet as alternative to price reductions. Under-^ 
N. R. A., when many prices were controlled by code provisions, some 
of the schemes adopted verged on the fantastic. For example, a retail 
druggist in California, unable to cut prices, employed a medium to 
give free psychic readings to his customers. An automobile dealer was 
accused of indirect price cutting because he bought six suits of .clothes 
from a tailor to whom he sold a car. Lumber manufacturers cut 
prices indirectly by shipping a higher quality of lumber than the in- 
voice called for. Coal producers offered guarantees of heat content 
which they knew were impossible of fulfillment, backed by a penalty 
in case the fuel failed to meet the standards set. Price-maintenance 
laws (the "Fair Trade" Acts) which largely eliminate price competi- 
tion between retailers selling trade-marked products have resulted in 
emphasis upon elaborate service in some cases, and in a search for 
indirect ways of granting price concessions in others. 

In some irrdustries, although legal controls may be absent, the fear 
that price reductions may lead to price wars often results in the 
multiplication of grades and sizes. For example, instead of cutting 
prices on a standard grade of fertilizer, the producer may introduce 
'a slightly different grade. As competitors match the new mix, the 
process is repeated. In many states the number of different grades 
became so bewildering that laws were passed to limit the variety that 
could be sold. Similar practices have occurred in many other 
industries. 

This very cursory review of some phases of nonprice competition 
emphasizes both the importance of the issues and the difficulties of 
any unqualified appraisal. It seems reasonably clear that the change 
in competitive emphasis has not been entirely undesirable. Thus it 
is probably true that the increased attention paid to quality and per- 
formance has served to stimulate technical research. Certainly the 
automobile, the refrigerator, and the tractor are more satisfactory 
products today than they were some years ago. Undoubtedly 
technical advances would have occurred even if competition had 
focused upon price, but it is at least arguable that centering attention 
upon quality served as a more effective stimulation to its improve- 
ment than would otherwise have been possible. Conversely, there 
is some evidence that excessive emphasis upon- price may lead at 
times to undesirable degradation of quality. 



CONCENTRATION OF ECONOMIC POWER 57 

Where products are highly diversified and comparability between 
rival merchandise is very difficult to obtain, the elimination of price 
as a major competitive factor may actually simplify the consumer's 
problems of selection. For example, since the standardization of 
women's dresses is remote from reality, the institution of price lines 
is not without benefit. It is probably simpler for the average con- 
sumer to select the dress she likes best at a given price than to weigh 
the desirability of small differences in price as against small differences 
in quahty. 

On the other hand it must, be recognized that emphasis upon 
quality has often served to divert effort from programs designed to 
produce cheap but satisfactory merchandise to meet the needs of 
lower-income groups. It has been argued, for example, that the 
production of cheaper automobiles or refrigerators, stripped of all 
luxury features, could serve a useful purpose in expanding the poten- 
tial market for those products. 

One of the most serious objections to many forms of nonprice. 
competition is the manner in which they complicate the buyer's 
problems of selection. Price is a universal measure and the signifi- 
cance of a price difference is readily understood by any buyer. The 
appraisal of differences in content or quality, or the translation of 
collateral terms of sale into price equivalents, is much more difficult, 
particularly for the average untrained consumer. Consequently, 
when the policy of distinguishing one's product from a competitor's 
is revealed not in any real betterment of quality but in the multiplica- 
tion of unneeded gadgets and superficial eye-catching features, there 
may be a distinct loss of competitive efficiency. It is unlikely that 
fancy packaging is of as much value to the consumer as low prices or 
improved quality. The forms taken by nonprice competition when 
it reflects the suppression of price competition through collusive or 
coercive tactics seem particularly valueless in serving the economic 
system. All these schemes have the disadvantage of substituting for 
a direct price cut, which the consumer wants and can measure, some 
substitute of uncertain value which he can well forego. If but a small 
fraction of these economically useless expenditures were translated 
into reductions in the price level, the gain in public purchasing power 
and the resulting stimulus to production and employment would be 
material. 

During recent years, there has been a very marked trend in the 
■direction of rendering available to the consumer more accurate infor- 
mation — and less misinformation — regarding the character of the 
various commodities on our markets. The impetus has come from 
a number of sources. Consumers themselves have shown a growing- 
awareness of their interest and have formed increasingly effective, 
organizations. Direct pressure has been exerted upon businessmen, 
particularly upon retailers, to furnish adequate technical descriptions 
of the commodities they offer for sale. Marked success has been 
achieved in the field of textile fabrics; accurate designations of fiber 
content and weave have been substituted for confusing names designed 
to conceal rather than to reveal the true nature of the product.^ 

Businessmen, intelligently aware of their self-interest, have con- 
tributed materially in many fields. Alarmed by the unnecessary and 

' standard specifications developed by the Bureau of Labor Statistics for use in compiling Its retail price 
•uata have stimulated the interest of many retailei'S in the accurate designation of textile products. 



5g CONCENTRATION OF ECONOMIC POWER 

expensive multiplication of grades and container sizes, they have 
cooperated with Government and the consumer in programs of simpli- 
fication. . Canned goods, accurately labeled as to grade, have appeared 
on the market. The results of laboratory tests of competing products- 
have been publicized. Of course these moves have encountered 
material resistance but they have progressed notwithstanding. 

Finally Government — both Federal and State— has intervened 
actively. The National Bureau of Standards has cooperated with 
industry in the move for standardization. The Federal Trade Com- 
mission and the Food and Drug Administration have done much to 
combat misrepresentation and to further informative labeling. Con- 
gress has materially facilitated the work of these agencies by passing 
the new Food and Drug Act and the Wheeler-Lea Act. 

To summarize, the increasing emphasis upon the nonprice aspects 
of competition, like most broad economic trends, is not susceptible to 
unqualified appraisal. In part it is an inevitable reflection of changing 
technology; in part the result of more controllable forces. Some of its 
manifesta-tions and results are probably desirable, others are question- 
able, \v^hile still others seem definitely to impair economic efficiency. 

The most clearly undesirable aspects of this trend seem to arise 
from coercive and collusive devices designed to restrain or eliminate 
price competition. Public policy has been traditionally and properly 
concerned with opposing such devices. 

At the same time Government can encourage, both by cooperative 
and by regulatory action, the improvement of comnxodity information 
and the development of adequate standards of quality and perform- 
ance. Such a program seems well designed to discourage inefTicient 
and detrimental manifestations of nonprice competition. 

The following sections of this chapter do not present a compre- 
hensive record either of the causes or the effects of nonprice competi- 
tion. They treat a few outstanding types of competitive patterns, 
selected partly because of their importance and partly because of the 
availability of data for statistical measures. A brief review of somfe 
of the causes and implications of the trend away from jprice competition 
is first presented, followed by a discussion of the role of quality as an 
outstanding focus of nonprice competition. Certain specific com- 
petitive techniques are then examined and their significance to the 
functioning of the economy appraised. The first of these is the prac- 
tice of price lining as exemplifying the manner in which business con- 
vention may alter competitive emphasis. The second relates to the 
use of brands, trade-marks, and fidvertising as means of distinguishing 
the products sold by business rivals. The last examines the way in 
which competitive strategy is continually altered to avoid restraints 
imposed upon any specific form of competition either by Government 
or by industry. Finally, the conclusions derived from this analysis 
are considered in their relation to theforinulatjpn of Government policy. 

PRICE VERSUS NONPRICE COMPETITION — THE SETTING OF THE PROBLEM 

The changing jocus oj competition. — Many recent studies of the work- 
ings of our economy maintain that competition has for years been 
dechning in intensity and scope. To quote from one of these: 

An industrial organization which was in the broad sense competitive has 
become diminishingly so during the past half century * * * 

******* 



GONCENTRATION OF ECONOMIC POWER 59 

Competiti^ o capitalism was given a protracted and thorough trial in the 
United States after the Civil War. Although legal institutions were framed 
with a broad and consistent regard for the assumptions of competition, capitalism 
failed to preserve its competitive quality * * * 

******* 

The rise of the "heavy industries," changes in methods of selling, and the 
widening use of the corporate forms of business organization are bringing, if they 
have not already brought, the era of competitive capitalism to a close.* 

This point of view has, of course, been vigorously challenged. 
Specific illustrations of industries in which competition seems to have 
become less intense during the past generation ape countered with 
examples of other industries, such as petroleum, in which earlier 
monopolistic controls have apparently abated. The evidence for 
either side is largely an assembhng of individual type cases; even for 
those the data available often permit, conflicting inferences. More- 
over, agreement is even lacking as to prcciseh' what constitutes, 
competition. Neither set of arguments seems at present conclusive. 

Although proof of the thesis that competition is declining appears 
inadequate, there is abundant evidence that the focus of competitive 
effort has been shifting. In many sectors of the economy price com- 
petition has dwindled in importance and sometimes even disappeared. 
The nonprice aspects of competition have been emphasized instead. 

However, this redirection of competitive strategy cannot of itself 
be accepted as synonymous with a decline of competition. In 
some instances it has probably been concurrent with an actual reduc- 
tion in the intensity of the competitive struggle; nor is evidence lacking 
that this has at times been its specific purpose. Yet there are cases, 
though perhaps less typical, in which the converse is true and in which 
emphasis upon factors other than price has intensified rather than 
tempered the struggle between business rivals. What the net result 
for the economy has been, on balance, is probably impossible to 
determine. The available clues are fragmentary. Intensity of com- 
petition is an abstract concept, not susceptible of quantitative 
appraisal,^ 

Nor docs it seem particularly important, even for abstract discus- 
sion, whether the trend toward nonprice competition has or has not 
carried with it an appreciable abatement of the competitive struggle. 
The significant issue, from the standpoint of public policy, is more 
immediate and practical. The forms which competition takes 
intimately affect the ways in whi^h our resources are utilized, they 
influence the cyclical swings of business activity, and, in the long run, 
the consumer's standard of living. 

Nonprice competition is of particular importance to the standard 
of living of consumers because of the extent to which it affects retail 
markets and the everyday necessities of life. The amount which a 
family must spend for food, clothing, groceries, drugs, and cosmetics 
is related to the manner in which business concerns selling these prod- 
ucts choose to compete, by their decisions to stress or skimp quality, 
to advertise more or less intensively, to pack simply or elaborately, 
to favor or oppose retail price-cutting, and so on. This is clearly a 
matter of broad public concern. 

* The Decline of Competition, by Arthur E. Burns, 1936, pp. v, 1, 40. 

' However, some attempts nave been mafie to measure degree of monopoly power. See. for;example — 

Michael Kalocki— A Theory of Commodity Income and Capital Taxation, The Economic Journal, Sep- 
tember 1937, vol. XLVII, p. 444. 

A. P. Lcmer— The Concept of Monopoly and the Measurement of Monopoly Powers, The Review of 
Eeonomic Studies, vol. I, No. 3, June 1934. 



60 CONCENTRATION OF ECONOMIC POWER 

A wide variety of forces has contributed to the trend away from 
the price aspects of competition. Some of these have been considered 
eariier in this report; the salient points will be repeated here for the 
sake of completeness. Among the most important of these forces are 
the technological developments of recent years, reflected in the in- 
creasing complexity, dijfferentiation, and the ever-changing character 
of the commodities on our markets. As commodities increase in 
number and complexity, it becomes more and more difficult for the 
purchasers to form accurate estimates of their serviceability and utility. 
Price differences become an ever less satisfactory yardstick for guiding 
the buyer's selection. Even the most expert professional purchasing 
agent often faces great difficulty in attempting to translate physical 
product differences into terms of price. For example, the calculations 
which a manufacturer must make in choosing between alternate makes 
of machinery or different types of motive power unit involve a host 
of variables, many of them based upon hazardous forecasts of future 
trends; the initial price may be only a very minor consideration. 
Even the raw materials of industry have multiplied amazingly. Syn- 
thetic fibers, new alloys, and plastics of all kinds confront the industrial 
buyer with a constantly increasing variety of choices wliich he must 
make. As a result, the significance of price in guiding his choice is 
much diminished. 

The problems of the expert industrial buyer, difficult as they are, 
are far less overwhelming than those which the technically untrained 
consumer faces. There are today relatively few products on retail 
markets which can be compared upon a simple price basis. Even 
apparently standard products like salt or sugar have been packaged 
or branded in such a way as to discourage reliance upon price alone.* 

Increasing product complexity and differentiation has therefore 
limited the significance of price comparisons, while it has correspond- 
ingly emphasized the nonprice aspects of competition. In large part, 
this has simply reflected the inevitable effects of technological develop- 
ment. To an extent, however, there has been a deliberate policy on 
the part of businessmen to accentuate the apparent differences between 
their products and those of their rivals, for the specific purpose of 
diverting competition into nonprice channels. 

Many businessmen, probably a substantial majority, have long pre- 
ferred to emphasize the nonprice aspects of competition and to subor- 
dinate price appeal. There are many apparent reasons for this pref- 
erence. Perhaps the most important is that consumer good will based 
upon nonprice factors tends to be more lasting than that depending 
simply upon price appeal. The manufacturer whose sole selling argu- 
ment is price must continue to undersell his competitors indefinitely. 
Should they meet his offer, his advantage is gone. On the other 
tand, if he has in some way succeeded in creating a demand among 
buyers for his products because of their quality, or appearance, or 
packaging, or through the effective use of trade-marks or advertising, 
his position in the market becomes more secure. He is not as vulner- 
able to price reductions made by his competitors as would be true if 
he depended exclusively upon price appeal. He achieves a protected 
sector of the m.arket to the extent to which buyers have become 
accustomed to attribute especially desirable qualities to his wares. 

• For afuller discussioi: of the effect "of brands and trade-marks upon price competition, see pp. 75-90 below . 



CONCENTRATION OF ECONOMIC ^OWER Ql 

With it he also attains some latitude in determining his own price 
policy without the need of constant reference to what his rivals are 
doing. 

In a sense, the maintenance of a market position based upon non- 
price appeal requires continual vigilance over the long run, just as 
does one based upon price appeal. Thus, good will built up by the 
intensive use of advertising cannot be long retained if the advertising 
is discontinued. Nevertheless most, though not all, businessmen 
seem to find this less onerous than the maintenance of a poHcy of 
continually underselling competitors. 

Moreover, business rivals often bitterly resent the tactics of the 
firm which constantly strives to undersell. The price cutter conse- 
quently risks reprisals in the form of retahatory cuts, which often 
culminate in costly price wars. Even if his rivals' products or prestige 
are admittedly superior, they are often reluctant to permit him to 
undersell them by an amount sufficient to compensate for this 
disadvantage. 

From the point of view of the seller, price appeal also has a certain 
disadvantage in that its value can be measured in precise terms. 
A price reduction by one firm loses its competitive force completely 
if some other firm exactly matches it. On the other hand, even an 
intrinsically insignificant change in the character of the product or in 
the context of its advertising cannot often be matched so exactly, 
and the advantage gained thereby is more hkely to persist.^ 

As the business-getting potentialities of nonprice competition have 
been more thoroughly explored, price competition has fallen not only 
into disfavor but also into disrepute. Many trade associations have 
-condi cted long and vigorous campaigns to persuade their members 
'that price cutting is an unethical practice; today the price cutter is 
'videly considered a chiseler. The value of price reductions in expand- 
ing markets has been ignored or underemphasized ; it is contended 
instead that they disrupt the standards of an industry and create 
distress to all its members. Price "stabilization" is held forth as the 
desired goal. 

A frank expression of this point of view by a prominent industrial 
engineer and trade association manager follows: 

If I were in a position to write the ticket for industry in this country, I should 
give each industry the right to name the prices at which its products should be 
sold, and I should enforce these price determinations through the due process of 
law. In my opinion, these prices should be based on certain factors which would 
insure absolute fairness and equality of treatment to capital, management, labor, 
and consumers — four factors involved in every transaction. I should determine 
these prices on the average industry cost, using replacement costs for raw material, 
adequate wage rates for labor, and overheads based on a reasonable use of the 
facilities of the industry. I should not expect this cost to include carrying charges 
on idle, unused, or excessive capacity. Executive salaries should be checked and 
should bear a reasonable relationship to the size of the company' involved.^ 

Among those who advocate eliminating price competition are many 
who hold no strong brief for the nonprice forms of competition either. 
Some at least are striving toward a market in which each firm is con- 
tent with its allotted share of the total business available, and makes 

' Of course some nonprice features— e. g., the terms of a guarantee— can be matched just as precisely as 
price. Nevertheless, the proposition is broadly valid. 

• Stevenson, Charles R., Price Control and the Allotment of Business — address delivered before the 
National Association of Cost Accountants, June 26, 1934. 



02 CONOBNTRATION OF ECONOMIC POWER 

no effort to increase that share by the use of either price or nonprice 
tactics. The ehmination of price competition is to some people merely 
a step to the ultimate goal, the elimination of all effective competition. 
As a preliminary step, however, they prefer to see sales effort devoted 
to nonprice channels as a less obnoxious form of rivalry for business. 

The development of certain business customs and conventions has 
also served to divert competition from price channels. Among the 
more important of these is the establishment of fairly rigid." price lines" 
for a wide variety of commodities. The effects of this practice are 
considered subsequently. (See pp. 70-75.) 

Whether on grounds of expediency, custom, or ethics, therefore, 
the business world at large, with some notable exceptions, has (?ome to 
frown upon price competition. In order to make this disapproval 
effective, ingenuous techniques have been devised for eliminating 
price competition by fixing (or more euphemistically "stabUizing") 
prices in many lines of industry. Many of these have proved extremely 
effective. This phase of the subject, however, is not within the 
province of this report. 

At times Government, both Federal and State, has intervened in 
ways calculated to limit the freedom of price competition. The most 
comprehensive step of this kiad was the regulation of trade practices 
under the N. R. A. At the present time such regulation is much more 
narrowly confined, existing primarily in the field of public utility 
rates, of bituminous coal, and of certain farm products. 

In addition to such direct fixing of prices, other kinds of legislation 
have served to limit price competition to some degree. For example, 
the Fair Trade Acts which are now in force in 44 States, together with 
the MUler-Tydings Enabling A^t, permit manufacturers to fix mjii- 
mum resale prices for articles bearing their identifying brand or trade- 
mark. As between retailers, therefore, competition, on the sale of 
items of the classes affected, particularly of drugs*, toiletries, cos- 
metics, books, and liquors has been forced to a considerable extent into 
nonprice channels. 

Many States have enacted Unfair Practices Acts which prohibit 
sales below cost, with the term *'cost" defined in various ways. While 
these laws do not of themselves suppress price competition, there is 
some evidence that trade associations in a number of areas have used 
them as a vehicle for fairly rigid price control. 

Mention may also be made of the antidiscrimination laws, such as 
the Robinson-Patman Act, though their effect is somewhat less 
obvious. To the extent to which sellers are required to maintain 
uniform prices to all buyers, they are rendered unable to seek particular 
sales by cutting prices. If they choose to rely upon price competition 
as their primary sales argument, they must cut prices simultaneously 
to all comers. Naturally, many sellers are far more reluctant to take 
such a broad step than to reduce prices on individual transactions. 
In this way, therefore, antidiscrimination laws may restrict ■ price 
competition and may favor the emphasis of nonprice factors. 

Numerous other developments have undoubtedly affected the trend 
away from price competition. For example, changes in market 
structure, such as the number of buyers or sellers in a given market or 
modifications in channels of distribution have exercised an influejice 
upon the focus of competitive strategy. However, such forces, 



CONCENTRATION OF ECONOMIC POWER g3 

important as they be, have been less consistent in their direction and 
perhaps less significant in their net effect than those which have been 
]ust discussed. 

Prices related to nonprice elements of the transaction. — So far, the 
terms "price competition" and "nonprice competition" have been 
used broadly to denote different general patterns through which busi- 
ness rivalry expresses itself. Actually, of course, they are not mutu- 
ally exclusive terms and it is difficult to draw the precise boundary 
between the two. 

A host of elements enter into the exchange between the buyer and 
seller which constitutes the general business transaction. Some of 
these, as, for example, trade discounts, are clearly translatable into 
terms of exact price equivalents. Others, such as brand prestige, or 
streamlined design, or neon lights in front of a retail store, are not 
translatable into price equivalents and may, therefore, be considered 
forms of nonprice competition. 

In between, however, there is a wide variety of elements on the 
border line which cannot be clearly assigned to either category. 
Premiums offered in connection with sales at retail constitute one 
example. Sometimes the premium offered is of a character which may 
be Considered the direct equivalent of a monetary rebate, as in the 
case of profit-sharing coupons, or it may take the form of some 
specific article whose value is readily measurable in terms of doUars 
and cents. Presumably, premiums of this kind might be considered 
forms of price competition. On the other hand, many premiums have 
a less tangitjje valiie, as in the case of pins denoting a child's member- 
ship in some club organized for advertising purposes. Similarly 
credit terms, particularly on conditional sales, have both price 
aspects, such as the rate of interest, and nonprice aspects, such as the 
form of security demanded or the conditions under which the article 
sold may be repossessed. Guarantees expressed in general terms, or 
which fall well within the expected performance of the merchandise in 
question are largely of a nonprice nature ; however, if the guarantee 
stipulates a specific performance, with a bonus for exceeding the 
guarantee and a penalty for failing to come up to it, the price aspect 
may be paramount. Certain elements of quality yield satisfactions 
difficult to measure in terms of price; others such as the heat content 
of fuels or the tensQe strength of steel are often directly translatable 
into price equivalents. 

It is apparent, therefore, that no strict line of demarcation between 
price competition and nonprice competition is practicable. Conse- 
quently the two terms should be understood to relate to broad trends 
of business strategy rather than to any specific practice or set of 
practices. 

ASPECTS OF NONPRICE COMPETITION 

Quality and performance. — Perhaps the most important single avenue 
through which nonprice competition expresses itself is the actual 
physical quality or content of the goods involved. Of all the nonprice 
elements entering into the ordinary transaction, this seems to be the 
most universally significant. Moreover, it is probably the outstand- 
ing single factor conditioning the interpretation of price statistics. 

QuaUt^ itself is by no means a simple concept. For any single 
commodity it may invohe a host of variables. In the case of auto- 



g4 CONCENTRATION OF ECONOMIC POWER 

mobiles, for example, any appraisal of quality must include durability, 
gasoline consumption, probable frequency and cost of the necessary 
repairs, appearance, comfort, riding qualities, safety, ease of manipu- 
lation, "brilliance" of performance, and so on almost indefinitely. 
Each one of these may be subdivided further; thus economy of opera- 
tion is a function of the speed at which the car is to be driven, as well 
as of the roads over which it will be used. Some of these character- 
istics, e. g., gasoline consumption, may be expressible in quantitative 
terms. Others, such as appearance, defy such measurement. 

All of these factors modify the significance of price quotations. 
Some, as has been said, are relatively concrete and tangible; for 
example, it is possible to arrive at estimates of the durability of cer- 
tain kinds of goods. Chart VIII compares the price of automobile tire 
casings with their average life during the last 27 years. Between 
1913 and 1937 average tire life in years more than tripled; during the 
shorter period' since 1926, there was an increase of almost 70 percent. 
La terms of mileage, the increase in durability was undoubtedly even 
greater, since the average car travels much farther in a year than was 
true 20 or 30 years ago. It is apparent that the trend of the prices 
charged for automobile tires tells only part of the story. 

Similarly, in the case of mechanical refrigerators there has been a 
substantial increase in durability since 1920, although the change 
during the past decade has not been so great. In 1920 the average 
life expectancy was 6 years; in 1926 it was 1 1 years; in 1930 it was 13 
years, and today it is 15 years. 

Economy of operation .is another element of quality competition 
which may be approximately measurable. For example, the average 
current consumption for 6-cubic-foot electrical refrigerators was re- 
duced 21 percent between 1931 and 1938.^ 

Similarly, according to a recent study, operating costs per mile for 
automobiles were reduced by more than 40 percent between 1925 and 
1937; a significant component of this reduction was a decline of almost 
70 percent in repair expenses per mile.^° 

A comprehensive survey of some of the more measurable elements 
of quality in the case of farm machinery was published by the Amer- 
ican Society of Agricultural Engineers in 1933." This study sought 
to appraise these changes in quality in quantitative terms. It was 
concluded that changes in a wide variety of operating characteristics 
between 1910-14 and 1932 could be expressed as composite percent- 
ages of improvement.'^ 

» According to tests made in 1931 by the Procurement Division of the Treasury, the average consumption 
of a 6-cubic-foot refrigerator (five makes) was 44 liilowatt-hours per month. In 1938 a test based on 14 makes 
of refrigerators showed that the 6-foot box was consuming on the average only 35 kilowatt-hours per month. 

'« TheDynamicsof Automobile Demand, General Motors Corporation, 1939; p. 117. (Part of this decline 
in operating costs is attributable to the lower prices and greater durability of tires.) 

" Report of an Inquiry into Changes in Quality Values of Farm Machines Between 1910-14 and 1932 
pt. I, pp. 5 and 6. 

n Quoting from this report: 

"It was also decided to limit the study to 25 typical farm implements already highly developed and in 
general use in the pre-war period, and not to go into the field of automobiles, trucks, and tractors which, 
owing to their later development, present different questions and would call for a separate study. 

"Changes in the design, material, or construction of a farm machine, or any part thereof, may add to its 
quality value in a number of ways, of which the following are worthy of special consideration: 

"1. Greater durability and prcduciive usefulvess.— The value of this quality is measured In terms of units of 
service rendered during the life of the machine, such as acres oT land plowed, planted, cultivated, or. har- 
vested; bushels of grain threshed or shelled; pounds of food ground; quantity of cream separated, etc. 

"2. Reduction in the replacement of wearing parts. — Most machines have certain parts which in normal use 
are subject to wear. Farm machines are so designed as to make the replacement of these wearing parts 
convenient. The use of wear-resistant materials, such as heat-treated or alloy steels and corrosion-resisting 



CONCENTRATION OF ECONOMIC POWER 



65 




QQ CONCENTRATION OP ECONOMIC POWER 

Quality changes are not usually- thought of in connection with 
such relatively standard items as steel, yet even here they may be 
of material importance. Thus, during the last 15 years there have 
been distinct improvements in the quality of ordinary structural steel. 
Government specifications in 1933 stipulated an ultimate tensile 
strength of 55,000 to 65,000 pounds per square inch with a minimum 
yield point of 30,000 pounds. Present specifications called for an 
ultimate tensile strength of between 60,000 and 72,000 pounds with 
a minimum yield point of 33,000 pounds per square inch. These 
changes have been reflected in modifications of standard design re- 
quirements. For example, 12 j^ears ago the Procurement Division 
based its structural steel design upon a working strength of 16,000 
pounds per square inch. As the quality of steel improved, the work- 
ing strength was increased to 18,000 pounds and, 5 years ago, to 
20,000 pounds per square inch. In other words, the tonnage of steel 

materials, not only means less expense for replacement parts, but less labor and time are required for re- 
placements. 

"3. Redaction in loss of time due. to failure of machines to function continuously. —The value of fnrm machines 
(through improvement in design) is advanced by their ability to operate continuously without delay due 
to choking, clogging, or the failure of any part to function properly 

"4. Less breakage of machine parts.— The. making of machine parts of the proper design and of high-quality, 
reliable materials results not only in a reduction of the expense for broken parts, but also in a saving of labor 
and time for making the repairs. Furthermore, owing to the importance of timeliness for many farm oper- 
ations, the dependability and freedom from breakdown of a farm machine is of great value. Many safety 
features, such as spring releases for plows, have been introduced to protect machines from breakage. 

"5. Increased efficiency in the use of energy. — The value of a farm machine is raised when a stated amount 
of useful work can be accomplished with the consumption of less energy or power. Increased efficiency is 
secured by the elimination of friction losses through the use of friction-reducing bearings, better lubrication, 
and also by the introduction of mechanisms and features of design by which energy is applied more effec- 
tively to the work to be accomplished. For instance, the advance in the design and manufacture of silo 
fillers, or ensilage cutters, has resulted in easily doubling the output of useful work per unit of energy con- 
sumed. 

"6. Increased capacity of machine. — With the use of better design, better quality materials, and improved 
construction, the capacity of many machines may be increased b> ^ permissible higher speed of operation. 
Most field and belt-driven machines may now be operated at higher speeds with a corresponding increase 
in output. 

"7. Improved operating efficiency. — This quality is represented by the more efficient functioning of ma- 
chines such as the more thorough elimination of weeds through cultivation, the harvesting of a crop with 
less waste, or the removal of waste and weed seed from threshed grain. 

"8. Improvement in operating precision.— Although related to operating eflSciency, precision in operation 
and control represents a value not wholly covered by this term. This characteristic is indicated clearly by 
accuracy in seeding machines, fertilizer machines, control of machines, etc. 

"9. Reduction in time required to care for machines. — The time required to properly care for the lubrication 
and adjustment of machines may be an important consideration as the output of useful work is influenced 
thereby. Many current machines require lubrication only one-tenth as often as earlier machines on account 
of enclosure of working parts, improved oilers, grease cups, etc. 

"10. Reduction in lost time and expense due to accidents. — Important advances have been made in protecti'ng 
life and limb by safety releases, better guarding of working parts, etc., reducing the loss in time and money 
caused by accidents. 

"11. Greater economy through improved operating devices. — Power lifts, balancing springs, convenient levers, 
and adjusting devices make it possible to operate machines with a saving of time and effort. 

"12. Increased efficiency through lessening operator's fatigue. — A more comfortable and efiScient position for 
the operator, better protection for him from dirt and dust, and elimination of excessive vibrations contribute 
definitely to the value of a machine, making possible more continuous operation over longer work periods. 

"Being already familiar to a considerable extent with the construction, field operation, and testing of farm 
machines, and the changes therein during the period under consideration, the authors felt that their task 
should be primarily one of inspection, comparison, and appraisal rather than actual field tests. Obviously 
the time and expense required would completely prohibit determination through following and comparing 
the operation of 1910-14 and 1932 machines of the same type and purpose under varying conditions of soil, 
crop, and climate. 

"Accord ingly, the authors made a detailed examination of twenty-five machines of 1932 in comparison with 
similar machines of 1910-14 at the plants of three prominent farm-machinery manufacturers where machines 
of both periods were made available, together with the engineering records and data relating thereto. Be- 
sides comparing and checking the machines part by part, the authors also questioned at length a number of 
tngineers who have been devoting themselves to the development of these particular machines during the 
past 25 years. 

"In addition, the authors were provided' with chronological record of changes in machines, reports on 
elaborate and extended shop and field tests made to determme the results of these changes, and the findings 
and opinions of the engineers in question. The authors also called for and were supplied with data bearing 
on the reduction in the demand from farmers for certain repair parts after changes were made, and on this 
point were convinced that in many instances such reductions were extensive and signiicant. 

"Further, in order to evaluate more accurately the effect of changes in the life and performance of the 
machines considered, accelerated tests of wearing parts were made and laboratory tests of m&ny important 
typical Darts, old and new, were conducted in the presence of the authors. 

"The various changes in each of the 25 types of machines and the conclusions of the authors with respect to 
their separate and combined effect on quality values are set forth fully in the detailed studies of each machine 
contained in this report." 



CONCENTRATION OF ECONOMIC POWER 07 

required for a specific structure can be substantially less today than 
it was before these changes in specifications and in design require- 
ments. At the same time efiicient, wide flanged shapes were intro- 
duced following the development of new. types of rolls for I beams; 
these new shapes have also permitted lighter and more economical 
design. 

Many other criteria of quality are subject to some sort of concrete 
measurement or specification. Among these may be listed the fiber 
content or construction of cloths, the fabric and some aspects of the 
workmanship of apparel, the leather used in footwear, the quality of 
certain foods for which grades have been established, the metal con- 
tent of silverware, etc. All of these elements are to some extent 
physically determinable. It is manifestly impossible to compile a 
complete list. 

As a rule it is difficult or impossible to translate these quality 
changes into price equivalents; the significance of price indexes based 
upon quoted prices is limited accordingly. For automobiles, which 
are of course exceedingly complex, there has been an attempt to devise 
a price index which would show changes not only in price but also in 
weight, wheel base, and horsepower expressed in terms of price. The 
technique used involves many assumptions and a complex statistical 
procedure; it is mentioned here merely to illustrate the variety and 
significance of the many components of quality.^^ 

In addition to variables of this kind, there is a wide variety of less 
tangible factors entering into the concept of quality which cannot 
yield to any form of precise specification. Yet these intangible 
elements are often of primary competitive importance; they may 
largely determine the consumer acceptance of a product and must be 
considered in any interpretation of price behavior. In the case of 
apparel, for example, the consumer is more interested in the elusive 
element of style than in physical specifications of cloth or workman- 
ship. Similarly in the sale of food, the purely subjective factor of taste 
or flavor may largely determine the popularity or failure of the prod- 
uct. Reverting again to automobiles, the success of a model may be 
more directly affected by the design or ornamentation of its hood 
than by the efficiency of its carburetor. The color of bathroom 
fixtures may exercise a not inconsiderable weight upon a prospect's 
decision to purchase or rent a home. 

Some of these elements of style, appearance, or comfort may have 
a relation to objectively measurable characteristics. For example, 
it may be that most consumers prefer the flavor of canned foods 
meeting the grade A requirements of the Bureau of Agricultural 
Economics to those which would be classed as grade C. Attractive 
style is often associated with superior workmanship. Yet such 
relations are often fortuitous. A high quahty grade is not a necessary 
guarantee of desirable flavor; conversely, many may prefer the flavor 
of certain grade C products to others classed in grade A. In general, 

" Andrew T. Court describes this attempt to devise a hedocic price index in The Dynamics of Auto- 
mobile Demand, op. cit., pp. 99-117. His procedure was based upon computing equations of multiple 
regression for price in terms of weight, wheel base, and horsepower for the standard models of all the more 
important makes of cars during each year. This technique was designed to determine the valuation placed 
by the market upon each of these factors. Court listed, in addition, various other determinable elements 
of quality, such as tire section, the period of the front spring, front seat width, top speed, rate of deceleration 
and acceleration, rate of depreciation, etc. Of course any important change in design affecting the signifl- 
cance of any of these elements, such as the introduction of a new lightweight structural alloy, would seriously 
impair the usefulness of an index of this kind. 



gg CONCENTRATION OF ECONOMIC POWER 

the preference or whim of consumers cannot be confined within rigid, 
definable categories. . . 

It is apparent, then, that the range of quaUty competition may 
extend from such precisely measurable characteristics as durabiUty, 
operating economy, tensile strength, or fuel value to such relatively 
indefinable elements as taste, style, comfort, or exclusiveness. 

The degree to which any of these factors is actually emphasized in 
business sales strategy varies widely for different commodities. Thus, 
in sales to expert buyers (e. g., industrial, institutional, or Govern- 
ment purchasing agents) technical specifications and tested char- 
acteristics of performance are usually more important than such 
elements as style or appearance. In deahng with the comparatively 
imtrained ultimate consumer, on the other hand, less stress usually 
is laid upon performance data and more upon style, taste, and eye- 
catching features. 

The focus of competition is materially affected by the degree to 
which any element of the transaction has become standardized by 
business practice, or custom, or by Government regulation. Thus it 
has been pointed out that price uniformity favors the shift of com- 
petitive pressure into nonprice channels. Similarly the standardiza- 
tion of any element of quality necessarily reduces its value as a selling 
argument. The increase in tensile strength of structural steel is of 
considerable importance in the interpretation of price statistics; 
however, since all steel plants are equipped to produce the same grade 
of steel, it is not a basis for rivalry between them. 

To the individual seller, therefore, certain phases of quality com- 
petition involve problems similar to those which have been described 
in connection with price competition. Where changes in quality are 
such that they can 'be accurately measured and precisely duplicated, 
their efficacy as a competitive weapon is thereby limited. 

The following quotation expresses this dilemma which faces rival 
sellers when their products approach imiformity: 

The selling of refrigerators requires the massing of all conceivable sales influ- 
ences. It becomes evident to one who compares the methods of the leading 
companies that mere sharp angles will not sell refrigerators any more. As an 
industry matures, angles disappear and products approach uniformity. Adver- 
tising at the same time takes on a similarity. 

Probably nothing is so striking about the refrigerator advertising as its simi- 
larity. Probably no one feels this more keenly than the advertisers themselves. 
Assuming that .Joe Doakes, the common man, has an analytical mind, he doubtless 
compares the advertising of the leading makes with growing confusion. It is 
certainly impossible for him to decide from the advertising which of them is best 
for his purposes." 

Conseauentlv, there has been some oendency for sales emphasis to 
shift to tnese elements of quality which cannot be so readily imitated, 
particularly for consumers' goods. Sellers of groceries rarely mention 
their conformity with government standards of quality; sellers of 
dresses do not usually emphasize fiber content;'^ cosngetics are com- 
monly sold without reference to the quality of their ingredients. 
Instead it is flavor, style, or attractive containers which constitute 
the focus of interest. Distinctive appeal is far more readily attained 
on the basis of the latter elements of quahty than on that of the former, 
and is subject to ingenious variation to maintain leadership. 

'< Printers' Ink Monthly, August 1937. 

'•There has been a growinp tendency to indicate the fiber content of apparel on the label, partly as a result 
of Federal Trade Commission activity. However, style usually reinnins the primary form of competition. 



CONCENTRATION OF ECONOMIC POWER 59 

Guarantees. — Closely akin to quality as a basis for competition are 
guarantees offered by the seller. For example, an important consid- 
eration in connection with the purchase of an automobile is the dura- 
tion of the period diu^ing which the seller guarantees to remedy any 
defects free of charge. This is perhaps even more important in the 
case of used cars than in the new car market. The average purchaser 
would prefer to pay substantially more for an automobile purchased 
from a reputable dealer than for one bought directly from its private 
owner, because of the possibility of recourse in the former case for 
defects which are not observed at the time of purchase. Automobile 
tires have already been mentioned as an outstanding example of the 
importance of the guarantee. In the case of electric refrigerators the 
general practice is to guarantee replacement of cabinets, shelves, trays, 
accessories, refrigeration imit, and controls in case they become un- 
satisfactory within one year of purchase due to any defects in manu- 
facture. In addition, the refrigeration unit is commonly guaranteed 
for an additional 4 years. In some cases this latter guarantee is 
included as part of the purchase price. In others, the guarantee is 
optional with the purchaser; he can, if he wishes, pay an additional 
$5 for this added protection. Here there seemi3 to be a direct equiva- 
lence between the price difference and the guarantee. 

From the competitive standpoint, simple guarantees of this charac- 
ter are subject to somewhat the same hmitations as price appeal. 
Their terms can be matched exactly; once a practice has become uni- 
form in the industry, the offer of the guarantee is no longer a competi- 
tive asset. Thus, the present system of refrigerator guarantees seems 
to have become the general practice in 1936. The effect of this 
uniformity is commented upon in an editorial in a trade publication: 

"is the 6-tear guarantee necessary 

"A recent trip into the field reveals the fact that electric dealers are highly 
dissatisfied with the epidemic of 5-year guarantees which seem to have broken 
out in the national advertising of the electric refrigerators. 

"Originally the guarantee found an excuse for itself in that it was the exclusive 
promise of one company and so formed a sales argument for the salesmen handling 
that line. Now, when practically every manufacturer makes the same promise, it does 
not even offer a talking point against rival makes. "^^ (Italics supplied.) 

Other common forms of guarantee are often important aspects of 
the transaction. Thus, certain sets of china and glassware are sold 
with the guarantee that additional pieces can be purchased as desired, 
usually for stipulated periods of years. These so-called open sets 
may sell for substantially higher prices than other sets of identical 
quality. 

In the wholesale markets, an important form of guarantee is the 
guarantee against price decline. For example, the purchaser of fer- 
tilizer may be protected against any reduction in the price level during 
the balance of the selling season. Sometimes such guarantees extend 
only to price changes by the specific producer involved; sometimes 
the buyer is protected against any price reduction initiated by any 
important competing seller. Guarantees of this latter kind greatly 
limit, if they do not eliminate, the scope of price competition. They 
make it unnecessary for the purchaser to compare competing price 
offers or to delay his buying in anticipation of future market declines. 

" Electrical Merchandising, December 1936, p. 22. 



7Q CONCENTRATION OF ECONOMIC POWER 

Price guarantees may also have the collateral effect of reducing price 
flexibiuty during the periods covered. Since price cuts apply not 
only to future but past sales, the reluctance of sellers to reduce prices 
is correspondingly increased. 

PRICE LINES 

The foregoing pages have described the multiplicity of nonprice 
factors which can be varied to furnish a basis for competitive rivalry 
and the variety of industries in which they appear. It is important 
to emphasize that the presence or absence of price competition is not 
of itself a criterion of monopoly or collusion. While it is probably 
true that active price competition is infrequent in monopolistic 
markets, it is also possible for competitive rivalry to center largely 
or exclusively upon nonprice elements even in highly competitive 
industries. 

The nature of the commodity may be such as to make price com- 
parisons difficult and emphasis upon nonprice factors logical. Where 
this tendency exists, it may be reinforced by the development of 
conventional patterns of business practice. The so-called price lines 
which characterize the retail and wholesale markets for a fairly wide 
variety of commodities furnish an outstanding example of such 
crystallization of business custom. 

Price lines are most commonly associated with the apparel market. 
In the case of women's dresses, for example, a series of definite whole- 
sale prices has become established by the accumulation of habit and 
tradition. These are: 



$1.87>^ each 
2.25 

2.87/2 " 
3.75 
4.75 
6.75 
7.75 
8.75 



$10.75 each 
12.75 " 
14.75 " 
16.75 " 
19.75 " 
22.75 " 
29.75 " 
39.75 and over 



Manufacturers and wholesale buyers of dresses have come to accept 
these lines as virtually immutable," except that new lines may be 
added when extreme changes in cost occur. They are rarely, if ever, 
considered subject to modification by bargaining. In planning pro- 
duction, the manufacturer carefully estimates the material and labor 
costs which will be required to produce a desired model and then 
makes such modification in the design as wiU be necessary to permit 
him to sell the product at one of these accepted fines. The com- 
petition between two manufacturers producing, say, a $6.75 dress 
will center not upon the price, but upon the quality of materials, the 
quafity of trimmings, the workmanship, and the amount of style. 
The efforts of the buyer similarly will be concentrated upon obtaining 
the maximum value at a given price and not upon breaking down the 
price line itself. 

It is probable that even rigidly established customs of this sort 
may be somewhat shaken during periods of severe economic stress as, 
for example, during the buyers' market which prevailed during the 
trough of the depression. Thus, it may be significant that the mem- 

" The prices listed are gross prices subject to standard trade and cash discounts. 



CONCENTRATION OF ECONOMIC POWER 



71 



bers of the corset and brassiere industry deemed it advisable to stipu- 
late rigid adherence to accepted price lines as a code provision during 
N. R. A. The clause in question follows: ^* 

Wholesale prices. — To maiDtaih established trade practice, and to liroit the 
multiplication of numbers, but without any attempt at price fixing, each person 
being free to determine the value to be given at each price, the following shall be 
the wholesale prices, per dozen, for sale to retailers (except chain stores selling 
up to one dollar ($1) retail), and no intermediate prices may be used: 



$2.00 doz. 
2.25 
3.25 
4.00 
4.25 
4.50 
6.00 
7.00 
8.00 



$8.50 doz. 

10.50 

12.00 

15.00 

16.50 

18.00 

21.00 

22.50 

24.00 



$27.00 doz. 
30.00 
33.00 
36.00 
42.00 
48.00 
54.00 
60.00 
66.00 and up. 



Price lines in the wholesale market are reflected in a similar though 
perhaps slightly less invariable practice at retail. This is illustrated 
by the prices reported by the Retail Price Division of the Bureau 
of Labor Statistics, covering the quotations of representative retailers 
32 cities. For example, 114 quotations for women's medium 



m 



Price — Continued. 



$4.69. 

$5---, 
$5.50. 



Number of 
guotatioTU 

.... 1 

.... 1 

.--- 67 

.... 2 



Total 114 



quality, woven elastic girdles, retailing from $2.95 to $5.50, showed 
the following distribution as of June 15, 1938: 

Number of 
Price: quotations 

$2.95 - 4 

$2.98 2 

$3.39 1 

$3.50 32 

$3.59 1 

$3.95 2 

$3.98 1 

In other words, 99 of the 1 14 price quotations were concentrated at 
2 figures — $3.50 and $5. Only 15 quotations, or 13 percent of the 
total, were at intermediate figures. 

Similar concentration of retail prices exists for many other apparel 
items. For example, 396 quotations were reported for women's 
hose ranging from 69 cents to $1.15 per pair. Of these, 119 were at 
79 cents and 154 at $1. These two prices alone accounted for 61 
percent of the total. 

Although apparel, and particularly women's apparel, furnishes the 
most conspicuous example of price lining, the custom is by no means 
confined to these fields. Such products as electric refrigerators, 
vacuum cleaners, and radios also show a distinct tendency toward the 
establishment of a limited number of price lines. Table 21 in chapter 
IV (p. 162) illustrates the effect of this practice in the case of refrig- 
erators. During 1939 all major producers with one exception quoted 
list prices which were almost identical for each size. 

The retail prices of vacuum cleaners are usually spaced at $10 
intervals between $39.95 and $79.95. It is apparently the opinion of 
the trade that intermediate levels, such as $42 or $56, would meet 
with customer resistance and could not be used. Similar variations 
apply to radios.'* 

" National Recovery Administration, Codes of Fair Competition, vol. I, p. 76, Corset and Brassiers 
Industry, sec. 9 (i). 
" The foregoing and additional exanrples of price lining are described in more detail In appendix II. 



247140 — 41— No. 1- 



y2 CONCENTRATION OF ECONOMIC POWER 

The influence of price lines upon the pattern of competition has 
been suggested above. In both the wholesale and retail markets the 
buyer's choice is confined to selecting the best possible value at a 
given price rather than to comparing prices for similar products. 
The force of this generalization is, of course, limited by the size of 
the interval between price lines. For example, the consumer may 
find a $3.50 girdle as satisfactoiy as one ofl'ered for $5; in that case 
price becomes the paramount consideration. In general, however, 
there is an appreciable gradation of quality comparable to that of 
price; in other words, the best article offered at $3.50 is of distinctly 
lower grade than the poorest offered at $5. Consequently, though 
price is not eliminated as a consideration, the scope of price com- 
petition is limited. 

Frequently another consideration rehiforces the emphasis upon 
nonprice factors. Many manufacturers, particularly in the field of 
apparel, concentrate their efforts upon not more than one or two price 
lines. For example, a women's dress manufacturer may be spoken of 
as a "$10.75 house" or a "$14.75 house." This means that the firm 
in question regularly produces garments only within the price line 
specified. Any changes in costs of production will be reflected in 
changes of the character of the garment and not in modifications of 
the price. For such one-price houses nonprice channels are the 
only form of competition available. 

The practice of price lining may affect market patterns not only for 
the finished products sold at the price lines, but also for the major 
raw materials entering into these finished products. Thus Mr. S. J. 
Kennedy points out that the prevalence of price lines for apparel and 
for piece goods is reflected in the gray goods market. It acts to 
retard the responsiveness of finished goods prices to changes in tex- 
tile manufacturing costs and means that the advantage of certain 
savings will not be passed on to the consumer promptly. Thus it 
introduces distinct rigidity into the market: 

* * * It is patent that seasonal fluctuations in prices of gray cloth, even 
when as great as 1 cent per yard, do not always reach the ultimate consumer in 
the form of lower prices. If the given cloth were converted into printed percales 
to be sold by the converter at 14^ cents per yard and retailed as yard goods at 
25 cents per yard, a reduction of 1 cent per yard in the gray, if passed on by the 
converter to the retailer would have no effect whatever under normal conditions 
upon the price paid for the cloth by the consumer. It is not a large enough cut 
to fit the cloth into a 19-cent bracket, which is the next lower price bracket used 
generally on piece goods in the trade. The only result would be to increase the 
margin to the retailer. 

Likewise, if the cloth went into the hands of cutters-up instead of their selling 
the garment at a lower price, they would continue the sale at their fixed wholesale 
price, and at best might put on more or better trimmings or employ a more 
intricate pattern of garment. 

In other words, by the time the product reaches the consumer, price changes of 
a temporary or minor character would have been absorbed bj' the channels of 
distribution so that there is no certainty that such savings in manufacturing costs 
as can be secured from the u.se of more efficient macliinery will have been passed 
on to him. The increasing price inflexibility of our distributing system, as goods 
pass from primary manufacturers to the ultimate retailers, makes it increasingly 
unlikely that the consumer will get the beneGt of these savings unless they are 
drastic enough to move the product out of one price bracket into a lower one. 

Conversely, it should be noted that increases in price experience similar retarda- 
tion. The same increasing price inflexibility, as goods pass from primary manu- 
facturers to retailers, operates to prevent a price rise when costs are increased. 
An increase of 1 cent per yard in gray clotii costs would, under certain conditions, 
be absorbed by the various operators out of their gross margins before the goods 



CONCENTRATION OF ECONOMIC POWER 



73 



reached the retail counter. Under present conditions of a high degree of organi- 
zation in the distributing trades, whereby the combined buying power of many 
individual retail outlets is applied jointly to the manufacturer, the latter must 
absorb more than his share of this reduction in price spread. In other words, 
his own prices will generally be less flexible than his costs'. When prices reach a 
certain level, he will be unable to raise his price further and still get any business 
on his product. 

However, before such a level is reached where his customers are no longer able 
to use the product for existing price brackets, the primary manufacturer would 
probably have switched to a lower construction ; for example, from 80 by 80 print 
cloth to 68 by 72; or if the product were a nonstandard cloth, he would have 
"cut" the construction by removing a few ends or picks, reducing the width, using 
lighter weight yarns, or any of the other many means for deteriorating quality. 
On the other hand, if the price rise were a large one, enough to throw the cloth 
into a higher retail price bracket, then the manufacturer could get a higher price 
and maintain his profit margin; however, the volume on that construction would 
be reduced and he would be under the necessity of developing a cheaper cloth for 
the lower price bracket in which it had formerly fitted. 

Put in another way, a price rise due to external factors such as a rise in cotton 
prices or a manufacturers' sales tax, would put the manufacturer under the neces- 
sity of finding a way to make the cloth at lower cost, to offset the increases in 
these other elements of prime cost. Price pressure from retail distributors would 
tend to prevent the manufacturer from raising his price until prices were practi- 
cally equal to his direct costs. As that level was approached, either of two things 
would happen: (1) The cloth might be forced into a higher retail price bracket — 
for example, from 29 cents to 39 cents per yard as piece goods over the counter, 
or from a $1 garment to $1.95 — in which case the volume would be materially 
reduced, and a lower construction would be developed for the old price bracket; 
or (2) the cloth might be progressively cheapened by "cutting" the construction 
as the price rose, and be kept at about the same price level. 



To what degree such "cuts" in construction lower the actual output of the in- 
dustry or give consumers less for their money is not a problem to be settled here. 
In large measure it is a problem in home economics, and is to be decided as a result 
of research concerning relative wearing qualities of various constructions, and the 
extent to which retail stores give actual value for money received. 

It must not be overlooked, however, that this flexibility of quality, by which 
manufacturers are able to adjust to price fluctuations without lowering real manu- 
facturing costs, permits the industry to meet fluctuating price conditions in the 
cotton market with a minimum of internal friction. It is made possible only by 
the continued lack of knowledge on the part of the consumers (nonindustrial) of 
what actual quahty of cloth is.^" 

For some products, price lines are maintained by adjusting quantity 
rather than quality to changing conditions. For example, the retail 
price of bar chocolate is usually either 5 or 10 cents. The disinclina- 
tion of many customers to bother with odd pennies is undoubtedly one 
of the causes for the crystallization of this custom. Changes in the 
size of the bar offered by a leading producer follow. 





Table 3. — Changes in size 


of chocolate bars 








Date of change 




Net weight per bar 




Plain 


Almond 




5 cents 
retail 


10 cents 
retail 


5 cents 
retail 


10 cents 
retail 


Jan. I, 1926 


\% 
2 


2'^ 

2?^ 

4 

4 

35^ 


1 


2 


Apr. 1, 1930 


2H 


Oct. 10, 1931 


3Ji 


Sept. 2, 1932 


3 


Nov. 4, 1032 


3 







' Stephen Jay Kennedy, Profits and Losses in Textiles, pp. 168-170. 



•jf^ CONCENTRATION OF ECONOMIC POWER 

Similarly, it is understood that the contents of packaged goods sold 
by limited price variety stores are changed from time to time in order 
that the conventional 5-cent, 10-cent, and 25-cent lines may be rigidly 
maintained. 

Bread affords a particularly striking illustration of the way in which 
a price line can be maintained by varying quantity. A total of 1,132 
retail price quotations for bread from stores located throughout the 
country were reported to the Retail Price Division of the Bureau of 
Labor Statistics as of February 1939. Of these 1,132 quotations, 
808 or 71 percent were at 10 cents. In 8 of the 9 major geographic 
census areas, the 10-cent loaf accounted for more than 50 percent of 
the total nimiber of quotations. In contrast to this uniformity of 
price, the size of the loaves offered for 10 cents varied from 16 ounces 
to 24 ounces. 

Price lining is also characteristic of many noncommodity prices. 
Examples may be drawn from common experience. Thus, in many 
localities, the charge for dry cleaning a suit of clothes is apt to be either 
75 cents or 39 cents; intermediate prices are unusual. The usual 
price for haircuts is either 35 cents or 50 cents. Frequently the price 
of services is related to the size of convenient monetary units (e. g'., 
5 cents or 10 cents) as in the case of shoeshines or a cup of coffee in 
ii restaurant. 

The foregoing exam^plcs show clearly that the practice of price 
lining definitely influences the focus of competition. It does not, 
however, eliminate price competition entirely, but rather restricts 
its scope. 

In general, price lines are more rigidly adhered to in the wholesale 
than in the retail markets. Yet, even in wholesale markets, prices 
are shaded from time to time. In general this is done by modifying 
one of the collateral terms of sale. The most important of these is 
the so-called cash discount. In most apparel lines, for example, it is a 
custom to allow a discount of 8 percent, 10 days E. O. M.^' In 
reality, as the size of the discount indicates, this is a combination 
trade discount and cash discount. It constitutes an important modi- 
fication of the nominal wholesale price quotation. There is some 
evidence that it is not adhered to quite as rigidly as the nominal price 
line itself. It is commonly believed that price concessions are some- 
times granted, particularly to very large buyers, by increasing this 
discount, usually to 10 percent. Indirect price concessions may also 
be granted by the use of other devices as, for example, by absorbing 
freight on certain shipment'^. 

In general, however, price variations of this kind in the wholesale 
market are comparatively minor. In the retail market, on the other 
hand, somewhat greater variations occur. Thus the retail prices 
listed above (p. 71) reveal a material number of exceptions to the 
established price lines. Presumably these reflect variations in the 
pricing policy of different retail outlets. Retailers whose operating 
costs are lower than the average may operate at lower than normal 
mark-ups and thereby deviate from the established lines. 

These cases are aU, however, exceptions to the general rule. 
Broadly speaking, the practice of price lining necessarily diverts 

" I. p., the discount applies if ;>■ -ment Is made not later than ttio 10th day of the month following that 
during which the sale was made. 



CONCENTRATION OF ECONOMIC POWER 75 

competition into nonprice channels. The efforts of the producer and 
the choice of the consumer both must accept prices as constant and 
center upon such factors as quahty as the significant variables. 

It should again be emphasized that this conventional restriction 
of price competition is in no sense associated with concentration or 
with any manifestations of monopoly power. Most of the industries 
in which price lining is prevalent are composed largely of small enter- 
prise and are by almost any criterion highly competitive. The 
highly diversified nature of the product makes emphasis upon non- 
price factors almost inevitable. 

There is no evidence that the practice of price lining, as such, is 
notably ineflBcient from the point of view of the consumer or the 
economy. It apparently introduces certain undesirable rigidities in 
the market for apparel and other consumers' goods which, in times of 
rapidly changing costs, hamper market adjustments. However, 
these rigidities do not appear to be sufficiently serious to create major 
issues of public policy. Price lining, therefore, affords an illustration 
of the manner in which factors inherent in the market more or less 
naturaUy lead to emphasis upon nonprice elements as the focus of 
business rivalry without materially affecting the costs of production 
or distribution or the efficiency with which consumers' wants are 
satisfied. 

ADVERTISING, BRANDS, AND TRADE-MARKS 

The practice of price lining does not of itself introduce any new 
elements into the transaction. Given a situation in which the 
product of rival sellers necessarily differs in quality and style, there 
has merely been a decision to concentrate com^petitive effort upon 
these elements and to accept price as constant. This procedure 
represents a simple choice of emphasis between elements which were 
in any event present, and does not of itself involve any major changes 
in the cost of manufacturing or distribution. 

In contrast, increasing use of advertising, brands, and trade-marks 
has far broader implications. It represents the introduction of new 
elements into the transaction; elements which are not necessarily in- 
herent in the nature of the commodities offered for sale, and it has 
far-reaching effects upon the functioning of the economy. 

In one sense, the purpose of advertising is to disseminate informa- 
tion as to those quality features in which the prospective purchaser 
might be interested, while brands and trade-marks furnish a ready 
means for identifying the merchandise in question. To an extent, 
therefore, advertising and branding may be considered a phase of 
the tactics involved in competition based upon quality. 

However, advertising is rarely, if ever, content with presenting a 
dispassionate, factual description of the quality or merits of an 
article; nor is the use of a brand merely a. device to permit the ready 
identification of a product having certain specific qualities. 

Essentially a brand or trade-mark is a device used by a seller to 
distinguish his product from similar competing articles. Advertising 
is used to persuade the prospective purchaser that the product has 
certain desirable characteristics which are unique or which it possesses 
in greater measure than rival merchandise. If this effort is success- 
ful, a demand is created for the article associated with its brand or 



yg CONCENTRATION OF ECONOMIC POWER 

trade-mark, and purchasers will specify such a brand or trade-mark 
in their buying. Thereby two related ends may be accomplished. 
The establishment of consumer preference for a specific brand yields 
its owner a certain assured sales volume. At the same time the 
product for which preference has been established is shielded to a 
greater or lesser extent from the impact of direct price competition. 

The effectiveness with which the use of trade-marks and brand 
names can insulate a product against direct price competition with 
similar articles made by others varies materially for different kinds 
of goods. Probably the most important determining factor, although 
it is but one of many, is the relative ease or difficulty which the con- 
sumer encounters in making comparisons between the actual intrinsic 
merits of rival merchandise. In those fields in which such compari- 
sons are relatively simple, or in markets where buyers are wel! equipped 
technically, there is a pronounced tendency to switch to competing 
brands as soon as material price differences appear. However, where 
for one or another reason the consumer is unable to compare rival 
products intelligently, the effective use of brands or trade-marks 
frequently permits very wide price differences to be maintained be- 
tween virtually identical products. In such fields it is essential to 
appraise brand significance in interpreting price behavior. 

Trained buyers — industrial, institutional, or governmental — are 
often well equipped to compare competing products on their merits. 
Sometimes, as in the case of Government agencies, their judgment is 
aided by access to the services of well-equipped laboratories. In 
cases of this sort, the effectiveness of brands is limited. The buyer 
is unlikely to accept advertising representations without investigation, 
particularly if appreciable price differences appear between similar 
products bearing different brands. ^^ 

The average household consumer is in a totally different position. 
He lacks the training, the facilities, and the time required for tech- 
nical comparisons of the merits of competing merchandise. Even 
in fields in which commodity standards or methods of rating exist, 
these are often inadequate or misleading. Thus Mr. L. R. Walker, 
testifying before the Temporary National Economic Committee, 
asserted that technological changes had made the prevailing system of 
measuring the capacity of warm-air furnaces for homes largely useless 
as a guide to their heating capacity, but that many members of the 
industry opposed the introduction of more meaningful standards. 
According to Mr. Walker: 

I would say this: that the standard that the consumer has been taught to use 
is no measure whatever of the rating of the product he gets. In other words, 
because the industry for many years all made a similar product they used one 
measure. Now, as we have learned to improve that product, they are still using 
that same measure and it doesn't at all typify the output of that product. More 
than half of the industry is still making the old product and opposes anything 
that changes that standard.^* 

The interest of the consumer in obtaining more adequate informa- 
tion regarding the character of commodities on the market has 
resulted in the establishment of a number of organizations whose 
purpose is to supply the consumer with technical guides in his pur- 
chasing. However, there are limits to the effectiveness with which 

» See Temporary National Economic Committee Hearings, Part 8, pp. 3440-3452. 
Mlbid., p. 3422. 



CONCENTRATION OF ECONOMIC POWER 



77 



such private organizations can perform this function. Moreover, in 
the case of several of these organizations, there even seems to be some 
question as to the good faith of their activities. ^^ Consequently, the 
average consumer is forced to a large extent to rely upon advertising 
claims and to base his buying upon brand names and trade-marks. 

In grocery products, for example, a distinction must be drawn be- 
tween such relatively standard commodities as sugar or rice, and those 
in which there are wide variations of quality, flavor, and contents, 
such as canned peas or coffee. Even the former may be and often are 
purchased by brand, but as soon as any material price differences 
appear the average housewife is almost certain to switch to a cheaper 
variety. In the case of the latter products, however, even material 
price differences may not suffice to induce her to change her habits of 
purchasing. Taste is so subjective an element that comparisons 
between different brands of, say, canned goods are inevitably difficult. 
Moreover, choice is complicated by the general refusal of packers to 
adopt grade labeling for canned products, as well as by the multi- 
plicity of can sizes which hampers any attempt to match prices on a 
uniform basis.^^ 



Table 4. — Prices and quality grades for specified brands of canned foods 
GREEN AND WAX BEANS 



Brand 


Price per 
pound 


Quality 
grade 


Brand 


Price per 
pound 


Quality 
grade 


A. & P 


$0.13 
.14 
.19 

.08 

;08 
.11 
.15 


A 
B 

A 

C 
C 

c 

B 


lona 

Premier (wax). 

Shrivers - - - .- 


$0.11 
.16 
.13 
f .11 
1 .13 
.25 
.18 
.17 


C 


Asco 


B 


Blue Label 


B 


Blue Ridge 


Stokely . . 


C 


Crown or Maryland 


Sweetheart 

Torsch's 

White Rose (wax) 


A 


Farmdale 

Fort 


C 
B 









BARTLETT PEARS 



Approval.. 

Asco 

Blue Label 
D. O. S .. 
Del Monte 
De Mand. 

Hunt 

lona 



$0.10 


B 


.11 


A 


.16 


B 


.18 


C 


.13 


B 


.15 


C 


.14 


A 


.10 


C 



Libby 

Lyric 

Mission 

Premier 

Ray Crest... 

S. &. W 

White Rose. 




TOMATO JUICE 



Alice 

Ann Page 

Approval 

Asco 

Beech-Nut 

Campbell 

College Inn._ 

Blackwell & Crosse 
Heinz's 



$0,066 


1 A (86) 


.096 


A (94) 


.083 


D (C5) 


.080 


A (90) 


.118 


A (90) 


.096 


A (92) 


.C99 


A (90) 


.108 


C (84) 


.106 


A (94) 



Le Grande. 

Libby. 

Phillips 

Ritter 

Scott 

Stokely 

Webster 

Welch 

White Rose 



$0. 101 
.096 
.076 
.075 
.057 
.087 
.072 
.15 
.118 



C (78) 
A (89) 
C(78) 
A (87) 
A (92) 
A (93) 
A (96) 
A (94"/ 
C (82) 



' Number in parentheses is the numerical grade. 

Source: Hearing before the Committee on Coinage, Weights, and Measures, House of Representatives, 
on H. R. 6964, Standard Metal Container Act of 1937, Mar. 15 and 18, 1938, pp. 20-21. 

» The Federal Trade Commission is at present (Spring, 1940) proceeding against two organizations 
which purport to furnish the consumer with technical buying information. See complaints of the Federal 
Trade Commission in the matter of Albert Lane, an individual, trading as Consumers' Bureau of Stand- 
ard?, Docket Xo. 3718, and in the matter of Hearst Magazines, Inc., Docket No. 3872. 

" Sec Temporary National Econongic Committee Hearings, Part 8, pp. 3346-3355. 



yg CONCENTRATION OF ECONOMIC POWER 

Some of the consequences of this situation are reflected in table 4, 
which is based upon data presented at recent congressional hearings. 
The price per pound of different brands of Bartlett pears, tomato 
juice, and green and wax beans, is compared. The quality grades 
based upon the standards of the Bureau of Agricultural Economics 
are also indicated. It is apparent that there is no significant corre- 
lation between price and quality. Thus, one brand of grade A beans 
costs approximately twice as much per pound as another brand meeting 
the same specifications. Products of lower grade sold for more than 
those of higher grade. 

An informal questionnaire recently circulated among a small group 
of consumers in Washington and Boston, by the members of the Tem- 
porary National Economic Committee staff, gives some indication of 
the extent to which brand preference prevails in the grocery market. 
This questionnaire comprised a list of 60 common prepared foods.^^ 
Consumers were asked to specify the degree to which their purchasing 
was affected by brand preferences in accordance with the following 
instructions: 

Mark the item "a" if, in buying, you simply ask for it by its general name 
without giving attention to its brand or trade-mark. (E. g., "Give me a loaf of 
bread.") ,, 

Mark the item "b" if you usually ask for a specific brand and buy it if it is 
no more expensive than competing brands but are still usually willing to accept 
substitutes for trial or to save a cent or two. 

Mark the item "c" if you ask for it by brand name and insist upon it, despite 
small differences in price, but are nevertheless willing to experiment with other 
brands and to shift if price differences become material. 

Mark -the item "d" if you insist upon a specific brand despite material price 
differences between it and competing brands and if you are not, generally speaking, 
willing to experiment with other brands. 

Mark the item "x" if you do not use it, or if your experience with it has been 
too meager to furnish a basis for judgment. 

NOTES 

(1) By price difference is meant, not only differences in the price itself but ako 
differences in other material factors such as quality, grade, size of can, attractive 
premiums, and the like, 

(2) The habit of buying in a specific store because you like the products handled 
there is not, for this purpose, to be considered equivalent to buying by brand. 
For example, if you like the butter handled by a certain grocery and regularly buy 
it there, but if it is sold loose or if you are unaware of its brand name, you are 
not buying by brand. On the other hand, if you go to that store because it 
happens to carry, say, Blue Valley Butter, you are buying by brand. 

The results are summarized in table 5. Particular attention is 
directed to the frequency with which consumers indicated that they 
would insist upon their favorite brand despite material difference s in 

Erice. Thus, in the case of such products as tea, canned salmon, 
aked beans, and flour, ipore than a -third of those answering the 
question indicated that they would insist upon their favorite brand 
regardless of price and another third would change only if the price 
inducement were material. 

» The lirt was selected from those prepared foods whose prices are reported in the Bureau of Labor Sta- 
tlsncs wholesale price Index. This was done to permit comparisons of price behavior. 



CONCENTRATION OF ECONOMIC POWER 
Table 5. — Extent of consumer brand preference for prepared foods 



79 



Name of commodity 



Dried apples 

Powdered milk , 

Pretzels 

Dried peaches 

Cored beef 

Dried apricots 

Dried currants 

Black pepper , 

Rice.- , 

Corn meal 

Granulated sugar 

Fresh meat 

Dressed poultry 

Cornstarch 

Vinegar , 

Hominy grits 

Peanut butter 

American cheese 

Sweet crackers 

Olive oil - 

Grape jam 

Canned apples 

Dried prunes 

Lard 

Oleo oil - 

Canned cherries 

Canned string beans. 

Soda water 

Soda crackers 

Macaroni- 

Canned apricots 

Canned pears , 

Canned spinach 

Canned tomatoes 

Cured ham 

Oleomargarine 

Cendensed milk 

Corn flakes 

Canned peaches 

Canned pineapple... 

Dried raisins 

Canned corn 

Salt.- 

Molasses 

Butter 

Wheat cereal 

Evaporated milk 

White bread 

Rolled oats 

Canned peas 

Bacon 

Ginger ale 

Grape juice 

Cocoa 

Canned asparagus... 

Family flour 

Canned baked beans 

Tomato soup 

Canned salmon. 

Tea.... 



Total re- 
porting 



Number of consumers who purchased — 



Without re 
gard for 
brand or 

trade-mark 



With regard to brand or trade-mark 



Total 



By brand if 

not higher 

in price 



By brand 
unless there 
was a very 
marked 
price dif- 
ferential 



By brand 

regardless 

of price 



Source: Bureau of Labor Statistics. 



gQ CONCENTRATION OF ECONOMIC POWER 

In the field of apparel, price comparisons are in some ways more 
difficult than in that of groceries. To the average consumer, such 
matters as thread count or tensile strength are mysteries.^^ Few 
buyers will examine a shirt to see how many stitches there are per 
inch. Many do not even know that such terms as "satin" or "crepe" 
or "velvet" refer to weave and not to fiber content. Consequently, 
there is often a substantial difference in prices between apparel sold 
under a well-known label and similar more obscure brands. For 
example, according to data compiled by the Retail Price Division of 
the Bureau of Labor Statistics, the average price of one nationally 
advertised brand of men's business shirts during December 1937 was 
$2, while the average for alh other brands meeting the same general 
set of specifications was $1.61. 

Frequently, apparel manufacturers sell identical products under 
several dift'erent brands, one of which may bear their own nationally 
advertised label, while the others bear distributors' labels. Generally 
the product sold under the manufacturer's label commands a sub- 
stantial premium both in retail and wholesale markets, over that 
bearing the distributor's label. In the case of hosiery, for example, 
according to the Knit Goods Weekly, ^^ the difference between na- 
tionally advertised and private label merchandise is normally 75 cents 
per dozen. Prior to 1938 the difference had been $1.25 per dozen. 
Since the product is identical, the differential simply represents the 
value of the brand. 

Similar situations exist in many other lines. A recent investigation 
by the Federal Trade Commission showed that the Goodyear Tire & 
Rubber Co. was selling tires to Sears, Roebuck & Co. under the brand 
"All State" which were of the same quality as those marketed by the 
Goodyear Co. under its own "All Weather" brand. The difierence 
in wholesale prices between these two brands during the period from 
1927 to 1933 varied between 29 and 40 percent. On the retail market 
the "All State" brand was generally sold at prices between 20 and 25 
percent below the price of the "All Weather" brand. ^^ 

In another case the Federal Trade Commission found that the Ameri- 
can Featherbed & Pillow Co. marketed their products under the five 
brand names "Princess," "Progress," "Washington," "Puritan," and 
"Ideal." In its advertising the manufacturer represented that these 
products were of different grades in the order named, and correspond- 
ingly different prices were charged for each. The Commission found, 
however, that all these five brands were of the same quality, and that 
the material price differential between the "Princess" and the "Ideal" 
brand reflected a difference in the label only.^*^ 

Similarly, it is understood that there has been a difference of $50 
in retail price between virtually identical refrigerators sold under the 
manufacturer's label and that of a large distributor. 

Probably the outstanding example of the degree to which trade- 
niarks and brand names can grant immunity from price competition 
is furnished by the drug and cosmetic trade."^ In this field the aver- 
age consumer is dealing with something which is to him utterly mys- 
terious. Moreover, it is a field in which experiment is not only diflfi- 

" See Temporary National Economic Committee nearings, Part 8, pp. 3287-3308. 
" Knit Goods Weekly, January 3, 1938, p. 8. 
" Federal Trade Commission, Docket No. 2110. 
w Federal Trade Commission, Docket No. 1129. 



CONCENTRATION OF ECONOMIC POWER 



81 



cult but may be dangerous. Few consumers have any possible way 
of appraising the merits of rival drugs. They know nothing of chemi- 
cal formulas. Few are familiar with the significance of the specifica- 
tions of the United States Pharmacopoeia. They may be guided by 
the advice of their physicians or druggists, or perhaps by advertising 
claims as to the virtues of various preparations. 

As a result, very w^ide price differences are encountered between 
products of virtually identical chemical composition. Table 6 com- 
pares the wholesale prices of identical preparations sold under pro- 
prietary and nonproprietary names. On the entire list the aggregate 
cost of one ounce of each of these products sold under their nationally 
advertised labels, is $28.95, while when marketed under their chemi- 
cal names the price is only $4.59. Presumably, retail prices show a 
similar spread. Consequently, the bulk of the price paid by the re- 
tailer, and probably by the consumer, represents the value of the 
brand. The saving for purchases under the nonproprietary name 
averaged 76 percent.^^ 

Table %.— Comparison of wholesale prices of identical sxibstances sold under pro- 
prietary and nonproprietary names 

[Net prices to retailers July 1938] 



Brand name 



Phenatetin 

Bayer Aspirin... 

Veronal 

Veronal Sodium-. 

Atophan 

Duotal-Withrop. 

UrotroT^in 

Luminal 

Luminal Sodium 
Irinol-Withrop . 
Aristol-Withrop. 

Total 



Price per 
ounce 



$0. 03 
.75 
3.00 
3.00 
2.75 
1.07 
.25 
6.90 
6.90 
1.90 
1.80 



28.95 



Chemical name 



Acetphentidin 

Acetylsalicylic acid.... 
Barbital 

Barbital sodium 

Anchophen, _ 

Guaiacol carbonate 

Mothenamine 

Phenobarhital 

Phenobarbital sodium 
Sulphonethylmethane 
Thymol-iodide 

Total 



Price per 
ounce 



$0.21 
.13 
.56 
.62 
.38 
.29 
.13 
.57 
.57 
.70 
.43 



4.59 



Saving under 
chemical name 



Amount Percent 



$0.42 

.62 

2.44 

2.38 

2.37 

.78 

.12 

6.33 

6.33 

1.20 

1.37 



24.36 



66.7 
82.7 
81.3 
79.3 
86.2 
72.9 
48.0 
91.7 
91.7 
63.2 
76.1 



176.3 



> Average, unweighted. 

Source: Price data obtained from Blue Price List Section, published by American Druggist, July 193?. 



The high degree of immunity from direct price competition which 
the owner of branded drugs, toiletries, or cosmetics, enjoys is often 
reflected in a very v/ide spread between the price of his product and 
the cost of its ingredients.^^ This is particularly true, of course, in 
the case of nonstandard proprietary items of whose composition the 
consumer is generally ignorant. 

Num.erous efforts have been made to compare the retail prices of 
some of these products with the physical cost of their ingredients. 
Among the agencies which have conducted such work are the Ameri- 
can Medical Association and the Bureau of Health of the State of 
Maine. A summary of some of these data is presented in table 7. 

The items included in this table are in fields which are, in the broad 
sense, highly competitive. Consequently the very wide spreads and 

" For other examples of wide price spreads between trade-marked and unbranded produets~see Tempo- 
rary National Economic Committee Hearings, Part 8, pp. 3444-3452, and also Part HI of this voii me, infra, 
pp. 398-69. 

M Of course this spread is by no means all profit. Much of it represents the cost of advertising and 
packaging. 



82 



CONCENTRATION OF ECONOMIC POWER 



lack of any consistent relationship between ingredient costs and prices 
clearly attest the importance of branding as an aspect of nonprice 
competition. At the same time they demonstrate the futility of at- 
tempting to base price statistics or indexes upon physical specifica- 
tions for products of this kind. The significance of the brand far 
transcends that of the constituents of the product or any conceivable 
criterion of performance. 

So far, the discussion has been concerned with the effect of brands 
upon the price level prevailing at any instant. In addition, however, 
brands may exert a very definite effect upon the way in which prices 
behave during a period of time. 

Table 7. — Comparison of retail prices of drugs, cosmetics, and foods, with the costs 

of their ingredients 



Product name 


Advertised u.se 


Quantity 


Cost of ingredients 


Retail price 

under brand 

name 


Wholesale 


Retail 


Proprietary medicines: 


Cure for TB and ul- 
cers of stomach. 

Ulcers of stomach, hy- 
peracidity, general 
gastric distress. 

Phenobarbital and 
baking-soda tablets. 




$0.50 




$7.00. 


pound.' 
Currier's Tablets ' 


100 tablets-. . - 




3 $1.85 

'.98 
.02 


$5.00. 


Renesol *.. 


65 capsules 




$4.50. 


Electrovita '.- 


1 gallon 




$2.00. 


Mouthwashes: Lister- 






Few cents. - 
$0.10 


About $1.00. 


ine.' 
Dental remedy: Ora- 


Dental remedy 




$2.00. 


Noid.' 
Reducing agent: 

Oermania Herb 


Per package. 

Per package 

."i niincps 


$0.15 




$1.50. 


Tea.8 
Lesser ' 


Bathing salts 


Few cents.. 
Few cents.. 
About 40 

cents. 
2 cents to 3 

cents. 
$0.65. 




$1.00. 


Min-amin " 


Vitamin food 


$1.00. 


Pomay Rx " 

Stardom's Holly- 
Diet.n 


Salve --- 

Reducing food 


8 ounces 


$10.00. 


Package . . .. 


$1 to $2. 


4 bottles of differ- 
ent substances. 

4.708 ounces 


$5.00. 


Downing's Cure." 
Cosmetics: 

Coty's Dusting 

Powder.'* 
Coty's Face Pow- 






.157 
.120 
.338 
.466 

.066 

.220 

.160 

.094 
.118 
.100 
.098 

.m 

.174 


$0.75. 




1 SIR oiincps 




$0.75. 


der.u 
Elizabeth Arden 




6.345 ounces 




$3.00. 


Face Powder." 
Elizabeth Arden 




11.244 ounces 




$3.00. 


Dusting Powder 
Venetian." 
Harriett Hubbard 




2.262 ounces . . 




$0.60. 


Ayer Face Pow- 
der." 
Harriett Hubbard 




10.170 ounces 




$1.65. 


Ayer Ayeristocrat 
Bath Powder." 
Daggett and Rams- 




4.883 ounces 




$0.85. 


dell Dusting Pow- 
der." 
Daggett and Rams- 




2.934 min(y>B 




$0.85. 


dell Face Powder." 
Max Factor Face 




4.684 ounces - 




$0.76. 


Powder." 
Helena Rubonstein 




2.644 ounces 




$1.00. 


Faee Powder." 
Bourjois Sales Corp. 




3.332 ounces . 




$0.60. 


Poudre Java." 
Evening in Paris 




6.020 ounces 




$1.10. 


Bath Dusting 
Powder.*" 
Evening in Paris 








$1.10 


Face Powder with 
Perfume." 











See footnoteB at end of table. 



CONCENTRATION OF ECONOMIC POWER 



83 



Table 7. — Comparison of retail prices of drugs, cosmetics, and foods, with the costs 
of their ingredients — Continued 



Product name 


Advertised use 


Quantity 


Cost of ingredients 


Retail price 

under brand 

name 


Wholesale 


Retail 


Cosmetics— Continued . 
Richard Hudnut 




2.479 ounces 




$0. 065 

.077 

.197 

.140 

.061 

.037 
.082 

.143 
.038 

.024 
.737 
.031 
.071 
.088 

.061 
.087 
.190 

.268 
.252 
.053 
.082 

.100 
.200 

.140 


$0.55. 


Face Powder Mar- 
velous." 




1.872 ounces 




$1.00. 


der.23 
Luzier's Cleansing 

Cream." 
Luzier's Lu Mar 




5.700 ounces. 




$2.50. 




1.802 ounce... 




$3.00. 


Massage Cream. 2* 




2.109 ounces.- 




$1.00. 


Cream." 
Coty Rouge Refill ». 
Max Factor Dry 

Rouge." 
Luzier Rouge " 




0.148 ounce.- 




$0.38. 




0.300 ounce 




$0.38. 




0.317 ounce... 




$1.00. 


Harriett Hubbard 




0.315 ounce 




$0.55. 


Ayer Cream 
Rouge." 
Elizabeth Arden Ve- 




0.357 ounce 




$1.00. 


netian Lip Paste." 

Springtime in Paris 
Lipstick. 19 

Bourjois Sales Corp. 
Lipstick." 

Coty's Special As- 
tringent." 

Harriett Hubbard 




0.140 ounce 




$1.25. 




n 070 niinPA 




$0.55. 




4.000 ounces 




$1.00. 




11.993 ounces 




$1.75. 


Ayer Special As- 
tringent." 




4.000 ounces. 




$0.85. 


Freshner." 
Luzier Skin Refresh- 




1,910 nnncp.9 




$2.50 


ener." 
Elizabeth Arden- 




2.323 ounces 




$2.00. 


Vcnetian Derma- 

tex Depilatory." 
Evening in Paris 

Perfume." 
Springtime in Paris 

Double Vanity. 20 




0.550 ounce. 




$2.75. 




O.O.IS nnnr.p. 




$1.75. 




0.566 ounce -.. 




$0.55. 


cle Remover. 2" 
Barbara O o u 1 d 




3.999 ounces... - 




$0.45. 


Hand Lotion.^' 
Food: 

Ovaltine " 


14 ounces 




$0.75. 


Instant Alberty's 




16 ounces 




$1.35. 


Food.28 




16 ounces.. -. 




$0.59. 











1 Journal of American Medical Association, vol. 101, No. 12, Sept. 2, 1933, p. 795. 

> Ibid., vol. 101, No. 3, July 15, 1933, p. 227. 

' Retail price under nonproprietary name. 

< Ibid., vol. 9S, No. 8, Feb. 20, 1932, pp. 658-«60. 

» Ibid., vol. 98, No. 4, Jan. 23, 1932, pp. 337,338. 

• Ibid., vol. 85, No. 1, July 4, 192.'i, p. 55. 

' Ibid., vol. 92, No. 10, Mar. 9, 1929, p. 828. 

• Ibid., Apr. 8, 1933, p. 1126. 

» Ibid., vol. 92, No. 6, Feb. 9, 1929, pp. 492-495. 

"> Ibid., vol. 104, No. 4, Jan. 26, 1935, pp. 335, 336. 

" Ibid., vol. 109, No. 14, Oct. 2, 1937, p. 1142. 

" Ihid., vol. 102, No. 4, June 16, 1934, pp.204!l 2042. 

" Ibid., vol. 110, No. 7, Apr. 23, 1938, p. 1385. 

" Legislative Document of the State of Maine, No. 683, 1935, prepared by Dr. O. R. Coomb, director. 
Bureau of Health, p. 26. 

" Ibid., p. 27. 

" Ibid., p. 28. 

" Ibid., p. 29. 

"Ibid., p. 30. 

"Ibid., p. 31. 

"Ibid, p. 32. 

" Ibid., p. 33. 

"Ibid., p. 34. 

" Ibid., p. 36. 

'* Ibid., p. 35. 

" Hearings before subcommittee on Interstate and Foreign Commerce, House of Representatives, F. R. 
6906, H. R. 8805, H. R. 8941, and S. 5, July and August 1935, p. 371. 

"Ibid., p. 381. 



84 



CONCENTRATION OF ECONOMIC POWER 



In particular, the price of items sold under widely advertised brands 
often shows a tendency to be substantially more rigid than that of 
similar less advertised products. For example, chart IX compares the 



Chart IX 



RETAIL PRICES 


OF MEN'S DRESS SHIRTS 


DOLLARS DOLLARS 


PER SHIRT PER SHIRT 


2.20 
200 

1 80 




















2.00 
1.80 














,,— '' 


























\ 


\ 




^B^^^ 




V^ 










1 60 






\ 


^■^^ 






^^-^,, 




1 


1.60 


140 
1.20 
100 
80 
60 
40 
.20 












~ 








1.40 
1.20 
1 00 
80 
60 




























































































.40 
.20 




















1929 1930* 1931* 1932 1933 1934 1935* 1936 1937 


* NO DATA 


■c=«WIOELY ADVERTISED BRAND 


^■■■B BRAND NOT Wl DELY. ADVERTISED 


US BUREAU OF LABOR STATISTICS 



trend of retail prices for one widely adveitised brand of men's business 
shirts with the average of a number of less-known brands meeting the 
same general specifications. The contrast is striking. Retail prices 
for the widely advertised product showed no change whatever be- 



CONCENTRATION OF ECONOMIC POWER 



85 



tween December 1929 and December 1932, whereas the average for 
all other comparable brands declined from $1.91 to $1.55. 

These dijfferences in price behavior characterize not only specific 
brands but also the general class of commodity to which the brands 
apply. For example, there is some reason for believing that brand 
preference plays a more significant role in the market for corn Hakes 
than in the market for rolled oats. In the case of the latter, the 
product is somewhat more standardized and price comparisons between 
rival brands are perhaps simpler. Chart X compares the trend of 
wholesale prices and ingredient costs for these two commodities. The 
contrast is marked. The price of corn flakes is quite rigid and appar- 



Chart X 



BREAKFAST CEREALS 

PRICES AND MARGINS 



i CENTS 
PER POUND 
22 



ROLLED OATS 



CORN FLAKES 



CENTS 
PER POUND 




v^ 






x.^ 


,,^RETAIL 








>^^^ 












^^- 




WHOLESALE^^ 






















y 


-^ 


X^./ 


y^ 


FARM V 


, . , , 





1935 1937 \ I9'26 1930 1935 1937 

(I) SOURCE BUREAU OF AGRICULTURAL ECONOMICS 



S BUREAU OF LABOR STATISTICS 



eiitly independent of the fluctuations of its raw material costs. It 
did not decline at all between 1929 and 1933, despite the fact that the 
cost of its ingj'edicnts declined to less than one-third of its pre- 
depression level. During th(i same peiiod, the wholesale price of rolled 
oats fell about 39 percent, paralleling the course followed by the price 
of its coustituents. 

A more general comparison may be made on the basis of the informal 
questioimaire, to which reference has been previously made. (See 
p. 78.) The 60 products for which data were obtained were ranked and 
divided into four groups or "quartiles", each group including approxi- 
mately the same number of items, in order of increasing significance 
of brand prefeience. The average wholesale prices foi- each quartile 



gg CONCENTRATION OF ECONOMIC POWER 

were then computed for the period between January 1926 and December 
1938. These items for which brand preference was a relatively sig- 
nificant market factor showed far greater rigidity, as evidenced by their 
relatively sm,aller decline during the depression, as v^ell as by a similar 
contrast in behavior during the 1937-38 recession. This comparison 
is shown in chart XI. In addition, the quartiles were also compared 
on the basis of the various criteria of flexibility described in appendix 
I. This comparison is shown in table 8. Again it is apparent that 
brands exert a distinct influence upon price flexibility, regardless of 
the manner in which it is computed. Those products whose markets 
are relatively unaffected by brand preferences showed greater fre- 
quency of change, greater decline during the depression, and greater 
recovery subsequently. 

They also showed some tendency to respond more quickly to chang- 
ing business trends, particularly during the recent downturn. Prices 
of products for which brand preference were unimportant declined 
after Jirne 1937, while those for which they were most important did 
not start falling until 6 months later. 

Table 8. — Relation of price fexihility to importance of brand preference — Median 
flexibility according to specified criteria, for selected food products, grouped into 
quartiles on the basis of consumers' judgment as to brand significance 

[Median of each criterion per quartile] 



Criteria of flexibility 



Quartiles— in order of in- 
creasing brand signif- 
icance 



Number of changes 1926 to April 1929 

Percent decline, June 1929 to February 1933 

Percent increase from depression low— 1937 peak 

Percent difference, average of 1929 peak and 1937 peak, less depression low index. 

Aggregate change less net change, 1926 to April 1929 _ 

Peak month of 1937 to 1938 



34 

55.0 
93.9 
57.9 
94.7 
6/37 



18 
45.8 
74.4 
45.5 
93.1 
6/37 



13 
34.3 
43.7 
39.5 
40.4 
9/37 



37.9 
44.6 

38.2 
15.7 
1,'38 



It is probable that the effect of brands and trade-marks upon the pat- 
tern of competition has been somewhat affected by recent legislative 
trends. In 44 States, under the so-called fair-trade laws, the manu- 
facturer of a trade-marked article can, by contract, stipulate the min- 
imum price at which such an article may be resold by any dealer or 
distributor. Under the provisions of these laws, once such a contract 
has been signed between the owner of the trade-mark and any dis- 
tributor within a State, its provisions automatically become binding 
upon all other distributors, even though they may not have assented 
to such a contract. The Federal Miller-Ty dings Act exempts con- 
tracts of this kind between trade-mark owners in one State and dis- 
tributors in another from the provisions of the antitrust laws. 
_ Wide use has been made of the provisions of these laws in connec- 
tion with the sale of dru^s, toiletries, cosmetics, books, and Hquors; 
in other fields such as radios and tobacco products, their use has been 
more sporadic. Few price-maintenance contracts have been issued 
for grocery products, except in one or two States, notably Ohio, where 
minimum prices are jxperimentally established for a very few staple 
products. 



CONCENTRATION OF ECONOMIC POWER 



87 



e> 



CO 


o 


o 


O 


o 


O 


o 


O 
< 




(/) 


o 


^,</) 


UJ 


-•h 


H 


H CD 


o 


OC < 


UJ 


< X 

3 


_J 


O O 


UJ 


z 


(n 


0= >« 


Li. 
O 


o qq2 

Ll. " 




tr <»> 


CO 


oiuS! 


UJ 


si" 


o 


a: 


en 


Q. 


UJ o 




u. o 


UJ 




-J 


mO 


< 


<^- 


(0 


_i 


UJ 


o 


-I 
o 


(0 


X 


o 


^ 


3 




O 




CC 




Q. 





UJ 

_l 




\ 


t 






< 

O 

o 

z 


/ 


^ J 


9 






o 

UJ 

X 


^" 










^ 












c> 












^ 


^^ 


y 










UJ c n 
- ? * 

a: lo 




fe^ 


V^ 


> 




Ul 


-FOURTH 
Vfl W>««f5 W 

1 


1?* 









< 

O 

Q 




y^ 






l! 












^^ 




o 2 








^T 


? 












^ 


^ 




^ 










5 
















O ii £ 3 



:47149 — 41— No. 1- 



gg CONCENTRATION OF ECONOMIC POWER 

The most obvious and immediate effect of this legislation, and the 
one primnrily intended by its sponsors, has been the reduction or elim- 
ination of price competition between retailers in connection with the 
sale of nationally advertised merchandise. In those cases in which 
the minimum price is set at the advertised list price, there is no room 
for price competition as regards the products affected. For example, 
this is the situation which prevails with regard to some price-main- 
tained cosmetics. Wliere the minimum price has been set at a level 
below list, some scope for price competition remains. In the case of 
branded drugs, for example, there is a tendency to fix the minimum 
price at list minus 20 percent, minus 1 cent (e. g., if the list price is 
$1 , the contract minimum is 79 cents; if list is 75 cents, contract mini- 
mum is 59 cents; if list is 50 cents, contract minimum is 39 cents, etc.). 
In practice, however, there may be some tendency, though certainly 
not a universal practice, for all retailers to charge the contract 
minimum. 

Consequently, the focus of competition between retailers in the fields 
most affected (i. e., retail druggists, booksellers, and liquor dealers) 
has necessarily shifted. Those stores which emphasize price appeal 
have concentrated their efforts upon private brands which are not 
price maintained. One leading opponent of these laws has made its 
private brands available to any retailers who wish to compete on a 
price basis. The advertising of these retailers often emphasizes their 
private brands sold at reduced prices. Frequently, the advertising 
carries detailed technical comparisons designed to show that the 
product bearing the private brand is in every way equivalent to the 
nationally advertised, price-maintained article. 

On the other band, those retailers who favor the principle of price 
maintenance seized upon the elimination of price competition as an 
opportunity to feature such elements as service or convenience.^^ 

The effect of price-maintenance legislation is not confined to the 
pattern of competition between distributors. It is probable that it 
has also distinctly influenced manufacturers' sales strategy. In gen- 
eral, price-maintenance contracts provide a substantial margin for the 
wholesaler and retailer. Retail drug representatives have repeatedly 
insisted upon 33!^ percent of selling price — equivalent to 50 percent of 
cost — as the minimum margin acceptable. The manufacturer who 
issues the contracts has therefore decided that it is more important 
for him to retain the goodwill of his distributors than to appeal to the 
public directly by selling his product as cheaply as possible. 

The sales manager of a drug manufacturer summarizes this situa- 
tion succinctly in an article in Printers' Ink.^* He explains to a critic 
why manufacturers issue price-maintenance contracts: 

If he has followed the history of the fair-trade movement he should know that 
the laws were forced through by independent retailers; that very few manufac- 

" FuDflamentally, this controversy is not so much one between individual retailers as between com- 
petine channels of distribution. The mnjor proponents of price maintenance are members of the tradi- 
tionnl orthodox channels of distribution; that is, the independent wholesaler and the relatively small inde- 
pendent retailer. Aeainst thcra are arrayed some of the mass distributors, particularly large department 
stores and mail-order houses, whr usually purchase directly fr-^m the manufacturer rather than indirectly 
through the wholesaler. However, there exists certain anomalies in this line-up. An important group of 
mass distributors, the brpe national drug chains, generally support price maintenance. The reputation 
of these chains was originally built upon price appepl, but at present it is sufficiently established to permit 
tijem to depend upon their prestige and to benefit fr^^m the larger [irofits which price maintrnance of.ers. 
On fhe other hand, a number of smaller units, independents, or small chains, depend largely upon price 
appeal and have opposed the principle of price maintenance. 

** Printers' Ink, August 26, 19^7. 



CONCENTRATION OF ECONOMIC POWER 89 

turcrs hav'^e taken an active part in obta'ning passage. He should know, al?o, 
that in the drug and cosmetic fields many manufacturers are being compelled to 
operate under these laws against their wishes and better judgment. Pressure is 
being brought to bear through the retailers' associations and their fair-trade 
committees. 

Manufacturers who do not file minimum prices arc having their troubles with 
independent outlets in some States. Those manufacturers, such as ourselves, 
who have filed prices have had to set higher minimums than they desired in some 
instances. The committees are not permitted, supposedly, by law to dictate 
what the minimum prices shall be but they are doing just that by refusing to 
approve contracts containing prices which do not give the retailer what they 
consider to be a fair-profit margin. In most cases the committees are insisting 
on a mark-up of at least 20 percent and usually 33)i percent. 

Ifc is not surprising, therefore, that many drug manufacturers, in 
advertising to the trade, stress the high margins which they are offer- 
ing the retailer on sales of their product. The following advertise- 
ments, culled at random from various drug trade periodicals, illustrate 
this trend. Many of them advertise mark-ups substantially higher 
than the 33}^ percent minimum demanded by the trade: 

Even at minimum prices — 10-cent bottle profit when you sell Squibb's Milk of 
Magnesia 12 ounces at minimum 29 cents." 

3|C * * * * * * 

Dr. West's Miracle Tuft Toothbrush, retail price 35 cents. Weco's policy of 
price and profit protection by every legal means to insure full 20 cents for you 
ou every sale.^^ 

4c * * f * * * 

(Johnson and Johnson) — Fair trade minimums protect your interest and give 
you at least 42 percent average profit." 

******* 
J. & J. Red Cross Adhesive Plaster: Assortment cost $25.84 — your profit 48.3 
percent — sell at $50.04. * * * At fair trade minimums you meet competition 
and make a profit of 48 percent on the selling price.'* 

******* 
Your profits up from that big 45 percent to 54 percent on Co-Ets 48's.^' 
******* 
Solarex — Dark lens glasses: A high profit on all Folarex dark lens sun glasses, 
assured bv strict adherence to the Miller-Tvdings fair-trade laws. You pay 
$10.80. You sell for $18.36. Your profit " $7.5fi. 

******* 
In addition to offering you a diversified line of nationally known, popularly 
priced products of high quality, we prescribed full advertised j>rices to insure 
you a satisfactory profit. You can buy our products from your jobber, or, if you 
prefer, you can take advantage of our liberal credit terms, which range from 3 
to 6 months on direct purchases in quantities as small as $9.60, yielding an aver- 
age profit of 44 percent * * * Our full advertised prices are our minimum 
retail prices.^' 

******* 
$6.60— Cost Major Donald Duck Deal, 90 assorted packages, 1 large $4 Major 
Donald Duck, 1 Disney Counter Display, sells for $]3.'"' 

* :|c • * * * * 

Fifty percent average profit on all McKesson sales.*' 



" Drug Topics, May 16, 1938, p. 22. 
" Ibid., Dcccmbf-r 12, ]9ZS, p. 5. 
" Ibid , July 18. 1939, p. 7. 
'•Ibid., May 30. 1938. p. U. 
"Ibid.. April 3. 1939, p. 6. 
<»Ibid , March fi. 1939. pp. 8, 9. 
*' Ibii., June 20, lO'^S, p 24. 
" Ibid., March r., 1939, p. 53. 
« Ibid , August 29. 1938, p. 23. 



9Q CONCENTRATION OF ECONOMIC POWER 

Since price competition between rival manufacturers in such fields 
as drugs and cosmetics is largely ineffective as regards branded goods, 
price maintenance may have induced some reorientation of tactics 
by concentrating further attention upon the distributor and less upon 
the consumer. 

The effects of price maintenance upon price behavior have been 
the subject of much controversy. There have been no adequate 
impartial surveys conducted. It seems probable, however, that prices 
in those stores which used to feature price appeal have risen, and that 
perhaps there has been some minor decline in those outlets which 
competed on bases other than price. For example, the July 1938 issue 
of Dun's Revio.w compares prices for 50 fast moving drug and cosmetic 
items in the State of New York before and after the issuance of price 
maintenance contracts. These figures show that for those drug stores 
which featured price appeal, there was an average increase of 29 per- 
cent. The increase of one item was as high as 67 percent. In contrast, 
neighborhood drug stores which did not compete on a price basis 
showed an increase of only 2 percent in New York City and decreases 
varying from 4 percent to 10 percent in smaller cities. However, the 
entire group covered included only 40 stores. Moreover, the data for 
the first group of stores were obtained through the cooperation of a 
trade association which has been very active in opposing the legisla- 
tion, while those for the second group were obtained through the aid 
of an association which had been its vigorous proponent. Figures of 
this kind are particularly hard to verify, because there are few, if any, 
drug stores which maintain records of the prices which they charged 
in the past. Finally, it should be noted that the general trend of 
wholesale and retail prices during the period covered was downward. 
Consequently, the reliability of such surveys is somewhat questionable, 
though with very broad reservations the trend displayed may have 
some validity. 

It seems likely, too, that price maintenance has increased price 
rigidity in the wholesale as well as the retail markets for the com- 
modities affected. When a manufacturer has issued contracts in 
many states stipulating minimum resale prices, any change in price 
involves a somewhat complex and expensive mechanical process. 
It has already been shown that there is a tendency for prices of branded 
goods to remain relatively rigid. Price maintenance, by making it 
more difiicult to initiate price changes, has perhaps augmented the 
tendency. 

It is apparent, then, that brands, particularly for consumer's 
goods, must be considered a major aspect of nonprice competition. 
The use of brands and trade-marks materially lessens the intensity 
of price competition for the products affected. This may result in a 
level of prices somewhat higher than would othery^ise be the case. 
It almost certainly impairs price flexibility. Both of these trends 
may be reinforced by price maintenance legislation, though adequate 
data relating to its efi'ects are unfortunately lacking. 

OTHER FORMS OF NONPRICE COMPETITION — ESCAPE DEVICES 

It has been suggested earlier (pp. 55-56) that the altering focus of 
competition reflects to a considerable extent the attitude of business- 
men based upon considerations of expediency. To many business 



CONCENTRATION OF ECONOMIC POWER QJ 

firms the concentration of effort upon nonprice factors represents a 
distinct advantage, particularly as regards profit margins per unit 
of sales. 

These considerations of expediency do not, however, apply to all 
kinds of business firms equally. If price competition is absent, 
those firms which are best equipped to compete on the basis of quaUty, 
service, or prestige, are most likely to retain or expand their shares 
of the market. Conversely, those companies whose reputations have 
yet to be established encoimter distinct difficulty in marketing their 
wares if they are unable to offer some price inducement. 

In many industries this situation is more or less implicitly recog- 
nized by custom. The larger ** and better known companies often 
permit their smaller competitors to imdersell them by a slight margin, 
thereby permitting them to compensate in price for their disadvantage 
in nonprice competition. It may be considered that such a practice 
establishes a more or less direct price equivalent for certain intangible 
nonprice elements. 

Naturally, arrangements of this sort do not always survive periods 
of stress. During an acute buyers' market, for example, price often 
becomes an increasingly important competitive weapon and is used 
freely even by those whose normal tactics and inclinations avoid the 
use of price competition. During such periods, the small firm's edge 
often becomes reduced or obliterated. Efforts on the part of small 
firms to retain their edge sometimes culminate in severe price wars. 
Differences of this kind in the competitive position of different firms 
become particularly apparent whenever efforts are made to regulate 
market practices. Under National Recovery Administration, for 
example, these conflicts of interest become evident in many industries. 

Price regulation constituted an important aspect of many of the 
codes of fair competition. Regulations which tended to equalize 
prices and to eliminate price competition necessarily placed certain 
firms at a marked disadvantage. Thus, according to a report of the 
Division of Industrial Economics summarizing the National Recovery 
Administration experience: 

In whatever way uniform prices were achieved, their intent and effect were 
usually to impair the competitive strength of those concerns that had formerly 
depended upon price appeal. In the retail solid fuel industry, for example, dis- 
tribution by truck had expanded markedly during the depression. Small dis- 
tributors maintained no storage yards, but bought truckloads from the mine or 
the freight terminal and delivered directly to the consumer. Since their service 
was often irregular and their prestige not well established, they could obtain 
business only by price concessions. The effect of the industry's minimum 
prices was to deprive them of their selling argument and also to weaken the very 
small coal yards. 

******* 

In the Cleaning and Dyeing Trade the cash-and-carry cleaners contended that 
they could not keep their business unless they were permitted to sell below the 
prices of those cleaners who receive and deliver the garment at the customer's 
residence. Their refusal to abide by the uniform minimum prices established 
under the code was an important factor in the breakdown of the price structure. 
In the Wholesale Confectionery Trade a cash-and-carry wholesaler complained to. 
a member of his local code authority that he must either allow a larger discount 
than his competitor who delivered merchandise and extended credit or else go 
out of business. Aa he later described the conversation: "The answer was this,. 

" In manufacturing industries the advantage of prestive is usually, though not always, on the side of the 
largo, well-established firms. In the retail and wholesale trades, however, it is often the srhaller independent 
concern which prefers to compete on grounds other than price. 



g2 CONCENTRATION OF ECONOMIC POWER 

'Mr. Lieberman, you have been a cash-and-carry man. From today on you 
will become a service man.' I said, 'You are a code authority lawyer today; 
what would happen if someone wanted you to become a criminal lawyer? Would 
you like that' " '^ 

In other industries, prestige, rather than service, was a factor. 
Thus in the business furniture industry there was a serious conflict 
between the large manufacturers who depended upon their established 
reputation and smaller ones who could only operate on the basis of 
price appeal. Any program designed to eliminate price competition 
seemed congenial to the interests of the larger producers. The con- 
flict in point of view between those who favored price competition and 
those who wished to eliminate it entirely in favor of nonprice com- 
petition is clearly revealed in the following extract from a National 
Recovery Administration hearing. A speaker representing a very 
large producer stated: 

One of the serious difficulties in our business has been that the large manu- 
facturers by means of their designers, and advertising and other promotional 
efforts have created a demand for these products — you will recall that there is, 
after all, no particular demand for these products unless it is created — whereas the 
small dealers undersell, and undercut the eflForts of these large manufacturers, and 
the results in the past have been most disastrous. 

* :i! * * * * * 

The manufacturers who have developed these goods and the dealers who have 
sold it (sic) and created the demand must not have their business taken away from 
them— or all the profits taken away, which amounts to the same thing, by small 
manufacturers or small dealers from over the other side of the track, who are 
willing to sell at any price and thus spoil what was once a profitable business. 

Our code provides that there shall be no discrimination against the little fellow 
but nowhere, in any code, have I seen any reference to the small operator being 
entitled to protection or an "edge" at the expense of the larger group. The small 
operator is entitled to all the business he can get on the right terms and on equal 
terms with the rest of the industry. 

The representative of the Consumers' Advisory Board replied: 

Mr. BoFFEY. You made the statement that the small operator should not be 
allowed to take advantage of the big operator. 

Mr. Keeling. I feel that very keenly. 

Mr. BoFFEY. As between the small operator with limited sales promotion, 
and the large manufacturer who is able to use advertising and create consumer 
demand, who is going to get the order from the consumer on an equal basis? 

Mr. Keeling. I would like to answer that in a rather roundabout way. Bear 
in mind this, that all the large manufacturers were small at one time, and collec- 
tively, and in some cases individually, they have spent millions of dollars in devel- 
oping this business, and any small manufacturer has the right to come in tomorrow 
and open up a little shop in a back alley some place, but there is no obligation on 
my part to hold an umbrella over him and protect him until he is a responsible 
competitor. He is entitled to all the business he can get on even terms. When 
my firm started we asked no odds of anyone, and there are many other manu- 
facturers who did the same thing. They started in business and went out on even 
competition and built their business up, and there are many examples of manu- 
facturers who have started within the last 10 years and have built up a substantial 
business and asked no quarter of anyone. There are many manufacturrers doing 
business in a loft, or in a back alley. They claim a preference and a protection 
they are not entitled to. The small dealer is not entitled to any protection. He 
is entitled to all the business he can get on the right terms. 

Mr. Rauch. You also referred to there being no reason why the large producer 
should hold an umbrella over the small producer. You don't mean to infer by 
that if the small producer does not incur a large advertising expense, for example, 
he should be compelled to sell at a price which would include that expense? 

«• Miniipum Price Control— Stafl Studies— Division of Industrial Economics, ch. II, pp. 53, 57, 58. 



CONCENTRATION OF ECONOMIC POWER 93 

Mr. Keeling. I didn't mean that, but I mean this: If I have a file of a certain 
grade as the man across the street who is just going into the business makes, 
he has no right to undermine me by underselling me.. I like him personally and 
all that sort of stuff, but I am not going to pat him on the shoulder and give him a 
couple of dollars every time he sells a file. When my company started we asked 
no quarter; we went out and got the business, so I see no reason for any edge or 
protection from anyone in any line of activity. Let them go out and meet com- 
petitive conditions as they find them. That is the way we feel about it. 

Mr. Rauch. You maintain, do you not, that the small individual has the right 
to file any price he wants, and you have the right to meet it? 

Mr. Keeling. That is right. Any manufacturer has the right to file any price 
he chooses at any time, but when once filed, he must sell at that price. He can 
change it at any time, but he must file his change, and anybody has got the right 
to go out and meet him.''^ 

A somewhat similar situation occurred in the tire-manufacturing 
industry, where again it seems that smaller manufacturers could 
compete with the larger only on the basis of price. The consequences 
of the code provision designed to limit the freedom of price competition 
were expressed by a small producer in the following words: 

We don't want to sell below cost. We don't propose to sell below cost, but 
you notice what they add to it. Nobody must sell below cost unless to meet 
competition. 

Well, up here is a big manufacturer. Everybody knows he has to sell above us 
if he can make money. He can do it and has consumer acceptance that carries 
him on. He would starve if he sold at our price. There is no question about it. 
He does not have to. He keeps on advertising. Here is our cost. He does not 
have to sell at his cost when he meets our competition, so he can come down and 
meet us and we have not any right under the formula to fall below; in other words, 
as I have heretofore said, w-e are chained to a post, and he comes and gets us and 
sells against us as long as he wants to because of that provision. Don't you see 
where it all leads? ^' 

Illustrations of this kind could be multiplied indefinitely. Enough 
has been said, however, to show that a sliift from price competition 
to nonprice competition may not benefit all the firms in an industry 
equally, even if the longer term aspects of the issue be neglected. 
In general, established concerns are often content to retain their 
positions in the industry, and to avoid price competition, while growing 
companies must use aggressive tactics to expand their shares of the 
market. 

One procedure for equalizing the situation has already been sug- 
gested; that is, a state of affairs in which firms with superior prestige 
permit those whose prestige is inferior to charge a somewhat lower 
price. Where this alternative is unavailable, either because members 
of the industry do not accept the custom or because of some form of 
price regulation, other devices have been attempted. Under National 
Recovery Administration, for example, an amazing degree of ingenuity 
was displayed in devising new forms of competition to take the place 
of those prohibited by the codes. Quoting again from the report of 
the Division of Industrial Economics: 

Wherever minimum-price systems cause peculiar difficulties for one part of an 
industry, there was a, direct incentive to evade or destroy the minimum prices. 
Minimum-price provisions were consequently difficult to enforce. 

Opportunities for evasion were manifold. Since the code provisions had been 
hastily written, legal ways of selling below the minimum prices could often be 
discovered. Even the most carefully drawn code provision was seldom an adequate 
check upon a determined price cutter. Price concessions could be made by 

« Ibid., pp. 54, 55, 56. 
"Ibid., p. 56. 



94 CONCENTRATION OF ECONOMIC POWER 

greater liberality in the quality or quantity of the product or in any of the accessory 
services or terms of sale; and to regulate every detail of each transaction was 
impossible. 

In the sale of tires prices could be cut by extending the duration of guaranties 
of performance. Price concessions in the retail sale of automobiles consisted 
largely of higher trade-in allowances upon used cars. In the lumber and bitu- 
minous coal industries, price cutters delivered better grades than had been ordered 
and paid for. Inthe bituminous coal industry some producers offered guarantees 
which their customers knew were excessive and contracted to forfeit a part of the 
price if the coal was below the guaranteed standard. In many industries premiums 
or free deals were used to reduce the net price. Some producers attracted trade 
by offering lavish entertainment to buyers. Others offered unusually liberal cash 
discounts and credit terms. Long-term contracts whose date was alleged to be 
prior to the minimum price system served as excuses for sales at low prices to 
favored customers. 

******* 

Successive efforts to plug loopholes in minimum-price provisions made the 
provisions increasingly complicated. Detailed regulation of terms of sale decreased 
the flexibility of business transactions, caused inconvenience to many concerns 
which were not using the prohibited practices to evade the code, and multiplied 
the points at which governmental supervisions and enforcement were required. 
Petty regulations became so complicated that in some instances they were a 
nuisQ,nce both to the industry and to the administration. An example of the 
detailed character thus given to Federal law is the stipulation in the Retail Tobacco 
Code that "the retailer may give not more than 1 pad of matches for each unit sold 
or 5 pads per box of 25 cigars, or 10 pads per box of 50 cigars sold." *^ 

Perhaps the best commentary on the variety of forms which compe- 
tition can assume and the variety of ways in which price quotations 
can be indirectly modified is the following list of the types of regulation 
which were attempted under National Recovery Administration in the 
eflFort to regulate all forms of competitive tactics. This summary of 
code provisions is in a sense an index to all the varieties of nonprice 
competition with which business men in various industries were 
reasonably familiar, though even these did not include all the 
possibilities. 

Types of Concessions to Influence Sales as Dealt with by Codes 

1. Concessions primarily related to time of buyer's payment: 

Discounts. 

"Terms" and "conditions" of sale or payment. 

Credit practices. 

Credit terms. 

Cash discounts. 

Periods of free credit. 

Interest rate beyond free-credit period. 

Datings. 

Seasonal datings. 

Installment sales. 

Deferred payment. 

Anticipation of bills. 

Sales to delinquent accounts. 

Sales not contingent upon buyer's credit standing. 

Payment due when money received from other sources. 

Retained percentages. 

2. Concessions primarily related to risks of buyer: 

Guarantees. 

Price guarantees. 

Contracts for deferred delivery not subject to price change. 

Price offer not subject to change. 

Advance notification of price change. 

Delaying acceptance of order. 

"Ibid.,pp. 70, 72. 



CONCENTRATION OP ECONOMIC POWEU 95 

Options. 

Agreements indefinite as to time or quantity. 

Offers w ithout time limit. 

Offers not expiring within specified period of time. 

Offers without withdrawal provisions. 

Guaranties against defective goods. 

Product guarantees. 

Product guarantees against other than defective merchandise. 

Uniform product guarantees specified in code. 

Guarantees in excess of manufacturers' warranty (distributing and 

fabricating codes). 
Maintenance guarantees. 
Adjusting incorrect shipments. 
Accepting return of merchandise. 

Accepting return of obsolete, discontinued or "unsalable" merchandise. 
Exchanging merchandise. 

Accepting return of other than defective merchandise. 
Repurchase agreements. 
"Money-back agreements. 
Sales subject to trial. 
Sales on approval. 
Shipments without order. 
Sales on consignment or memorandum. 
Storing goods with customer. 
Display for direct sale in customer's store. 
Renting or leasing industry products. 
Resale guarantees. 

Agreeing that payment be governed by sales of secondary product. 
Accepting orders for specific jobs before customer secures award. 
Guaranteeing accounts due customers. 
"Compensation of customer for business losses." 
Unilateral agreements (buyer not bound). 
Contracts containing penalty clauses. 
Contracts containing liquidated damages clauses. 
Contracts not subject to adjustment necessitated by noncontrollable 

factors. 
Assuming liability for nonperformance caused by noncontrollable factors. 
Assuming liability for damage to buyer's drawings or equipment caused 

by noncontrollable factors. 
Assuming liability foi* errors in plans or specifications furnished or approved 

by buyer. 
Assuming liability for consequential damages. 
Assuming liability for patent infringement. 
Failure to give advance notice of discontinued lines. 
3. Concessions primarily related to supplying additional goods: 
Any gratuities. 
Free deals 
Premiums. 

Sales of other or additional goods at reduced prices. 
Combination sales. 
Combination offers. 
Coupons. 
Samples. 
Scrip books. 
Prices. 

Sales promotion awards. 
Containers. 
Special containers. 
Labels. 

Special labels. 
Special equipment. 
Accessories. 

Certain advertising material. 
Display materials. 
Printed matter (other than advertising material). 



96 CONCENTRATION OF ECONOMIC POWER 

4. Concessions rendered buyer through use of seller's employees or property. 

Any unusual service. 

Providing sales help. 

Demonstrating. 

Estimating. 

Furnishing drawings. 

Furnishing plans and specifications. 

Furnishing surveys and formulas. 

Tnstaljation and erection. 

Inspections. 

Furnishing unusual processing services soecified in codes. 

Stampings or markings. 

Repair and maintenance. 

Reconditioning. 

Engineering services. 

Handling. 

Crating or packing. 

Repacking. 

Delivery service by seller's trucks. 

Warehousing and storage. 

Lending of equipment. 

Permitting retention of trade-in equipment. 

5. Concessions rendered buyer through financial assistance or favors: 

Favors. 

Entertainment. 

Patronizing publications in which buyfer is interested. 

Participating in group showing. 

Gifts. 

Gifts to organizations (in which buyer is interested). 

Paying buyer's personal expenses. 

Paying permit or inspection fees of buyer. 

Paying customer's insurance. 

Paying customer's advertising expenses for products other than member's 

Assuming reversed telephone or telegraph charges. 

Assisting customer to obtain used products for trade-ins. 

Assisting customer to find purchaser for used products. 

Subsidizing or financing buyer. 

Employing customers, employees, relatives, associates. 

Purchase of buyer's capital stock. 

Financing payments due customer. 

6. Concessions related to manner and/or time of shipment: 

Split shipments. 

Shipments smaller than specified minimum. 

Tolerance in time of shipment 

Deferred delivery. 

7. Concessions through payment or diversion of commissions or fees to customer: 

Payment of commissions or fees by members to buyers. 

Payment of commissions or fees by members to other than bona fide or 
controlled sales representatives. 

Payment of commissions or fees by members to purchasing agents com- 
pensated by buyers. 

Payment of commissions or fees by agents of members to buyers. 

Splitting of commissions or fees by agents of members with agents of 
buyers without buyer's knowledge. 

Splitting of commissions or fees by members or their agents with buyers 
or their agents. 

Payment of brokerage to other than bona fide brokers. 

8. Concessions through allowances or payments for value rendered by buyer: 

Allowances. 
Trade-in allowances. 
Advertising allowances. 
Catalogue allowances. 
Distribution service allowances. 
Container allowances. 
Installation allowances. 
Allowance for further processing. 



CONCENTRATION OF ECONOMIC. POWER 97 

Maintenance or repair allowance. 

Rental allowances for space hired. 

Allowance on supplies furnished by purchaser for production of product 

ordered. 
Cartage allowances when buyer receives goods at factory. 
Allowance for special service. 
Label allowances. 
Purchasing from buyer. 
Renting from buyer. 

9. Concessions through acceptance of competitor's materials from buyers: 

Exchange of own for competitor's products. 
Purchase of competitor's products from customer. 

10. Concessions through sale of substandard or obsolete goods: 

Sale of seconds. 

Sale of used goods. 

Sale of damaged goods. 

Sale of rebuilt or overhauled goods. 

Sale of demonstrators. 

Sale of obsolete goods. 

Sale of discontinued lines. 

Willful manufacture of substandard products. 

Sale of returns. 

Sale of scrap. 

Sale of chaflF. 

Sale of culled goods. 

Sale of surplus stock. 

11. Concessions granted during performance contrary to provisions of agreement: 

Rebates. 

Departure from credit t-erms of contract. 

Settlement of old accounts at less than full value. 

Permitting improper deductions when buyer remits. 

Permitting buyer's cancelation or repudiation. 

Substitution of higher quality or greater quantity of goods. 

Substitution of new contract at lower price. 

Receipting bills before payment. 

Extending or exceeding contract. 

Collateral agreement not to enforce part of contract. 

Departure from delivery date of contract. 

Retroactive settlement or adjustments. 

12. Acceptance of forms of payment in which concessions may be concealed: 

Accepting securities. 

Accepting buyer's capital stock. 

Accepting goods from buyer. 

Accepting real or personal property. 

Accepting negotiable instruments. 

Accepting other than lawful money. 

Accepting credit transferred from one buyer to another. 

Selling for customer account and accepting proceeds for credit. 

Accepting form of payment other than specified in code. 

Accepting rental payments as part payment on purchases. 

Accepting deposit made to another manufacturer. 

Assignments (of receivables, etc.). 

13. Types of agreements, offers, invoicing, etc., by means of which concessions 

may be concealed: 
Oral agreements. 
Oral offers. 
Oral appraisals. 
Oral orders. 
False billing. 
False orders. 
False receipts. 
False agreements. 
False offers. 
Delayed billing. 
Misdated invoices. 
Misdated contracts. 



gg CONCENTRATION OF ECONOMIC POWER 

Misdated orders. 
Misdated offers. 
Misdated receipts. 
Invoices omitting terms of sale. 
Invoices omitting date of shipment. 
Invoices omitting specifications. 
Invoices omitting other specified detail. 
Agreements omitting terms of sale. 
Agreements omitting date of shipment. 
Agreements omitting specifications. 
Agreements omitting other specified detail. 
Offers omitting terms of sale. 
Offers omitting <late of shipment. 
Offers omitting specifications. 
Offers omitting other specified detail. 
Orders omitting terms of sale. 
Orders omitting date of shipment. 
Orders omitting specifications. 
Orders omitting other specified detail. 
Split billing. 
Lump sum offers. 
UniteWeed billing. 

Orders not subject to member's acceptance. 
Auction sales. 
14. Types of agreements, offers, invoicing, etc., primarily designed to prevent the 
concealing of concessions: 
Uniform contract form. 
Uniform order form. 
Uniform bid or quotation form. 
Standard invoice form. 
Standard leasing form. 
Form of contract. 

It is apparent then that trade-practice regulation, such as that 
practiced undei* the National Recovery Administration, often serves to 
divert the focus of competition. However, it may not prevent or 
stifle it; emphasis shifts from those aspects of the transaction which 
are regulated to others which are free of control. 

The National Recovery Administration experience was used to 
illustrate this point because it covered so wide a sector of industry 
and because of the wealth of data available as to its effects. How- 
ever, the phenomena observed are by no means unique to that period. 
Similar shifts in competitive emphasis are constantly occurring, not 
only because of the impact of Government regulation but also as a 
result ol all the constantly changing pressure to which the business- 
man is subjected during the ordinary conduct of his affairs. 

Thus, it is often hiexpedient for the individual firm to change its 
nominal price quotations to secure large individual orders. To do 
so may arouse the resentment both of competing sellers and of buyers 
not equally favored ; since the Robinson-Patman Act was passed it 
may even be illegal to do so. Consequently, many devices similar 
to those considered in connection with National Recovery Adminis- 
tration are utilized to grant indirect concessions in unregulated mar- 
kets, as well as in those subject to some form of Government control. 

Frequently these concessions amount so directly to modifications 
of the nominal or quoted price that they arc not, properly speaking, 
aspects of nonprice competition. However, since they are not usually 
reflected in published price statistics, they must be accorded diie 
weight in any interpretation of the movements of price indexes. 



CONCENTRATION OF ECONOMIC POWER 



99 



An excellent illustration is afforded by the market for sulfuric 
acid. The published price quotation for thi^s commodity is remark- 
ably rigid. It showed no change at all between November 1927 and 
May 1937. In all probability, moreover, this quotation accurately 
reflects what the small buyer was required to pay during this period. 

However, there is evidence that a very material share of the total 
sulfuric acid production is sold on the basis of contracts covering a 
period of a year or longer. The prices stipulated in these contracts 
seem to be subject to material modification by bargaiiimg. They 
are probably substantially lower than the published quotation at all 
times, and also seem to show appreciably greater flexibility. 

Thus, the following table contrasts the nominal quotations as re- 
ported by the Bureau of Labor Statistics with the actual prices paid 
by a large buyer: 



Table 9.- 



-Comparison of quoted prices for sulfuric acid with prices actually paid 
by a large buyer 



Year 


Average quoted 

price per ton 

(converted to 

100-percent 

basis) ' 


Price paid by 
large buyer per 
ton (100-per- 
cent basis) 2 


Year 


Average quoted 

price per ton 

(converted to 

100-pcrccnt 

basis) ' 


Price paid by 
large buyer per 
ton (100-per- 
cent basis) 2 


1926 


$15. 67 
16.20 
16.63 


$15.35 
15.94 
15.73 
12.85 
12.18 
12.37 


1932 . 


$16. 63 
16.63 
16. 03 
16.63 
16.63 
17.21 


$12 38 


1927.. 

1928 


1933 

1934 . 


12.25 
14.96 


1029 _.' 16.63 

1930 16.63 


1935 

1936 


14.68 


1931 


16.63 


1937 


13.52 



' The Bureau of Labor Statistics quotation was for 66° B acid. It was converted to a 100-percent basis 
by dividing by 0.932, which is the acid content of 06° acid. This basis of conversion is approximate, but it 
is adequate for the purpose of comparison. 

' All these prices, with the exception of the year 1934, were on the basis of contracts for the period of 1 
year or longer. The 1934 price represented noncontract purchases. 

Sometimes wide concessions below the quoted price level are made 
available to buyers generally, rather than to selected customersr Re- 
ported and published prices remain stable, while the level at which 
business is being transacted fluctuates sharply. The National Re- 
sources Committee cites the following examples of this technique in 
a report just published.*^ 

(1) The fertilizer industry. — Some clue to the extent to which rebates and con- 
cessions affect nominal fertilizer prices may be obtained from a report of the 
Federal Trade Commission. s" According to this report, there was widespread 
selling of fertilizer at prices far below list during the years 1921 and 1922. The 
Bureau of Labor Statistics index showed no change in price between January 
and December 1921. It showed a substantial cut between December 1921 and 
January 1922, and perfectlj' stable price quotations through 1922. According to 
the Trade Commission, however, "in 192i and 1922 price lists were published as 
usual, but were so high that the companies were unable to maintain such prices 
for any length of time." The Commission reproduced many letters taken from 
the files of fertilizer manufacturers which reveal the extent to which rebating was 
practiced. During this period, for example, Swift & Co. were selling to dealers 
at discounts of 33.3 percent plus 5 percent off schedule, and, in addition, granting 
a direct rebate of $2 per ton. The American Chemical Co. instructed its North 
Carolina sales managers to go as far as 33.3 percent below list wherever necessary 

" The Structure of the American Economy, National Resources Committee, pt. I, June 19?Q. p. 178. 

*> Fertilizer Industry. Letter from the Actmg Chairman of the Federal Trade Commission transmitting 
in response -to « Senate resolution ot June 17, 1922, a report on certain phases of the fertiliier industry. S. 
Doc. 347, 67th Cong., 4tb soss. 



^QQ CONCENTRATION OF ECONOMIC POWER 

to meet competition. On April 10, 1922, * * * a, district manager of the 
American Agricultural Chemical Co. wrote to its vice president: "I think every 
concern operating out of Atlanta, with no exception, is making almost any price 
it sees fit in order to get some business. * * * All managers and division 
managers practically admit that there is no regular price." 

Although similar documentary evidence is not available for periods subsequent 
to 1921 and 1922, persons close to the trade state that similar practices have re- 
curred under similar conditions. 

(2) Salt industry.— A parallel situation occurred in the salt industry during the 
latter part of 1935. * * * Price quotations show no decline from March to 
September 1935. Yet, according to a National Recovery Administration study, 
a price war started early in 1935 and discounts of as much as 30 percent were 
being granted by August 1935. According +o this report — 

"Particularly during time of depression, in efforts to bolster declining sales 
volume, many members of the industry offered secret prices, discounts, rebates, 
and other concessions * * *_ 

"In the latter months of the- code period, the practice of granting secret rebates 
atid other secret concessions from filed prices began to develop in the industry. 
Filed prices were maintained at uniform levels within the various marketing areas, 
but actual price uniformity was disappearing. The difficulty of discovering and 
proving secret price concessions, plus rather apathetic support from the National 
Recovery Administration along compliance lines, contributed to the growth, of 
secret pricing. 

"Following May 27, 1935, deviations from published prices became more and 
more troublesome. By August, the secret prices evidently became sufficiently 
serious to warrant retaliation by the price leaders in the industry. Since that 
time, there has developed one of the worst price wars experienced in recent years 
by this industry. Published prices remain practicp.lly the same as they were 
during the code period, but discounts and rebates ranging from 20 to 30 percent 
are being granted to various types of buyers." 

Despite the existence of this price war, the nominal price quotations * * * 

showed no change at all until October 1935. The October quotations were 26 

cents, or 10 percent, below the September prices; but even this reduction in the 

list price did not approximate the extent of the discounts which were being granted. 

******* 

Frequently, concessions are granted more indirectly. For example, 
advertising allowances are a common form of granting special induce- 
ments to purchasers. Allowances may be granted for window display, 
preferred location of goods, use of special selling equipment, adver- 
tising in local newspapers, distribution of samples, radio advertising, 
the furnishing of store space for demonstrations, and the like. Sup- 
posedly the allowance is proportioned to the value of the advertising 
services so rendered to the manufacturer. Frequently, however, par- 
ticularly prior to the passage of the Robinson-Patman Act, the amount 
of the allowance was governed largely by competitive conditions sur- 
rounding the particular transaction. In such cases the advertising 
services to be rendered may have been merely the excuse for the 
allowance; often no eflfort was made to determine whether they were 
actually rendered in accordance with the agreement. Evidence as 
to the extent of such allowance was obtained by Congress during an 
investigation of the American Retail Federation.^' 

Nor are practices of this kind confined to the wholesale market. 
Retailers often find indirect ways of granting concessions, to customers 
when overt price cuts either seem impolitic or are restrained by law. 
For example, a retail liquor dealer in Washington, D. C, carefully 
marks all his merchandise at the accepted price on his shelves but 
allows discounts of more than 20 percent to any customer who asks 
for it. In a southern city various retail druggists who depended upon 

»' Hearings before the House Committee on Investigation of the American Retail Federation, 70th Cong., 
Ist sess., vol. 1, pp. 465-470 and vol. 4, pp. 215-344. 



CONCENTRATION OF ECONOMIC POWER IQ^ 

price appeal, developed a novel scheme for evading minimum prices 
established by contract under the provisions of the Fair Trade State 
Act. They sold price-maintained drugs and cosmetics under the 
installment plan, requiring a down payment of a specified sum some- 
what under the minimum price, with the balance to be paid subse- 
quently. It is possible that no serious effort was made to collect this 
balance. 

Basically the issues raised by this section may be summarized in 
the following manner. In any industry or trade, unless an effective 
method for the outright allooation of business exists, there will be a 
degree of rivalry among competitors, each seeking to expand its own 
share of the market. In most lines the competitive strategy best 
suited to the position of the rival firms will show some variation 
between them. Usually, some firms, such as the largest and best 
known, can compete more effectively on the basis of their relative 
prestige. Assuming all other elements of the transaction to be iden- 
tical, a constant or increasing share of the volume would naturally 
flow to them. 

Consequently, those firms whose prestige is inferior usually find it 
necessary to offer some compensating inducement. The most obvious 
form in which such an inducement can be offered is as an outright 
price reduction. Frequently, however, the possibility of using price 
as a competitive argument is limited by such factors as the fear of 
reprisal, the threat of coercion, or the operation of law. In ihat case, 
competition is usually diverted into other channels. 

In a few industries, of course, all members are apparently content 
merely to maintain their respective positions. Whether such deci- 
sions be voluntary or reflect some form of duress, the result is equiva- 
lent to outright monopoly. In most industries, however, there are at 
least some firms which are dissatisfied with their shares of the market. 
WTaenever any particular form of competition becomes either illegal, 
unprofitable, or for any reason inexpedient, other outlets for the 
pressure of business rivalry are devised to take its place by these 
aggressive concerns. The range of such devices is limited only by the 
ingenuity of businessmen. 

This protean quality of competition must be reckoned with in any 
efforts to regulate or control specific competitive practices. When- 
ever any one avenue of competition is closed or made difficult, whether 
by business itself, or by Government through such legislation as the 
fair trade laws, a diversion of business tactics is the probable result. 
Unfortunately, as indicated in the following section, not all the 
aspects which competition assumes can be considered equally con- 
ducive to the efficient functioning of the economy. 

CONCLUSIONS 

In summarizing this illustrative discussion of phases of nonprice 
competition, it should be borne in mind that the basic criteria upon 
which public policy in regard to business practices must be based are 
their effect upon the standard of living of the people, and, more 
broadly, upon the manner and efficiency with which the Nation's 
economic resources are utilized. Uneconomical or wasteful practices 
which lead to unduly high prices are not in the public interest; ob- 



JQ2 CONCENTRATION OF ECONOMIC POWER 

souring the true value of products is not in the public interest; undue 
degradation of quality, even though it may bring lower prices, is not 
in the public interest. All of these practices prevent or interfere with 
the best use of the consumer's dollar and limit his standard of living. 
It is clear from the discussion presented here that the issues involved 
in regulation of business practices and, in particular, of the trend 
away from price competition, are exceedingly complex. This report 
has not attempted to present all the evidence required for categorical 
judgment on the value of these various forms of nonprice competition; 
but rather to suggest where the weight of evidence lies, and to point 
to possible types of public control. 

Attention may first be directed to the escape devices discussed in 
the immediately preceding section. The evidence seems to show that 
in many industries there has been a constant redirection of competitive 
effort. As one or another accepted form of competition becomes il- 
legal or inexpedient, the ingenuity of business firms is exercised in 
exploring new channels to replace the old ones. The economic effi- 
ciency of this process seems highly dubious. Its general trend seems 
to be the substitution of increasingly indirect ways of granting con- 
cessions as more forthright and direct ones are successively abandoned. 
Indirection is not generally an economical or efficient process. More- 
over, it complicates the problems of choice facing the buyer in com- 
-paring the offers of rival sellers. 

It has been shown that the trend frequently reflects the efforts of 
established firms to maintain their position in an industry by making 
it difficult for new entrants to compete on a price basis, or for small 
and comparatively unknown companies to expand by featuring factors 
other than prestige in their sales strategy. To the extent to which 
such efforts are sucfcessful, they impair the desirable flexibility of 
business structure. Even when they fail in their ultimate purpose, 
they often result in diverting competitive effort from direct and effi- 
cient channels into indirect and less efficient channels. Public policy 
may therefore be properly concerned with keeping all legitimate 
avenues of competition equally open, and with discouraging efforts to 
bar any one of them. 

A sharply contrasting situation is presented by such conventional 
practices as "price lining." Price lines do not involve any constant, 
wasteful redirection of competitive effort. Even in the absence of 
price lines, such factors as quality and style would necessarily play 
major roles in the apparel market. In fact, the existence of price 
lines, instead of complicating the problems of choice facing the buyer, 
as do most of the escape devices described, actually simplifies them 
somewhat. The number of variables between rival offers is reduced. 
The buyer can accept price as a constant and concentrate his attention 
upon comparing other elements such as quality or style. To the 
seller some economy is achieved in the problems of business planning. 

On the other hand, there seems little doubt that price lining incurs a 
penalty, particularly when the lines become unduly rigid. The ad- 
justments necessary from time to time to keep a product within 
established lines may be wasteful or undesirable. If manufacturing 
costs rise, for example, quality factors may be seriously skimped. 
When costs fall, on the other hand, adjustment may take the form of 
adding unnecessary frills which do not add proportionately either to 



CONCENTRATION OF ECONOMIC POWER 103 

appearance or usefulness. Such developments seem inevitable when 
production is geared to an unchanging price pattern. Considerations 
of this sort apply not only to such goods as apparel but with f^qual or 
greater force to other price-lined articles sucli as household equipment 
(e. g., radios, washing machines, etc.). 

Moreover, rigid price lining may detract from the degree of price 
flexibility which is economically desirable. This is particularly true 
where the steps between successive prices are large and where the 
buyer cannot readUy adjust by shifting from one price line to another. 
For example, during a period of declining purchasing power, the con- 
sumer may be obtaining a somewhat superior article for the same 
price; but this is not equivalent in its economic effect to a direct price 
reduction for an article of unchanged quality. 

It cannot be gainsaid that there is a certain inevitability about the 
development of conventional patterns of business behavior. Price 
lines and similar customs largely reflect the adjustment of buyers and 
sellers to each others' preferences and convenience. Occasionally, 
the rigid maintenance of price lines may be associated with some form 
of concerted or collusive action, although, in the main, they represent 
the gradual growth of custom in highly competitive industries, where 
collusion would be next to impossible. 

Consequently, if certain aspects of conventional business practice 
were found undesirable from the point of view of public policy, any 
program of action would have to take lines quite different from those 
traditionally followed by government. A mere attack upon collusive 
practices would accomplish little or nothing. Instead, any revision 
of business habits would probably have to proceed from a general 
discussion of the problem and mutual agreement within the industry 
as to the desirable modifications of conventional patterns. 

So much for the more general problem. It now becomes pertin,ent 
to consider the specific issues involved in the several major forms of 
nonprice competition which have been described above. 

One of the most important and difficult issues involved is the net 
effect of the emphasis upon quality as a basis for competition. It is 
desirable that quality be good, that shoddmess be avoided; but at 
the same time that consumers with limited incomes have available a 
usable article priced within their means wherever that is possible. 
It is reasonably certain that the recent trend away from price com- 
petition has materially affected the character of the goods on our 
markets as well as standard of living of consumers. 

In some ways this influence has been undoubtedly beneficial. 
Efforts to improve quality through technical research and otherwise 
have been stimulated. This is notably true of many of the newer 
mass production industries manufacturing consumer goods. Thus, 
it may be argued that the automobile is today a far more satisfactory 
product than would have been true had competition focused primarily 
on price. Data have been cited (see pp. 63-67) showing that improve- 
ments in the quality of such products as automobiles, refrigerators, 
tires, etc., are in some ways equivalent to direct price reductions. 
The benefit which the consumer derives from increased economy of 
operation or greater durability is concrete and tangible; sometimes 
it may be translatable into direct price equivalents. 



247149— 41— No. 1- 



JQ4 CONCENTRATION OF ECONOMIC POWER 

Conversely there is some evidence to show that where the price 
aspects of competition are strongly stressed, degradation of quality 
may occasionally follow. If price cuttmg is the niost expedient means 
of expanding sales, producers may be faced with the necessity of 
cutting costs correspondingly. Sometimes, of course, costs may be 
reduced by introducing economies of operation based upon improved 
technology, but this is not always feasible. The pressure on prices 
may then be reflected in attempts to reduce labor costs or to skimp 
on quality. The latter alternative is most feasible in the case of 
articles whose quality consumers find it difficult to appraise, as where 
objective standards of quality are unavailable or inadequate. Nat- 
urally, this tendency becomes aggravated when price competition 
becomes unusually severe, as in the case of the buyers' market pre- 
vailing during a depression. National Recovery Administration 
experience reveals many instances of this situation." 

However, the reverse side to this picture is of great importance, 
particularly to consumers of limited income. Quality features have 
at times been stressed far beyond their intrinsic worth. Unnecessary 
gadgets and eye-catching features have been multiplied. Intensive 
selling campaigns have been conducted to persuade consumers to de- 
mand such features in place of price reductions which could have 

K The following are excerpted from a study prepared by the Division of Review of the National 
Recovery Administration. 

(InfoTmation Concerning Commodities— A Study in NRA and Related Experiences in Control, Part B, 
Standards and Labeling. By Hunter P. Mulford, Division of Review Work Materials, No. 38.) 

Mayonnaise Industry. — "At the time of the sponsoring of its code the industry faced a difficult situation, 
marked by severe, price competition, which was felt to bear particularly heavily upon the makers of higher 
grade products. Reduction of oil content, use of substitutes, and synthetics, etc., were among the means 
chiefly employed to reduce costs and increase sales volume based upon low price appeal." (Ibid., p. 18.) 
Preserve, Maraschino Cherry and Olace Fruit Industry.— "Duving the years of the depression, due to steadily 
increasing price competition, a decided decline in the Quality of the industry's products occurred. This 
was a natural result of endeavoring to reduce costs and by so doing keep selling prices at a fairly low level 
in an effort to either retain or obtam volume. This is easily understood when the following cost figures are 
considered. At 2.5 cents per pound for fruit, when 53 pounds of fruit are used to make ICO pounds of pure 
preserves, the cost per case is $1.33, but when only 21 pounds of fruit are used to make 100 pounds of pre- 
serves, the cost "is only 53 cents per case. 

"Therefore, it can be clearly seen that by reducing the amount of fruit and increasing the amount of 
water, plus pectin, considerable savings in costs can be made. Industry representatives discussed this at 
considerable length at the public hearing on their code. They felt that this lowering of quality was harmful 
to the industry as a whole, and misleading to the consumers." (Ibid., p. 191.) 

Hosiery Industry.— "This depressed condition of the market resulted in a deterioration in the quality of 
hosiery which, because of the nature of the product, can readily be misrepresented. Thus Mr. A. Propper, 
executive of a large Chicago department store stated: 

" 'Women's hose • • * is more or less a blind article. Any manufacturer, imknown to us, or any- 
body, can easily take something out of a hose, that we don't know has been taken out until wo find • * ♦ 
that something has marred the wearing quality of the hose. Courses can be dropped, inferior silk can be 
used, threads can be tightened, and other small manufacturing qualities that are not discernible to the 
naked eye can be cheapened.' 

"Various forms of quality degradation are described in a booklet issued by a manufacturer of unbranded 
hosiery as skimping by reducing length; reducing number of stitches in the seam; use of lower-twist thread; 
elimination of reinforcements; insufBciont number of courser-; dropping of needles in the knitting bar; old 
stock sold as new; failure to identify fiber, etc. 

"That price competition had induced these and other manipulations in quality was alleged. To quote 
again from Mr. Propper's speech: 

" 'We nil know that it is easy to cut hosiery down to a price » • • that is aU we have been doing In 
the past, cutting it down to a price.' " (Ibid., p. 175.) 

Canning Industry.— "Pressure of competition within the industry has reduced prices in recent years, 
and this reduction in prices has in turn led to reductions in quality. Prices for canned goods were con- 
siderably lower during the years 1932-34 than for some years previous, and during this later period some 
buyers have complained that, after having placed contracts for future delivery, it was practically impos- 
sible for them to secure merchandise in conformance with their specifications." (Ibid., p. 138.) 

Macaroni Industry. — "Since price competition had become so acute in the industry in the last year and 
a half, manufacturers felt that they must cut the cost of producing their goods in any way possible. They 
could not^cut their labor costs without running into difficulties, therefore they cut the cost of raw materials. 
Consequently there has been a great increase in the use of artificial coloring to take the place of egg content; 
there has also been increase in the use of inferior grades of flour hi place of higher grade semolina; and finally 
there has been an effort to use a mixture of soya and ordinary flour to simulate semolina." (Ihid., p. 24.) 
Cleaning and Dyeing Industry. — "Testimony as to the lowered quality of services which accompanied 
price competition was given by the President of the National Association of Better Business Bureaus (and 
by others) at the hearing on prices and code violations for the cleaning and dyeing industry: 

" 'Our files show that refusal to adjust complaints is in the majority of cases excased on the basis that at 
cut rates the public ain't expect service or responsibility. 

'' 'From the consumers' standpoint, low prices have resulted in unsatisfactory cleaning jobs and resulting 
«Jestruction of merchandise at a very alarming rate.' " (Ibid., p. 212.) 



CONCENTRATION OF ECONOMIC POWER JQ5 

contributed materially to making available a larger volume of goods 
to the consuming public. Where cheeper models stripped of such 
features have been introduced, they have often been used primarily 
as leaders; sales effort by the retailer has been devoted to switching 
the consumer from such cheaper models to more expensive ones 
carrying luxury features of doubtful value. 

Sometimes a group of manufacturers in an industry makes delib- 
erate efforts to establish unnecessarily high standards of minimum 
quality. By precluding the appearance of low grade, though satis- 
factory, merchandise on the market, they hope to limit the scope of 
price competition. On the other hand the product which it is sought 
to bar may, when properly used, fill a perfectly legitimate need 
among consumers in the lower income brackets. For example, certain 
members of the plumbing fixtures industry have constantly sought to 
prevent the marketing of "culls" or "seconds" as a means of protecting 
the existing price structure. These efforts were the subject of antitrust 
proceedings by the Department of Justice. According to the Court: 

Defendants (in District Court) represent the Standard (Standard Sanitary 
Mfg. Co.) as the dominant * * * and the only honest manufacturer, point- 
ing out to other manufacturers the worthlessness of their output, they not having 
the Arrott patent; also the dishonesty of * * * putting out "seconds," the 
inferiority of which was discernible only by experts * * * thereby * * * 
"discrediting the ware and demoralizing the market and business." To avert these 
evil results * * * the Standard was willing to forego the advantages which 
its ownership of the Arrott patent gave it and confer them upon the other nianufac- 
turers. But upon terms, "First and foremost" * * * that ng "seconds" 
should be marketed. ^3 

Later, there was an endeavor to accomplish this same purpose 
under the National Recovery Administration by prohibiting the sale of 
culls under the terms of the Code. According to a National Recov- 
ery Administration study: 

Opposition to the provision was voiced by several smaller manufacturers on 
the ground that certain types of production equipment produced a larger pro- 
portion of culls; that to prohibit the sale of culls would drive such plants out of 
business; that there was a demand for this grade of ware, which had sound utility; 
and that to ban it would increase the cost of plumbing fixtures to the public 
generally. (Mulford, op. cit., p. 16.) 

Similarly, the bedding industry has made continual efforts to pre- 
vent second-hand materials from being used in the manufacture of 
bedding even after proper sterilizatian. In a few States, laws to this 
effect were enacted, but they were uniformly held unconstitutional 
on the grounds that: 

The business here involved is legitimate and useful; and, while it is subject to 
all reasonable regulations, the absolute prohibition of the use of shoddy in the 
manufacture of comfortables is purely arbitrary and violates the due process 
clause of the fourteenth amendment." 

Sometimes, instead of attempts to bar inferior articles from the 
market absolutely, it has been sought so to stigmatize them as to 
render them unsalable. Thus canners unsuccessfully urged the De- 
partment of Agriculture to require substandard products to be labeled 
in such a manner as to discourage their purchase. 

Excessive emphasis upon price competition, then, may lead to 
deterioration of quality; undue emphasis upon quality may result in 
unwarranted increases in price. 

" Standard Sanitary Mfg. Co., et al. v. U. S. of America (226, U. S. 20). 
•< Ibid., p. 29. 



JQg CONCENTRATION OF ECONOMIC POWER 

It is exceedingly difficult to strike a balance between those aspects 
of quality competition which may be considered beneficial and those 
which appear detrimental to the efficient functioning of the econom3^ 
Each product presents a different situation. The line between the 
desirable and the unnecessary in any specific case is one which must 
in the last analysis be drawn by the consumer. It is appropriate, 
however, for Government to endeavor to devise such standards and 
to place at the consumer's disposal such technical information as may 
make it possible for him to make these decisions intelligently. 

Similar conflicting considerations apply to the second broad issue — 
the competitive emphasis upon brands, trade-marks, and advertising. 
To an important extent such devices are necessary and useful. The 
creation of mass demand does in many cases pennit the introduction 
of improved methods of production and the material reduction of 
manufacturing costs. It is probable that the rapid growth of the 
newer mass-production industries, particularly in the automotive and 
the electrical household equipment fields, has been facilitated by the 
intensive use of advertising. 

Certainly, too, the use of brands and trade-marks to distinguish the 
product of rival sellers is an essentially useful technique, both to the 
producer who has acquired a deserved prestige and to the consumer 
whose problems of choice are facilitated. 

On the other hand, there have been manifestations of growing dis- 
satisfaction with the manner in which brands and advertising are 
used today. Consumers, in particular, have come to question the 
reliability of the guides furnislied them by advertising and branding. 
The very rapid growth of the organized Consumer movement during 
recent years is largely a reflection of this dissatisfaction. Business- 
men have become increasingly concerned with this reaction of con- 
sumers. The proportions and significance of this discontent were dis- 
cussed in a recent issue of Business Week: 

This is a study of organized discontent — the discontent of some consumers 
with the things thej' buy and the way those things are sold to them. It is a dis- 
content which feeds upon Uself and which business cannot afford to overlook be- 
cause it has already assumed the proportions of a real threat to producers and 
distributors of advertised brands." 

Basically, the criticism centers about the failure of advertising and 
branding to serve as adequate guides to quality, and to their tendency 
to divert the stream of competition into inefficient channels. While 
both those allegations are serious, it is the latter which is of primary 
importance to the present dibcussion, and with which public policjT^ is 
concerned. 

It has been pointed out that one efi'cct of the creation of mass de- 
mand through advertising may be the reduction of costs of manufac- 
ture as volume increases. On the other hand, it must be conceded 
that in some lines of business any such reductions in cost show little 
if any tendency to become translated into lower prices. Thus, 
according to Milton Handler — 

It cannot be denied that the current bewildering use of brands is economically 
wasteful, and undoubtedly tends to increase the costs of distribution. The tin- 
selled phrase is frequently designed to camouflage shoddiness of quality. The 
fortunes spent on popularizing catch words and nonsense syllables could better 
be devoted to the improvement of product and the dissemination of detailed in- 

»» Business Week, April 22, 1939, p. 39. 



CONCENTRATION OF ECONOMIC POWER 107 

formation regarding it, which is so essential to intelligent consumption. But in- 
telligent consumption also requires some means of identifying today the articles 
that pleased or displeased yesterday. This is the primary function of the mark. 
The unfortunate excrescences of modern trade-mark usage should not blind our 
perception of this fact.^^ 

The very wide spread between production costs and retail prices for 
certain common drugs, toiletries, and cosmetics has been described. 
(See pp. 80-83.) This spread does not necessarily represent any in- 
ordinate profits- to either manufacturer or distributors; much of it 
represents the cost of advertising and sales campaigns and elaborate 
packaging. Regardless of the cause for the spread, however, its 
existence does imply the possibility of greatly reducing the prices of 
products of this kind by altering the focus of competition. Such a 
reduction in prices would, of course, be equivalent to a material in- 
crease in consumers' purchasing power for other products. 

Here again, there seems sufficient cause for public concern and 
proper scope for pubhc action. The development of adequate com- 
modity standards and the establishment of regulations requiring 
informative labeling in accordance with such standards would go far 
toward fostering the desirable and discouraging the undesirable 
aspects of advertising and branding. The consumer should be in a 
position to appraise the significance of advertising claims and of brand 
names against a background of authentic product information. 

In summary, it seems that the less desirable aspects of the trend 
toward competitive reorientation are stimulated by at least two 
avoidable conditions. One of these is the concerted .or collusive 
effort of certain business firms to prevent the use of sales tactics 
which they deem inexpedient. The second is the inadequate informa- 
tion of most consumers with regard to the character of commodities 
offered on the market. Both of these are appropriate subjects of 
public concern; both may, to an extent, yield to corrective govern- 
mental measures. 

By pursuing its traditional policy of opposmg collusive action by 
business firms, Government may ease artificial impediments to the 
use of socially desirable forms of competition, particularly of price 
competition. This implies also that individual business firms must 
be protected in their freedom to choose competitive channels from 
coercion imposed hj their rivals who prefer that such channels be not 
used. To some extent this pursuance of accepted antitrust policy 
may also serve to minimize the development of wasteful escape 
devices resulting from the establishment of restraints upon one or 
another form of competition. It would seem highly desirable to 
consider seriously the consequences of imposing legal restraints upon 
the direction of competitive effort, by such legislation as the resale 
price maintenance acts or other laws seeking to restrict price com- 
petition. By thus endeavoring to keep all avenues of competition 
equally open, the orientation of competitive effort may be determined 
more by the combined decisions of buyers and sellers expressed in the 
market place, and less hj the monopolistic determination of specific 
sellers. 

In the second place. Government can intensify and expand its pro- 
gram for the establislmaent of commodity grades and standards and 
its requirements as to informative labeling. Such a program might 

w Handler, Milton, Unfair Competition, Iowa Law Peview, January 1936, pp. 185-186. 



2Qg CONCENTRATION OF ECONOMIC POWER 

well bo coupled with a broad plan for consumer education. In this 
way the consumer v/ould be enabled to profit by the trend toward 
emphasis upon quaUty. He would be made competent to judge rival 
products on their merits instead of being forced to rely largely upon 
claims advanced by sellers. The accumulated pressure of buyers 
equipped with an adequate basis for judgment might, in turn, serve 
to direct competition into socially desirable and economically efficient 
channels. 



CHAPTER IV ^ 

THE ELECTRICAL EQUIPMENT INDUSTRIES— AN 
ILLUSTRATIVE CASE 

SUMMARY 

So far, problems of price and sales policy have been considered in 
a broad setting. The complexities involved, and the dangers of broad 
generalization or over-simple solution have been stressed. 

In order to lend concreteness to the discussion a type case has 
been selected which presents in specific form many of the policy issues 
encountered in the preceding analysis. This case comprises a group of 
industries manufacturing household electrical equipment, such as 
refrigerators, washing machines, vacuum cleaners, etc. 

These are all relatively new industries which have experienced 
their major growth during the past two decades. A number of them 
seem, at the present time, to have entered stages in their development 
which require new decisions as to manufacturing and sales policies. 
The analysis of these industries contained in this chapter shows that 
they have all experienced similar patterns of growth. First is the 
experimental stage during which the product is being developed. 
Many crudities are still apparent. Costs are high because of the lack 
of standardization, coupled with a low aggregate volume of output. 
Prices are correspondingly high and sales are necessarily confined to a 
limited group which can aft'ord the luxury of experimentation. 

This period merges insensibly in- vj one in which the product has 
become relatively satisfactory, manufacturing methods have become 
standardized, and prices fall in anticipation of, and partly as a result 
of, the introduction of mass production. The product passes out of 
the class of a curiosity and obtains a wider and wider general appeal. 
Sales expand very rapidly as more and more consumers realize its 
convenience or desirability. Usually price reductions are slightly 
ahead of sales expansion. During this phase of growth the expansion 
of sales seems at times almost limitless. Even the depression of 1930 
to 1933 exerted no more than a very limited effect upon the sales of 
refrigerators and washing machines. By the fall of 1933, for example, 
the sales of washing machines were exceeding the 1929 rate by a 
substantial margin. During such a period, also, as profit possibilities 
seem very attractive, the number of companies in the field often 
increases sharply. Eventually, however, signs of approaching maturity 
become apparent. The first symptom seems to be an arrest in the 
progressive decline in costs and prices. Then the rate of increase of 
sales begins to taper off. Distribution of the product among families 
in the upper and middle income brackets has reached a high level. 
The number of remain ing original prospects in those classes dwindles 

' Ch. IV was prepared by Walt. • <. '« im anu i ihn M. Blair. 

109 



J IQ CONCENTRATION OF ECONOMIC POWER 

rapidly, even despite the constant increase in the number of wired 
homes, particularly in rural areas. 

At this point the industries begin to display very marked sensitivity 
to changes in general business conditions. Once the early period of 
dynamic growth has passed, they are no longer almost depression-proof. 
The durable nature of the product involving the possibility of post- 
poning purchase or replacement until conditions are favorable renders 
them subject to extreme cyclical fluctuations. For example, in con- 
trast to the record of the period 1929-1933, the number of washing 
machines sold fell 30 percent from 1937 to 1938, while the sales of 
refrigerators declined more than 45 percent.^ At the same time, 
recovery in sales volume ha&been longer delayed and much less rapid. 

At this point, then, the members of the industry are faced with the 
urgent need of reorienting their sales policy to changing conditions. 
Two major fields for sales promotion are available. One of these is 
the expansion of the market among families in the low-income groups. 
The other is the development of the replacement market, the substi- 
tution of new equipment for outworn or obsolete units. The tactics to 
accomplish these ends are conditioned by many other market factors 
such as the rate of obsolescence of equipment, the channels and costs of 
distribution, the possibilities and limitations of installment selling, 
and so on. 

Until 1940 manufacturers of these products had formulated no clear 
policy to meet these changing conditions. There had been some effort 
to produce cheap "stripped" models devoid of all luxury features to 
appeal to lower income groups. There had been a few scattered 
attempts to deal with the replacement problem. Those approaches, 
however, seem to have been largely exploratory. 

The first evidence of any important change occurred in the refrig- 
erator industry during the early months of 1940. During the second 
week in January, one manufacturer announced drastic price reductions 
for its 6-foot stripped model and" its competitors immediately followed 
its lead. At the same time economies were sought in the costs of both 
manufacturing and distribution. It is too early to determine whether 
these moves represent a true change in long-term policy, or whether 
they merely represent a temporary "price war" touched off by the 
action of a single manufacturer. In either event it seems significant 
that sales have risen sharply; during the first quarter of 1940 they were 
33 percent higher than during the corresponding months of 1939. 

It is apparent that the iormulation of sales policies designed to 
exploit the potential markets of these industries to the maximum 
involves many and complex issues. The nominal price alone is but 
one of these. Methods and costs of distribution must be subjected to 
searching analysis. Decisions musi be made as to collateral marketing 
poHcies. The treatment of used equipment is a basic issue. Another 
•of major importance is the financing of conditional sales. More 
liberal credit terms may stimulate the market immediately, but fail- 
ure to maintain sound business practices in the process incurs a sure 
penalty. The precise balance which is to be struck between improve- 
ments in quaHty and reductions in price is of prime significance. 
Moreover, all of these decisions must be adjusted to changes in general 

» This (lifTerence may have been due partly to the fact that prices were reduced during the forircr but not 
during the latter period. 



CONCENTRATION OF ECONOMIC POWER m 

business conditions as well as to the markets for the specific product 
in question. 

The problems confronting these industries are typical, in many- 
ways, of those encountered in many other industries producing con- 
sumers' durable goods. The consumers' durable goods industries 
have played a particulariy important role in the economy of the last 
generation, in creating opportunities for new investment and employ- 
ment and in opening new horizons for consumer enjoyment. At the 
same time, during periods of business recession, the drastic contraction 
of employment and investment opportunities to which these industries 
are generally subject creates acute social and economic problems. 

The manner in which the concerns comprising these industries adapt 
their sales policies to changing market conditions will largely de- 
termine whether they will expand further, remain static, or decline. 
It may also effect, at least to a limited extent, the stability of produc- 
tion during the swings of the business cycle. 

Consequently, such decisions regarding sales policy are proper 
subjects of public concern. A socially and economically desirable 
policy is one which would permit the widest possible distribution of 
sales so that more consumers may have the benefit of these products, 
afford maximum opportunities for employment and the investment of 
idle funds, and achieve a degree of stability adequate to minimize the 
distress attendant upon severe cyclical fluctuations. The orientation of 
policy to attain those objectives must embrace the entire problem; 
particularly it should be recognized that although price behavior is 
important, the issues far transcend the field of price. 

Moreover, it should be emphasized that governmental action need 
not be regulatory in character. Thus the Federal Housing Adminis- 
tration for a time insured loans for purchases of certain types of 
electrical equipment and stimulated sales of these products. The 
Electric Home and Farm Authority has also assisted - in financing 
sales of many kinds of electrical equipment; in the process it encouraged 
the production of relatively inexpensive models to meet the needs of 
low income groups. The Rural Electrification Administration, by 
widening the distribution of electric power, has expanded the potential 
appliance market. Efforts to reduce utility rates may also have con- 
tributed materially to the expansion of this market. 

PRICE AND PRODUCTION TRENDS 

The growth of the electrical-appliance industries during the past 
10 or 15 years has followed a pattern which is typical of the early 
stages of most new industries. Rapid technological developments and 
sharp price reductions made possible mass demand and the economies 
of mass production. The following tables compare the average retail 
values of refrigerators, washing machines, vacuum cleaners, radios, and 
electric ranges for the years 1929, 1932, and 1937, with their sales dur- 
ing the same years. Charts XII to XV show the trends of average 
retail value and sales for these-products, with the exception of radios, 
for each year between 1927 and 1938.^ 

' Average unit retail value was selected as the basis for this analysis instead of some form of price index 
for two reasons: (1) It is difficult to adjust the usual type of price index, which is supposed to relate to a 
more or less uniform commodity, to the very rapid changes in product which occurred in these industries 
during the period covered, and <2) average unit value figures are more useful because they portray the 
average outlay by the consumer for the commodities involved. 



112 



CONCENTRATION OF ECONOMIC POWER 



In the case of each of these industries the period of most marked 
price decline was from 1927 to 1932, whereas the period of most 
vigorous sales expansion was from 1932 to 1937. Apparently the 
stimulus to sales caused by the decline in prices was somewhat delayed 
due to the depression from 1929 to 1932. 

Table 10. — Average retail value and sales of selected electrical appliances 
AVERAGE RETAIL VALUE 





1929 


1932 


1937 


Item 


Average 
retail 
value 


Index, 
1929=100 


Average 
retail 
value 


Index, 
1929=100 


Average 
retail 
value 


Index, 
1929=100 




$292 
113 
46 
133 
165 


100 
100 
100 
100 
100 


$195 
59 
35 
48 
150 


67 
52 
76 
30 
91 


$171 
72 
46 
56 
134 


59 


Washing machines - . . 


64 




100 




42 


Ranges ... - 


81 







SALES 



Item 



Refrigerators.- 

Washing machines 
Vacuum cleaners— 

Radios 

Ranges 



Units 



778,000 

956, 000 

1, 395, 745 

4, 435, 000 

152,781 



Index, 
1929=100 



1932 



Units 



100 798, 000 
100 569, 830 
100 557, 288 
100 12,477,000 
100 60,000 



Index, 
1929=100 



103 
60 
40 
56 
39 



1937 



Units 



2,310,000 
1, "-05, 405 
1, 706, 337 
6, 278, 267 
405, 000 



Index, 
1929=100 



297 
153 
122 
142 
265 



The decline in average unit retail value in these industries, in gen- 
eral, ended in 1932. Between 1932 and 1939 average unit values have 
shown comparatively little change. However, sales rose sharply 
until 1937. 

In the case of electric refrigerators, for example, the average retail 
value declined from $350 in 1927 to $195 in 1932; 1 year later it 
fell to $170; it has remained near that figure to 1938. Sales rose from 
375,000 units in 1927 to 778,000 in 1929. The increase was inter- 
rupted but not reversed by the depression; in 1932 sales were 798,000 
or slightly more than in 1929. During the subsequent 5 years the 
expansion was resumed even more vigorously; in 1937 2,310,000 boxes 
were sold. 

Similarly, the average unit value of washing machines fell from $143 
in 1927 to $59 in 1932 and remained stable at about the latter level 
until 1936. In 1937 and 1938 the average value rose to approximately 
$72. Probably this last increase reflects a shift in buying from 
cheaper to more expensive models rather than any change in prices as 
such. Sales of washing machines increased slightly from 1927 to 
1929, then declined moderately through the depression. With the 
first signs of business recovery, however, sales expanded sharply; the 
1933 level actually exceeded the previous peak which had been 
reached in 1929. This upward trend continued to a maximum of 
slightly over 1,500,000 machines sold in 1936 in contrast to the pre- 
depression peak of 956,000. 



CONCENTRATION OF ECONOMIC POWER 
Chabt XII 



113 



NUK.eER SOLD 

THOUSANDS 

4000 



3000 



ELECTRIC REFRIGERATORS 

NUMBER SOLD AND RETAIL VALUE 



1000 
900 
800 
70 
600 

500 
400 

300 




RETAIL VALUE 
MILLIONS 
400 



UNIT VALUE 
DOLLARS 
400 



1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 

AVERAGE REALIZATION AT RETAIL AND 



100 
90 
80 
70 
60 

50 



30 



WHOLESALE PRICE INDEX 

1932 = 100 



300 - 



100 
90 
80 

70 



^REALIZATION' 



PRICE INDEX 
400 



WHOLESALE PRICE 




1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 

(I) SOURCE' ELECTRICAL MERCHANDISING 
U.S. BUREAU OF LABOR STATISTICS 



114 



CONCENTRATION OF ECONOMIC POWER 
Chabt XIII 



NUMBER SOLO 
THOUSANDS • 
2000 



ELECTRIC WASHING MACHINES 



NUMBER SOLD AND RETAIL VALUE 



1000 
900 
800 

700 

600 

500 



300 



RETAIL VALUE 
MILLIONS 
200 




100 
90 
80 

70 

60 



40 



30 



1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 

AVERAGE REALIZATION AT RETAIL AND 
UNIT VALUE WHOLESALE PRICE INDEX 



DOLLARS 
300 



100 
90 
80 
70 
60 



200 




PRICE INDEX 
300 



'-REALIZATION' 



1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 

(I) SOURCE' ELECTRICAL MERCHANDISING 
US BUREAU OF LABOR STATISTICS 



CONCENTRATION OF ECONOMIC POWER 
Chaet XIV 



115 



NUMBER SOLD 

THOUSANDS 

2000 



VACUUM CLEANERS 

NUMBER SOLD AND RETAIL VALUE 



2 00 



100 



RETAIL VALUE 
MILLIONS 
200 




100 
90 
80 
70 

60 

50 

40 
30 



20 



10 



1927 1928 1929. 1930 1931 1932 1933 1934 1935 1936 1937 1938 



UNIT VALUE 

DOLLARS 
200 



100 
90 
80 
70 
60 



AVERAGE REALIZATION AT RETAIL AND 
WHOLESALE PRICE INDEX 

IS3ZM00 



30 



20 



WHOLESALE PRICE 




PRICE INDEX 
200 




J L 



J 1. 



100 
90 
80 
70 
60 



1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 



(DSOURCE: ELECTRICAL MERCHANDISING 



30 



20 



116 



CONCENTRATION OF ECONOMIC POWER 
Chart XV 



NUMBER SOLD 
THOUSANDS 
600 



ELECTRIC RANGES 

NUMBER SOLD AND RETAIL VALUE 



400 



100 
90 
80 
70 
60 



40 




RETAIL VALUE 
MILLIONS 
60 



20 



927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 193 

AVERAGE REALIZATION AT RETAIL AND 
uNiTVALUE WHOLESALE PRICE INDEX 

IC32HOO 



DOLLARS 
200 




PRICE INDEX 
200 



100 
90 



1927 1928 1929 1930 1931 1932 1933 19J4 1935 1936 1937 1938 

('1 SOURCE ELECTRICAL MERCHANDISING 
US BUREAU OF LABOR STATISTICS 



CONCENTRATION OF ECONOMIC POWER 117 

The electric range industry is somewhat younger than the two 
previously mentioned. Presumably reflecting its more recent growth, 
the decline in unit value did not get under way until 1931 ; between that 
3^ear and 1935, however, there was a material fall in the average prices 
paid by consumers. 1937 sales of 405,000 units were more than 2}^ 
times as large as the 1929 peak of 153,000 and were more than 6 times 
as great as the 1932 low of 60,000. 

The electric vacuum cleaner industry constitutes a possible excep- 
tion to the pattern described, probably because it is slightly older 
than those previously considered and had achieved a more mature 
stage of development prior to 1927. Nevertheless the all-time sales 
peak was attained in 1937. The average retail prices of vacuum 
cleaners declined from $49 in 1927 to $35 in 1932 and then rose, 
stabilizing at approximately $45 for the years 1934-37. This rise 
probably reflected an increase in the proportion of the higher-priced 
models sold, rather than any change in price as such. The sales of 
vacuum cleaners increased from 558,000 units in 1932 to 1,706,000 
in 1937. 

Taken as a whole the price and sales behavior of these new indus- 
tries manifest three basic common characteristics: 

(1) A marked decline in price between 1927 and 1932. 

(2) A relative stabilization of price near the low level reached in 
1932. 

(3) A great increase in sales during the period 1932-37. 

To these three characteristics may be added a fourth. In each case 
there was an abrupt decline in sales during the "recession" of 1937-38. 
During this period electric refrigerator sales declined by 46 percent, 
electric washing machines by 30 percent, vacuum cleaners by 24 per- 
cent, and electric ranges by 38 percent. 

These declines came immediately after each of these industries had 
reached a sales volume never before attained. Presumably they 
reflected basic changes in market conditions. An important factor 
is probably market "saturation." 

MARKET SATURATION 

For the electrical appliance industries, market saturation may be 
measured in terms of the proportion of homes wired for electricity in 
which these appliances are installed. In appraising the significance 
of this measure, it is important to remember that the number of 
wired homes is continually increasing, both as new homes are built 
and as the use of electric power is extended. This is particularly 
true in rural areas, partially due to the activities of such government 
agencies as the Tennessee Valley Authority and the Rural Electri- 
fication Administration. (The significance of these programs in 
creating new markets for electrical appliances is discussed below — 
pp. 158-160.) Since the number of potential consumers is thus 
growing, the degree of saturation in terms of wired homes prevailing 
at any time should not be construed as setting any fixed limit to the 
available market for original sales. Nevertheless, this measure does 
afford an indication of the potential market available at any given 
time, and the rapid increase in the percentage of saturation for many 
of these appliances shows that the market for original sales is steadily 
dwindling despite the increasing availability of electric power. At 



118 



CONCENTRATION OF ECONOMIC POWER 



the same time, the figures also show that complete saturation has 
not even been approached for any of these appliances; a substantial 
original market remains whose effective development obviously de- 
pends upon the sales policies adopted by manufacturers. 

The trend of market saturation from 1925 through 1937, measured 
in this way, for electric refrigerators, electric washing machines, 
.electric vacuum cleaners, and electric ranges is shown in chart XVI 
and in the following table: 

Table 11. — Saturation of the market 





Percentage of wired liomes owning— 


Year 


Refrig- 
erators 


Washing 
machines 


Vacuum 
cleaners 


Ranges 


1925 - 


(') 

2 

4 

6 

9 

13 

17 

22 

25 

29 

34 

41 

49 

62 


21 
27 
28 
30 
33 
35 
41 
39 
44 
46 
49 
53 
5« 
58 


31 

37 
39 
41 
44 
44 
45 
47 
49 
48 
48 
49 
49 
49 


3 


1926 - -- 


3 


1927 . . . 1 


3 


1928 - 


4 


1929 -.- 


4 


1930 


5 


1931 


5 


1932 


6 


1933 - 


6 


1934 


6 


1936 . .. 


7 


1936 - --- 


8 


1937 


9 


1938 


10 




1 



' Less than 1 percent. 

For electric refrigerators, electric washers, and electric ranges the 
degree of saturation has steadily increased, especially during the 
period 1932-37. The vacuum cleaner market, on the other hand, 
has not experienced such a sharp increase during recent years because 
it was already saturated to a much higher degree, than were any of 
the other fields at the beginning of the decade. 

A comparison of saturation in each of the industries with the ex- 
tent of sales decline during two periods of business recession is pre- 
sented in the following table. Saturation in 1929 is shown in relation 
to the change in sales between 1929 and the depression years 1932-33,* 
and saturation in 1937 is compared with the sales decline between 
1937-38. 

Table 12. — Market saturation and sales 



Item 


Percent 

saturation 

1929' 


Percent change 

in number sold 

1929 to average 

1932-33 


Percent 

saturation 

1937 


Percent change 

in number sold 

1937-38 


Refrigerators 


9 
33 
44 


-f 17 49 
-20 50 
—54 4Q 


-46 


Washing machines 


-30 


Vacuum cleaners 


—24 











' Percent of wired homes. 
Source: Electrical Merchandising. 



* The 1932-33 average was considered to give a better measure of dciJiossion decline than either of the.'^e 
years taken separately. For refrigerators and washing macliinos 1932 sales showed a drop which was 
somewhat extreme. On the other hand, 1933 sales for both of these industries showed a very sharp revival. 
Consequently, tho two were averaged to obtain r. more eenorally representative figure. 



CONCENTPATION OF ECONOMIC POWER 



119 



O — uj m 



<a: 
ecu 
30- 



< 

I- 
< 
CO 



\ 


\ 






( 


1 




\ 


z 
o 

If 




^ 


UJ 

_l 
< 






\ 


i 




1 



Qlui 
30- 











^; 












zll 
ol 

3 1 












1 





-IqO 



-ISO 



CO 
LJ 

< 
CO 



^ 


o 

a: 


\ 


\ 


/ 

. in 

% UJ 

\ _i 
\ < 

\| 


■ 




1- 
< 


> 


\ 


\ 


\ 

























uluj 












30. 


1 






i 




CO 


■ 










<o 








\ 


- 


rr 


ll z 






\ 




III 


y 2 






\ 


■z 


1 < 






\ 


< 


(£ 








% 


UJ 


H 








\ 


1 


< 








1 


o 


Vi' 








I 


s 


\ 






to 


) 


3 


\ 






UJ 


/ 


_) 


1 






< 


/ 


o 


n 






""J 1 


< 


H 






\l 1 


> 








y 






\ 


\ 




1 


. 


a 











UJ30 
-lOO 



247149— 41— No. 1- 



-10 



]^20 CONCENTRATION OF iX^ONOMIC POWER 

For refrigerators a sharp drop in sales between 1937 and 1938 con- 
trasted with an actual increase between 1929 and 1932-33. In the 
case of washing machines there were declines during both periods, 
but that between 1937 and 1938 was materially greater although the 
recession in general business Activity was much less prolonged. 
Between 1929 and 1937, however, the degree of saturation for re- 
frigerators had increased fivefold, and for washing machines it had 
almost doubled. The sharpest difference in the trend of sales oc- 
curred in electric refrigerators in which the change in saturation was 
most marked. 

The sales of vacuum cleaners declined much more severly during 
the 1929-33 depression than did those of either refrigerators or 
washing machines. At the same time the degree of saturation for 
this product was materially higher than for either of the other two.* 

Apparently, therefore, the change in the character of the market is 
largely responsible for the change in the sensitivity of these industries 
to depression influences. As long as there is a wide market for 
original sales, declines in the rate of general business activity seem 
to retard growth somewhat, but do not result in severe contractions 
of sales. As the original market becomes more nearly saturated, 
however, the picture changes. This is probably true particularly of 
that segment of the market which involves the replacement of used 
equipment, since replacements are usually postponed during periods 
01 general economic stress. Consequently, the exploitation of the 
original market, coupled with the tendency of consumers to postpone 
replacements during periods of bad business, results in making in- 
dustries of this land increasingly sensitive to depression influences as 
the degree of market saturation increases. 

Saturation by income groups. — Market saturation is particularly 
significant in relation to income groups, since it reveals the particular 
segments of the market which constitute the most favorable prospects 
for "new" sales. 

A study of consumer purchases ^ by the Bureau of Labor Statistics 
in 1935-36 shows the distribution of ownership of electric refrigerators, 
washing machines, vacuum cleaners, and radios,^ by various income 
groups.* This survey covered a representative sample group of 
Tamilies restricted, in this case, to urban- areas and to families whose 
heads were native-born and of native parentage. These data, as 
presented in charts XVII to XX inclusive, give an approximate indica- 
tion of market saturation for this specific sector of the population 
and may also afford some guide to conditions prevailing in the market 
as a whole. 

The charts compare the degree of saturation (i. e., the percentage 
of families having these appliances in each income group) for these 
products in selected cities in six areas of the country. The patterns 

» Electric ranges have been omitted from this discussion. Although saturation as measured by wired 
homes undoubtedly affects their sale, this effect is probably overshadowed by the influence of the rate of 
new-home construction. It may even be contended that new-home construction constitutes almost the 
entire true "original" market for electric ranges; that the substitution of an electric range for a used gas 
or coal range la largely in the nature of a replacement sale. 

• The Study of Consumer Purchases, in which the Bureau of Labor Statistics and the Bureau of Home 
Economics have cooperated with the National Resources Committee, the Central Statistical Board, and 
the Works Progress Administration, provides data on the average purchases of families, including husband 
and wife, both native-born, at different income levels, in cities in different parts of the country for the year 
1935-36. 

' The radio data are presented to illustrate an industry whose market is almost completely saturated. 

• This study of consumer expenditures reifttes to nonrellef families including husband and wife, both 
native-born, in 18 url>an areas throughout the country. 



CONCENTRATION OF ECONOMIC POWER 121 

for refrigerators and vacuum cleaners are similar, with a rapid and 
progressive increase of saturation as income rises. In the case of 
radios, saturation is almost complete at a relatively low income level. 
Washing machine ownership presents a contrast; there is a rise in the 
rate of ownership until the $1,250-$1,500 income class is reached, but 
higher income brackets show little if any further increase. This 
probably represents the greater tendency of upper income groups to 
send laundry to commercial laundries. 

Chart XVII presents o^\^lership data for electric refrigerators in 
more detail. The pattern is generally consistent; in each case sat- 
uration increases rapidly with income. The lower income groups 
have not been reached effectively while, in general, the market among 
the upper groups is almost completely saturated. 

The two "metropolises" (i. e., New York and Chicago) present 
exceptions to this pattern; the curve flattens out in the middle and 
upper income groups. These exceptions can be explained by the 
large number of such families living in apartment houses in which 
refrigerators or refrigeration are furnished by the landlord. Although 
this practice is most marked in these two areas, it is not confined to 
them. In interpreting these figures, therefore, it should be recog- 
luzed that in general the percentage of families in the middle and 
upper income levels using electric refrigerators is greater than the 
percentage owTiing them. 

The rapid increase in the proportion of families owning this equip- 
ment as income rises, as shown by the steepness of the curves for all 
areas, indicates that future sales to the upper and upper middle income 
groups must be largely for replacement, and that the major potential 
market for original sales is to be found among families with lower 
incomes. 

In 1935-36 only 17 out of 100 homes having incomes of less than 
$1,500 reported ownership of electric refrigerators. The market in 
the middle-income groups, $l,500-$3,000, was approximately 54 per- 
cent saturated while, for families with incomes of $3,000 and over, 
the ratio was 80 percent. 

For vacuum cleaners the saturation pattern is simdar to that of 
electric refrigerators. Saturation increases rapidly as income rises; 
29 percent of the families in the $250 to $1,500 income groups own 
cleaners; for the middle income group the figure is 71 percent; for the 
upper group it is 90 percent. 

In the case of radios it is apparent that saturation is practically 
complete for all income groups except the very lowest; the radio market 
is therefore almost entirely on a replacement basis or on a basis of 
selling extra radios for other rooms in the home. 

The charts also show certain geographical differences. The market 
saturation curve for most items is lower in the Southeast even among 
white families than in the other areas. This is particularly true of 
washing machines and vacuum cleaners. In the case of electric re- 
frigerators, the contrast is not so great, probably because of climate. 

In most areas, the saturation curve for large cities is slightly above 
the curves for small cities. Finally, for each of the items, the satura- 
tion curves for small cities, middle-sized cities, and large cities display 
a surprising degree of uniformity; that is, there is the same general 



122 



CONCENTRATION OF ECONOMIC POWER 
Chabt XVII 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

ELECTRIC REFRIGERATORS 

1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



PCRCEHl 
























NEW ENGLAND 


PER 


eo 
























r 


-^ 


^ 



























A. 


^^^ 


^--^'^-^ 


-=^ 




40 














fl 


i 




/ 


V 






















^ 


V 


i 


/s 


^- 












20 



/'f^\ 


J 


C 




^ 


„,*-— "^ 


V^ 


s 




L. 


^ 


U 


0^ 


^ 










^-^ 




^V 


^ 



EAST CENTRAL 



eo 



1 


A =5.^—= 




1 /^ 


K 


1 ^-^ 






\ £/ 








^ 


S^ 




1 


^ 


-^ — ^ 


-L^ 4-L- 






... .. 





WEST CENTRAL 



80 



250 1000 2000 3000 4000 5000 

INCOME GROUPS IN DOLLARS 

^^ METROPOLIS ►♦^^ MIDDLE-SIZED CITIES 
"=• LARGE CITY ooooo SMALL CITIES 
US mWC*U or LABOR STATISTICS |STUOt OF CONSUMER PURCHASES. URBAN SERIES 



80 



20 























rp^ 


C^]^__ 


— ■ 




100 
















r 


y 


9 


^ 


^ 








60 
40 
20 









^ 


1 


i 


/ 


= 


J 




















i 




- 
















V 


t 


4 

1 





















rSOO AND OVER 



CONCENTRATION OF ECONOMIC POWER 
Ohabt XVII— Continued 



123 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

ELECTRIC REFRIGERATORS 

1935-36 

NON RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



PERCENT 
100 



80 



20 



40 



20 



SOUTHEAST 



ROCKY MOUNTAIN 



PACIFIC NORTHWEST 




250 1000 2000 3000 4000 5000 7500 

INCOME GROUPS IN DOLLARS 

— =» LARGE CITY 

•♦■♦^ MIDOLE-SIZEO CITIES 

U^S ■UWtAUJjMJjOjjl »T«TISTIC»; STUDY Of COWaUMIW jUjlCH*M«, jjWMiM ^flMM 























r^ 


>^ 




» 














fr 


^ 


« 


c 


^ 


I 

^ 


^ 
















1 
















i 




A 


f 
























i 


9 


H 








H 



















— M — ■ — 1/-^ 



10,000 

MPOVtH 



T500 *Np even 



124 



CONCENTRATION OF ECONOMIC POWER 
Chabt XVIII 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

POWER WASHING MACHINES 

1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 

PCRCENT NEW ENGLAND PERCCNT 


80 - 
60 - 

40 - 

c 
20 - 


























80 

60 

40 

20 



100 

80 

60 

40 

20 






*" 


i 


r 

A. 


yxxi 


,00 












i 


ft 




v^ 




...— ' 


^^ 






\ 








y^ 


"*- 












^ 


A=* 






^^ 






- 


" 


\ 


^^"^u-r^ r^ 










EAST 


CENTRAL 


80 - 
60 - 
40 - 
20 






p 


^3^ 


/^ 






f ^ 


^ 

1 


^1 


•eS 


k:> 




x^--^ 




*L 




r 


^ 


^ 


•^ 








-^-^ 
























































WEST 


CENTRAL 






100 
80 
60 
40 
20 


80 
60 
40 
20 






















,,, 






^ 


r^ 


% 


^ 


< 


^ 

-N 


. 


"XT^ 






i 












v- 




""•^ 








































1 














°2 

V) 8.1 


lob 
\iM*u a 


2000 30'00 4000 5000 75 
INCOME GROUPS IN DOLLARS 

— • METROPOLIS •**** MIDDLE-SIZED 
— =• LARGE CITY .««o« SMALL CITIES 
r LABOM STATOTICSi STUDY OT CONSUUER PURCHASES, URBAN SERIES 


00 iO.C 
:iTIES 

•7500 « 


0( 

MO 


) 

n 

OVER 



CONCENTRATION OF ECONOMIC POWER 
Chart XVIII— Continued 



125 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

POWER WASHING MACHINES 

I93S-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



PERCENT 
100 



SOUTHEAST 



40 






PERCENT 
100 



40 



PERCENT 
100 



ROCKY MOUNTAIN 



PACIFIC NORTHWEST 



250 1000 2000 3000 4000 5000 7500 

INCOME GROUPS IN DOLLARS 

— =» LARGE CITY 
•♦♦^ MIDDLE-SIZED CITIES 
u ». tunw Of iMon groTtmcSi stupy or comuMCw puwcm*sc», umah stmts 






























_^__ 


, 




80 
60 

40 


- 




/ 


/^ 


V 










::^ 


«^ 


c 




^"'" 






J 

/ 


/ 


r 


























/ 


/ 




























20 





































•7900 *N00yW_ 



126 



CONCENTRATION OF ECONOMIC POWER 
Ohabt XIX 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

VACUUM CLEANERS 

1935-36 

NON RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



PERCENT 

too 



eo 



40 



20 



20 



100 



60 



NEW ENGLAND 



EAST CENTRAL 



WEST CENTRAL 



250 1000 2000 3000 4000 5000 

INCOME GROUPS IN DOLLARS 

«— METRQPLIS 
— =- LARGE CITY 



7500 



MIDDLE-SIZED CITIES 
<«>*»« SMALL CITIES 

















i 


^ 


^.yi 


^ 


^1 ! msi ^ 






^ jp-r^^ 


^^ 


^ . 


■ — ■ 














k 


i 




r 




v 












> 


k 


1 


1 




r 




















k 


\ 

/ 
























- 


J 


Li 












J 














1 — ' 



PERCENT 
100 



80 



20 






60 



40 



20 



"■[ ■■ ■ ■■ ■ — — ' 


1 — 1 


^^^^ 


SSS^-.-— 


""^^ 














y^\ 












At 

























U t.WRIAU Of L«tOW tTATI»TIC«; 8TUDY OF COWSUMIR PURCHAglR. URB*N MRItS 



10,000 
ANO OVER 



7S00 AND OvtR 



CONCENTRATION OF ECONOMIC POWER 
Chart XIX — Continued 



127 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

VACUUM CLEANERS 

1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



KRCENT 
100 



60 



40 



SOUTHEAST 











^^^^___^» 




r 


***. 




H^^^'^ 




^ 








Vy 












..^ 






\ 




— ' 



ROCKY MOUNTAIN 



PACIFIC NORTHWEST 



250 1000 2000 3000 4000 5000 7500 

INCOME GROUPS IN DOLLARS 

•=» LARGE CITY 

•*•** MIDDLE-SIZED CITIES 

U ». lUMM) OF U»OW ITgmTIMi tTUOY Or COW«uytR Pm>CM*«E». URBAN StHH« 



100 
























-•w 








IOC 




^ 


1^ 


!^^»^ 


==»----— — —"■ " 






60 

40 

20 












/ 


/ 


? 


4 


9 
















60 
40 
20 









J 


f 


/ 




















- 


* 


} 


^ 


V 
























I 


- 








_ 



















U 



}P^^ 




""^^ 


jM 






V 






¥ 













1 0,000 

AND OVER 



*7500 AWOfVew 



128 



CONCENTRATION OF ECONOMIC POWER 
Chabt XX 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

RADIOS 
1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 




40 



NEW ENGLAND 



EAST CENTRAL 



WEST CENTRAL 




250 1000 2000 3000 4000 5000 7500 

INCOME GROUPS IN DOLLARS 



•^— METROPOLIS MIDDLE-SIZED CITIES 

-c=« LARGE CITIES <><kxx> SMALL CITIES 

U 3 BUREAU OF LABOR STATISTICS, STUDY OF CONSUMER PURCHASES, URBAN SEBICS 



PERCENT 
100 



• 


f 


f 


¥^ 


^ 


iMi 


iOft 


*** 


==*•« 



















































































































.10,000 

AND OVER 



7500 AND OVER 



CONCENTRATION OF ECONOMIC POWER 
Chabt XX — Continued 



129 



HOUSEHOLD EQUIPMENT OWNERSHIP BY INCOME GROUPS 

RADIOS 
1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 

PERCENT SOUTHEAST percent 
100 -»- — — — — — - »^n tT»^ '■ , , — .ino 


80 
60 
40 
20 



100 


"/ 




/ 


t 


;■ 


c5 


^ 


A 


" 


^^ 


pn*- 










- 80 

- 60 

- 40 

- 20 


i 


f 


f 
























r 


























































































ROCKY MOUNTAIN 


-ilOO 

- 80 

- 60 

- 40 

- 20 

■ 
100 
80 
60 
40 
20 


80 
60 
40 
20 




i 


f 


i^ 


^ 


^ 




7 " 


^ 


«=:*• 


^=^" 


^^ 








f 






















































































































— ' 1 1 1 1 1 ■ ' ' 1 

PACIFIC NORTHWEST 


80 
60 
40 
20 


\ 


V 


f 


^ 


^ 




^ 


w 


^ 


!»^ 


iSr-* 


-=*. 







'^^ 


























































































































2 

U.S. 


50 lobo 20'00 3000 40 
IN 

■UREAU OF LABOR STATISTICS; STUDY OF C0< 


00 50 
COME GRC 

=» LARGt 
►^MIDDL 

4SUMCR PUR 


00 75 
UPS IN DOLLARS 

: CITY 
E-SIZEO CITIES 

CHASES, URIAH ICRIIS 


00 10,0 
ANDC 

•7500 AND 


00 
)VER 

OVEH 



130 



CONCENTRATION OF ECONOMIC POWER 



tendency for a larger share of families in upper income groups to own 
electrical appliances in all communities. 

Expenditures by families. — During the period of general business 
revival in 1934-36, the Bureau of Labor Statistics conducted a study 
of actual expenditures for living by families of employed wage earners 
and clerical workers in various incorne groups. Among the products 
purchased, of course, were electric refrigerators, washing machines, 
vacuum cleaners, and electric stoves and hot plates. The results of 
this inquiry are presented for families at three economic levels — 
representing family incomes of approximately $1,000, $1,600, and 
$2,100 — in the following summary and in table 24. 

The figures represent average expenditures per family and accord- 
ingly are small, since only a fraction of the families make such pur- 
chases (or payments on such purchases) in any one year. For example, 
at the $1,000 level, only 1.1 percent of the families purchased electric 
refrigerators during the year, while at the $2,100 level 12.1 percent of 
the families purchased such equipment. 

Table 13. — Average expenditures hy families of employed wage earners and cle;;rical 

workers, by economic level 

[Refer to table 24] 



Item 



Refrigerators.. 

Washing machines 

Vacuum cleaners 

Ranges and hot plates 



$1,000 income 



Percent- 
age of 
families 
purchas- 
ing 



1.1 
3.4 





Average 
expendi- 
ture per 
family ' 



2.43 







$1,600 income 



Percent- 
age of 
families 
purchas- 
ing 



6.9 

6.0 

6.0 

.6 



Average 
expendi- 
ture per 
family ' 



$2,100 income 



Percent- 
ape of 
families 
purchas- 
ing 



$11.34 
3.81 
2.C3 
.40 



12.1 
5.8 

10.fi 
2.2 



Average 
expendi- 
ture per 
family ' 



$21.57 
3.93 
5,19 
2.0O 



' Average for families in 42 large cities from unpublished data of the Bureau of Labor Statistics based on 
total tiumber of families in groups, not on families purchasing. 

As was to be anticipated, the upper economic level spent consider- 
ably more for electric refrigerators than did the middle group; the 
latter in turn spent very much more than did the lowest economic level. 
A similar sharp contrast in expenditures appears for vacuum cleaners 
and electric stoves; for washing machines, as might be inferred from 
its saturation pattern, the difference is less striking. 

Families in the $1,000 level spent an average of only $1.98 for elec- 
tric refrigerators, $2.43 for washing machines and no expenditures 
were recorded for vacuum cleaners and electric stoves. It is apparent 
that these families did not participate significantly in the markets for 
those products. Consequently the bulk of sales was to families in the 
upper and middle income classes. 

Income residuals. — The reasons for this greater-than-proportionate 
reduction in expenditures for electrical household equipment as 
income falls are apparent. A family can afford to purchase an ex- 
pensive piece of equipment such as an electric refrigerator only if it 
has already met, or made provision to meet, the expenses incurred for 
what are commonly spoken of as the "necessities of life" — food, 
clothing, shelter, and personal care. Consequently, the amount of its 
income which a family may be able to spend for household equipment 



CONCENTRATION OF ECONOMIC POWER 131 

should be measured only after the family's expenditures on th^se 
items are deducted. 

In chart XXI the income which remains after deductions are made 
for these primary expenditures is shown as a percentage of total 
income. 

In general, it is apparent that nonrelief * families in the very low 
income brackets actually expend more than their total incomes, 
whereas those in the upper brackets have a residual of more than 
40 percent. It is out of this residual that purchases of such equipment 
must come, as well as expenditures for such items as transportation, 
personal care, medical care, recreation, tobacco, drugs and cosmetics 
and taxes. The opportunities of purchasing such products as refriger- 
ators, vacuum cleaners, or washing machines arc correspondingly 
limited. 

This docs not mean that the lower income groups must be dropped 
from consideration as a potential market for these goods. However, 
the extent of that market should be measured not in terms of the 
entire income of a family, but rather in terms of that share of the total 
income which remains after more urgent expenditures have been made. 
Obviously, if these markets are to be tapped, prices must be low and 
payments must be extended over substantial periods of time. 

COMPETITION AND SALES STRATEGY 

The expansion of certain household-equipment industries since 1920 
has been very marked. Sales of refrigerators, vacuum cleaners, and 
ranges more than trebled, and sales of washing machines and radios 
more than doubled during the period 1932-37. In each industry, the 
1936-37 peak was far in excess of pxe-depression levels. 

The virgin markets available to these new industries were, of course, 
a primary, basic factor in their rapid development. Sales were stimu- 
lated by (1) price reductions, (2) improved equipment, quality and 
appearance, (3) modern merchandising methods, and (4) general 
business recovery. 

Price uniformity. — During the downswing of the cycle from 1929 to 
1932, the focus of sales effort seems to have been on prices. The 
reduction in average unit retail value for all these products during 
this period has been described. (See p. 112.) Price competition 
seems to have been particularly active during the most acute phase of 
the depression. The refrigerator industry experienced a severe price 
war during 1931-32; dunng its course some boxes were sold slightly 
under $100 retail. 

From 1932 on, less attention was given to price and more stress 
was placed upon the development of efficient, modern-styled equip- 
ment. Prices were fairly uniform and, in general, price competition 
was not emphasized. 

This type of situation became increasingly characteristic of the 
industries as the years passed. By 1938 prices quoted by the leading 
electric-refrigerator manufacturers, with one important exception, had 
approached a degree of almost complete uniformity, as is shown in 
table 21. Altogether, the concerns listed in the table control at least 
80 percent of the total sales of electric refrigerators. The one im- 

* Many of the families in metropolitan areas and large cities with annual incomes under $500 which main- 
tained tb'-'nselvcs without relief were those with resouroes to draw on either in the form of past savings or 
credit. 



132 



CONCENTRATION OF ECONOMIC POWER 
Chabt XXI 



INCOME RESIDUALS AFTER PRIMARY EXPENDITURES 

BY INCOME GROUPS 

1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



NEW ENGLAND 




250 500 750 1000 1250 1500 1750 2000 2250 2500 3000 3500 4000 5000 7500 10,000 

AND ANO AND AND AND AHO AND AND AND AND AND AND AND AND AND <nd 
UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER* UNDER UHDER UNDER UNDER UNDER UNDER UNDER 

500 750 1000 1250 1500 1750 2000 2250 2500 3000 3500 4000 5000 7500 10,000 OVER 
INCOME CROUPS IN DOLLARS 
— METROPOLIS ECTtjBsa MIDDLE-SIZED CITIES 

QZZB LARGE CITY iyA>//A SMALL CITIES 

U. S BUREAU OF LABOR STATISTICS; STUDY OF CONSUMER PURCHASES, URBAN SERIES 



CONCENTRATION OF ECONOMIC POWER 
Chart XXI — Continued 



133 



INCOME RESIDUALS AFTER PRIMARY EXPENDITURES 

BY INCOME GROUPS 

1935-36 

NON-RELIEF FAMILIES INCLUDING HUSBAND 
AND WIFE BOTH NATIVE BORN 



SOUTHEAST 




250 500 750 1000 1250 1500 1750 2000 2250 2500 3000 3500 4000 5000 7500 10,000 

AND AND AND AND AHO AHU AND AND AND AND AND AND AND AND AND .„- 

UNDCN UNOCfl UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER UNDER *"'' 

500 750 1000 1250 1500 1750 2000 2250 2500 3000 3500 4000 5000 7500 10,000 OVER 
INCOME GROUPS IN DOLLARS 



I LARGE CITY ^253 -MIDDLE-SIZED CITIES 

U. S BUREAU OF LABOR STATISTICS; STUDY OF CONSUMER PURCHASES, URBAN SERIES 



234 CONCENTRATION OF ECONOMIC POWER 

portant deviation from the pattern of price uniformity is the Coldspot 
refrigerator, handled through a mass distributor. 

The uniformity of prices among the various companies during 1938 
is quite apparent from above table. In addition to this uniformity of 
Ust prices, guarantees were generally uniform, consisting in most cases 
of a one-year guarantee on cabinet shelves, traj^s, and accessories, a one- 
year guarantee on controls, and- a 5-year "replacement" or "protec- 
tion" plan on the refrigerator system itself. In the cast of all the 
companies listed, except Stewart-Warner, these guarantee features 
are included in the list price; if the price quotation for this company 
is corrected by adding the charge for the guarantee, the price uni- 
formity becomes even more striking.^" During 1939 this price 
uniformity continued; the important change which occurred early 
in 1940 will be discussed subsequently. 

Prices in the washing-machine and vacuum-cleaner industries are 
also uniform. In both of these industries the influence of "price 
lines" is predominant. Most vacuum cleaners and washing machines 
sell at either $29.95, $39.95, $49.95, or $59.95. In the case of washing 
machines the size of the machine offered at each price line is much the 
same for each of the major companies. Thus, competition is removed 
from the sphere of price and size of machine to the efficiency of opera- 
tion and to general quality appeal. 

Concentration. — It is probable that the trend toward price uni- 
formity in the refrigerator industry in the years following 1933 was 
facilitated by increasing concentration among producers. Business 
mortality was high during the depression. Thus the Electric Re- 
frigerator News in May 1933, published a list of concerns which had 
ceased manufacturing electric refrigerators. The 250 producers in 
1932 had been reduced to 75; 110 had gone out of business, 41 could 
not be reached by mail, and 24 had been absorbed by other 
manufacturers. 

This high mortality undoubtedly reflected the stress of the de- 
pression generally, ani, more particularly, the severe price war of 
1931-32." ■ In addition, however, a sharp reduction in the number of 
concerns is often a symptom of an industry's approaching maturity 
and represents a more or less inevitable "weeding out" process 
following its developmental stage. 

Table 22 reveals the degree of concentration among producers in 
three of these appliance industries during 1937. The output of the 
four largest producers in each case is expressed as a percentage of 
total output in the industry. Concentration was least marked in the 
washing-machine industry where four producers accounted for more 
than half of the total production; it was greatest in the electric- 
refrigerator industry where four concerns produced approximately 
three-fourths of the total dollar value. 

In appraising the significance of this concentration, certain relation- 
ships existing between companies should not be neglected. For 
example, the Kelvinator Co. manufactures and distributes the 
Leonard refrigerator, and, in addition, has a substantial interest in 
the Universal Cooler Co.'^ Patents are of strategic importance, 

'» The addition of a .$5 "Ruaranteo" to the ILst price of the Stewart- Warner 6.0-6.9-foot model brings the 
net price to $184.75 which is exactly the same price charged by Frigidaire and General Electric. 
«i Sec p. 112 above. 
II Standard Corporation Records, the Kelvinator-Nash Corpwration. 



CONCENTRATION OF ECONOMIC POWER J 35 

especially in the washing-machine industry. The Maytag Co., which 
produces washing machines and ironing machines exclusively, owns 
the basic patents on the type of mechanical agitation utilized by most 
washing-machine manufacturers.*' In the spring of 1939, however, 
the patent control of the Maytag Co. was materially lessened as a 
result of a decision by the United States Supreme Court.** In the 
electric- refrigerator industry the more important patented features 
are freely utilized by most of the industry's members. 

Emphasis upon quality. — The corporations surviving the depres- 
sion — especially the large firms — invested heavily in research and 
experimeptal activities. Modem sealed units for the refrigerator 
were introduced by the majority of manufacturers; "streamlined" 
refrigerator cabinets were perfected; economic methods of insulation 
were devised; and great advances were made in improving the internal 
features of the refrigerator. Washing machines acquired many new 
features. The "spinner" type of machine was introduced. Table- 
top ranges with high-speed cooking units were developed. Through- 
out these industries important technological advances were achieved. 
New designs and new styles enhanced not only the appearance but 
also the utility of the appliances. 

At the same time, sales effort was intensified, not only by manu-^ 
facturers and dealers, but also by public utilities which sought to 
expand the demand for electric current. House-to-house canvassing 
and demonstrations of the various products became a common prac- 
tice. Complete electrical kitchens were advertised and salesmen were 
trained to sell not merely a single item, but completely equipped 
kitchens for the home. Price was not emphasized duiing this period; 
the focus of competition had altered. Advertisements stressed 
improved quality, style, design, efficiency, and reputation. 

Manufacturers sought for and developed new markets. This 
required new distributors and more outlets. This movement toward 
the extension and expansion of distributive outlets was aided by 
established retail stores of various kinds. Furniture stores, hardware 
stores, music stores, automobile accessories shops, and department 
stores seized the opportunity to handle these new and profitable lines. 
Today the largest group of outlets is electrical specialty stores (includ- 
ing radio stores), with department stores second, public utilities third, 
and furniture stores fourth. 

Distribution systems vary according to product. In general, sales 
are through some sort of retail store, but some of the larger manu- 
facturers of vacuum cleaners maintain large sales staffs which conduct 
house-to-house canvasses and sell by means of demonstration. This 

'3 Standard Corporation Records, the Maytag Corporation. The National Recovery Administration 
Code History of the washing-machine industry describes it as being of a "very compact nature" and that 
the industry was "not troublesome from the viewpoint of compHance. The small number of violations 
reported (wore due to) the fact that this was a well-disciplined industry * * * " It is possible that 
patent arrangements played a role in this experience. 

'< The Maytag Co. filed suit against several corporations for infringements of its patents. The patent, 
Isyjed July 12, 1932, to the Maytag Co., assignee, contained 39 claims, 36 of which were for washing machines 
and 3 (Kq^-. 1, 38, and 39) for a method of washing fabrics. The Maytag Co. contended that the functions 
performed under claims 38 and 39 were distinct and separate. The Court decided otherwise. To quote 
the opinion delivered by Justice Roberts: 

"The company insists that the crucial difference lies in the fact that in 38 the moving fluid in the tub Is 
said substantially to suspend the fabrics, whereas in 39 tbe same agency is said to cause the fabrics to be freely 
moved about. But the difference in verbiage describes no difference in operation or result. We conclude 
that, when read in their entirety, they describe the same method * * • we are of the opinion that the 
patent is void for failure to disclaim claim 39." (Afaytag versus Hurley ^Machine Company, Easy Washing 
Washing Machine Corporation, and General Electric Corporation, 59 Supreme Court Reporter, October term 
1938, p. 857.) 



136 



CONCENTRATION OF ECONOMIC POWER 



procedure seems to entail higher distribution costs and prices than the 
orthodox retail channel used by another major group of manu- 
facturers.'* 

Prior to 1931, most manufacturers presented relatively few models 
and styles of each item of equipment. After business recovery began 
in the spring of 1933, the number of price lines was increased, affording 
the consumer a wider variety of choice. Instead of showing only 
three or four refrigerators as was the case in 1929, by 1935 the average 
dealer was able to present to the prospective customer 8 or 10 distinct 
lines. In general, at least until 1940, there has been some tendency 
to reduce the spreads between prices of different models.'^ 

After 1932, when efforts to expand the market were intensified, 
attempts were made to introduce models wliich would appeal to 
families in the lower-income groups. For a time efforts were made to 
sell small 4-foot refrigerators, which were the lowest-price models, to 
those homes wliich could not afford to buy the larger, more costly 
equipment. During the early stages of the recovery, sales of 4-foot 
and smaller boxes predominated. During 1934 and 1935, however, 
advertising and sales effort were directed primarily toward marketing 
5-foot, 6-foot, and 7-foot boxes which are more useful for the typical 
household. Prices were further reduced on these lines, in order to 
widen their appeal. This trend has continued, and at present the 
6-foot box is the most popular size. 





Year 


Percentage distribution of sales by size of box 




4 cubic feet 


6 cubic feet 


6 cubic feet 


7 cubic feet 


1934 . . ... 


31 
13 


21 
25 


13 
35 


11 


1937 


9 







In other items of equipment — washing machines, ranges, cleaners — 
salesmen constantly warn against purchase of small, low-quality mod- 
els. They have been educated to "sell quality" and to sell those 
models, particularly the higher-priced lines, which bring them larger 
commissions. 

"Leader" selling has come to be a standard practice in these indus- 
tries. For example, most manufacturers of refrigerators produce at 
least one model stripped of all the gadgets and extra features which 
are included in the "deluxe" styles. These models are advertised to 
gain the attention of bargain seekers. The "leader" models usually 
lack merely the eye-catching innovations, the special trays, the evap- 
orators, and specialties of the higher-priced lines. They are available 
at relatively low prices and have come to represent a fairly large pro- 
portion of sales. On the other hand, prospective buyers attracted by 
the advertisement are often persuaded by the dealer to buy a higher- 
priced line instead. Similarly, in washing machines, radios, and 
cleaners, models stripped of gadgets and attachments are made avail- 
able at relatively low prices to meet the demand of the "price con- 
scious" segment of the market. 

:» See p. 146. 

" In the case of washing machines, the various lines offered are usually priced et $10 intervals, at 5 cents 
under the even figure. (E. g., $29.9S, $39.95, $49.95, etc.) Some manufacturers claim that this pricing tech- 
nique results In the sale of more higher-priced models. 



CONCENTRATION OF ECONOMIC POWER. 137 

The turning 'point — the 1937-38 recession. — Sales had advanced at a 
rapid pace throughout the recovery period from 1932 to 1937; the 
latter year was the all-time peak in sales for all of these products." 
Production far exceeded that of 1929. 

The first and second quarters of 1937 represented prosperous levels 
of business. Aided by modem merchandising policies, advertising, 
favorable terms and conditions of sale, new styles, efficiency of equip- 
ment, and general business recovery, sales came easily. 

The subsequent experience of the refrigerator industry may be con- 
sidered typical of the group. Manufacturers had expanded plant and 
equipment facilities throughout the period 1932 to 1937. As a result 
they were prepared to meet the' high levels of demand which came 
during the early months of the latter year. However, encouraged by 
the large increase in sales during the first quarter of 1937 and by 
favorable reports from distributors in all parts of the country, they 
continued to expand plants to meet still further anticipated increases 
in sales. Manufacturing activity was maintained at a high rate 
throughout the summer of 1937, despite accmnulating evidence of an 
impending business set-back. Heavy inventories were created during 
this period ; production was not curtailed for some time after the rate 
of purchase had fallen off. 

Plans were being made to modify the seasonal pattern of the indus- 
try. Showings of new models, which were usually held after the turn 
of the year, were scheduled for a pre-Christmas date during 1937. 
The industry had planned to stimulate winter sales by promoting holi- 
day gift buying and elaborate preparations had been made accordingly. 
The change may have been suggested by the successful experience of 
the automobile industry which had altered its seasonal pattern in 1935 
by changing the date of introduction of new models. 

It became evident early in the summer of 1937 that the decline in 
sales would be much greater than normal seasonal expectation. Buy- 
ing dropped off rapidly during the summer and fall. The expected 
increase in sales at the end of the year during the Christmas holidays 
did not materialize. The downward trend became even more severe 
during the early months of 1938. During the latter year, refrigerator 
sales were 46 percent below the 1937 peak level. 

Inventories rose rapidly. At the end of 1937 there were 300,000 
refrigerators in dealers' hands as compared with only 125,000 during 
December 1936. 

The curtailment of public purchasing power was reflected in the 
failure of many conditional buyers to keep up th nr monthly pajrments. 
Repossessions of equipment which had been sold on time increased 
sharply during the winter of 1937-38. Some manufacturers have indi- 
cated their opinion that the favorable credit terms which had been 
offered prior to the break were at least partly responsible for this high 
rate of return. Presumably the impact of the recession hit with espe- 
cial force marginal buyers in the lower-income levels whose purchases 
had been made possible in the first instance by the easy terms offered. 

The large credit companies seem to have become aware of this situa- 
tion somewhat belatedly. Their policy was changed during 1937, and 
credit facilities were generally restricted, terms of payment shortened, 

" In the case of washing machines, although dollar volume reached its peak in 1937, the number of units 
Bold was greater! n 1936. 



J 38 CONCENTRATION OF ECONOMIC POWER 

larger down payments required, and the paying ability of prospective 
purchasers more carefully examined. These changes may have con- 
tributed to the contraction in sales. During 1939, however, there was 
evidence that the terms of conditional sales were again being made 
more liberal. Such liberalization is apparently characteristic of periods 
of active demand. Terms are usually tightened up when sales decline. 

PROBLEMS OF SALES POLICY DETERMINATION 

It is evident that some at least of the industries considered in the 
foregoing section, particularly the refrigerator, washing machine, and 
vacuum cleaner industries, have come to critical turning points due to 
the increasing saturation of a substantial portion of their original 
markets, particularly in the more prosperous sector of the population. 
The effect of this change in market conditions was forcibly revealed in 
the sharp dechnes in sales experienced by these industries during the 
1937-38 recession. During 1939 there seemed abundant evidence 
that their initial period of rapid technological development, aggressive 
price reductions, and vigorous growth had apparently reached or was 
rapidly approaching an end. 

It is clear that this change in market conditions reflecting ap- 
proaching maturitjr must be met by corresponding changes in market- 
mg techniques and in price policies if the expansion possibilities of these 
industries are to be fully realized. The policies which these industries 
followed between 1932-37 seem to have been well suited to the ex- 
ploitation of the original market among families of the middle and 
upper income brackets. This market is, however, rapidly declining 
as evidenced by the saturation figures which have been presented. 
Consequently, the bulk of future sales must be either to famihes in 
income brackets who have not hitherto been able to afford the pur- 
chase of these kinds of equipment, or else they must be sales for the 
purpose of replacing worn out or obsolescent equipment. Maximum 
expansion would be achieved through appeal to both of these markets 
concurrently. 

It is convenient to consider these two possibihties separately. 
Consequently, the discussion will first proceed to an examination of 
possibilities of expanding the original market, particularly among 
members of the lower income groups. The possibilities of stimulating 
replacement sales will be examined subsequently. 

EXPANDING THE ORIGINAL SALES MARKET 

Quality emphasis and advertising. — Since approximately 1932, and 
until 1940, programs for expanding sales in these industries (as well as 
competition between rival firms for their shares of the market) have 
focused primarily upon nonprice techniques. Prices throughout this 
period for all these industries and for most of the firms within each in- 
dustry, with the large mail-order houses constituting a notable ex- 
ception, remained stable. Sales effort concentrated partly upon 
advertising and sales campaigns designed to acquaint the public with 
the virtues of the respective apphances, and partly upon improvements 
of quality and appearance. Guarantees were ejxtended to assure 
the consumer of the reliability and durability of the product. Im- 



CONCENTRATION OF ECONOMIC POWER 139 

provements in efficiency of operation were continually sought through 
constant laboratory analysis and research.^* 

In the absence of revolutionary changes in mechanical details and 
construction, the future effectiveness of these techniques seems clearly 
limited. Although advertising wiU probably remain an important 
instrument of rivalry between competing concerns, its value in ex- 
panding the market is conditioned by the dwindling number of 
potential original purchasers. Moreover, there is some evidence 
that the ingenuity of advertising copywriters is beginning to be 
strained in devising new forms of appeal. Every conceivable aspect 
of an electric refrigerator, for example, has been exploited in advertis- 
ing. Such features as the size and shape of the box, "streamlining,'* 
the "efficient" compression unit, the number of trays, the control 
over temperature, etc., have been described repeatedly in advertising 
copy.^^ The exhaustion, of "sharp angles," the similarity of advertis- 
ing of the various producers, and the consequent necessity of repeti- 
tion lead to extremes in advertising which often mitigate its effect- 
iveness. ^'^ 

The washing machine industry has not been characterized by 
advertising as extensive as has the electrical refrigerator industry. 
Instead, it relies heavily upon a system of direct sales solicitation. 
Manufacturers often maintain elaborate schemes for establishing 
prospect lists and for guiding "follow-up" work.^^ 

18 The early electric refrigerators were affected by constant (liflBcalties with motors, compressors, mechan- 
ical drives, cooling units, stuffing boxes, freezing trays, and enamel finish. Cork Insulation was expensive 
and was only moderately successful in excluding heat. As a result of research, however, all of these diffi- 
culties were overcome. Enamels were developed which enabled the entire cabinet to be fabricated and 
fired as one piece. New and superior types of insulation such as wood fibre, rock wool, aluminum foil, glass 
wool and paper were devised. In addition a noncorrosive, nontoxic, noninflammable, nonexplosive and 
Inexpensive refrigerant was created, dichloro-difluoro-methane or "freon." This refrigerant — which boils at 
21 degrees below zero — was immeasurably superior to SOi, ammonia, and methyl chloride. This improve- 
ment has alone contributed materially to the growth of consumer acceptance of the electric refrigerator 
(H. A. Toulmin, Jr., Patents and the Public Interest, Harper and Bros., 1939, pp. 149, 150.) 

i» In the words of Printers' Ink Monthly, August 1937: 

"The selling of refrigerators requires the massing of all conceivable sales influences. It becomes evident 
to one who compares the methods of the leading companies that mere sharp angles will not sell refrigerators 
any more. As an industry matures, angles disappear and products approach uniformity. Advertising at 
the same time takes on a similarity. 

"Probably nothing is so striking about refrigerator advertising as its similarity. Probably no one feels 
this more keenly than the advertisers themselves. Assuming that Joe Doakes, the common man, has an 
analytical mind, he doubtless compares the advertising of the leading makes with growing confusion. It 
is certainly impossible for him to decide from the advertising which of them is best for his purposes." 

>ii A few examples of these extremes are as follows: 

"New super-duty Frigidaire with the meter-miser cuts current cost amazingly! Proves completeness 
never before known in all five basic services for home refrigeration." 

"The new Kelvinator is plus-powered. It has as much as double the cooling capacity of other well- 
known refrigerators of equal .''ize. The new Kelvinator runs only half as many minutes per day — during 
the rest of the time it maintains low temperatures using no current at all." 

Incidentally, this latter type of extreme advertising resulted in action by the Federal Trade Commis- 
sion. (Federal Trade Commission, Stipulation No. 1749, and Docket No. 3125.) 

An indication that the advertising features of the product have been exhausted is revealed in the ten- 
dency of the General Electric Co., to become philosophical in its advertising: 

"Life * • ♦" General Electric remarks, "a few fleeting measures of conscious time • • • precious 

• * • packed with infinite possibilities— but how to make the most of our time? It flows away so fast 

• • * priceless, because nothing can purchase more time than is given to us all * • *" 

" The Maytag Co., for example, goes to great lengths in suggesting methods for obtaining narnes of pros- 
pects. These consist of: Contacting regular customers who come into the store; personal solicitation of 
Maytag owners; field solicitation; circular letter with return card; newspaper advertising; exhibits at auto 
shows, fairs, carnivals, and public gatherings; cooking schools and home sliows; demonstrations at church 
and society activities, clubs, etc.; guessing contests; drawing and registration schemes; bonus offered to 
Maytag owners who turn in prospects that result in sales; rough survey, the salesmen call at every fifth 
house; demonstrating to high-school domestic-science class; advertising second-hand washers in classified 
ads, some of those answering can be traded up; store and widow demonstrations; newspaper coupons, the 
company recommends some such offer as "This week's washing done free;" contacting newlyweds; follow 
birth announcements; locate washerwoman prospects by following up "washing taken in" ads in news- 
papers; watch "help wanted" and "situation" or "laundress wanted" ads in newspapers; newly wired 
homes; swapping prospects; regular charge-account customers; bookkeepers, repairmen, linemen, clerks, 
etc.; Maytag on truck at customer's door; getting husband's permission first to bring the machine to tie 
home; newspaper news, leads; gas inspectors, meter readers, etc.; special invitation cards to the store. 
(Printers' Ink Monthly, August 1937.) 



l^Q CONCENTRATION OF ECONOMIC POWER 

In tlie vacuum-cleaner industry, as has been noted, two principal 
producers maintain their own salesmen and rely upon house-to-house 
canvassing. This necessitates the establishment and maintenance by 
the manufacturer of branch warehouses, district sales managers, 
branch managers, crew managers, and canvassers. In addition, con- 
siderable amounts are spent in the education of salesmen and in devis- 
ing effective sales techniques. Companies selling through ordinary 
retail channels apparently find it more difficult to achieve high sales 
volume. It is the opinion of many in the industry that house-to- 
house canvassing is necessary in order to persuade the housewife that 
she is eliminating only part of the dirt from her home with her carpet 
sweeper or her old cleaner. 

In each of these cases the sales techniques which have been described 
are somewhat expensive. Yet it seems unlikely that they will be 
materially modified in any particular in the near future. Although 
their value in increasing the total sales volume of the respective 
industries may be limited, particularly in view of the present degree 
of saturation, they nevertheless constitute effective competitive tech- 
niques. Consequently, no one company can abandon them without 
risking some loss of its share of the industry's sales volume. In any 
appraisal of the expansion prospects for each of these industries as a 
whole, therefore, these particular aspects of nonprice competition may 
be somewhat detrimental in that they impose elements of cost which 
must in turn be reflected in the price level. 

Other forms of nonprice competition which these industries have 
recently utilized may not involve any material additions to cost. 
Nevertheless, it is doubtful whether "streamlining" of styles or the 
further extension of attractive guarantees can be counted upon to 
expand markets appreciably. In fact, as some of these techniques 
come to be generally utilized, they may even lose their value as com- 
petitive devices. When, for example, one or two refrigerator pro- 
ducers first introduced long- term guarantees, these guarantees may 
have had some effect in augmenting the manufacturers' respective 
shares of the market. Soon, however, the practice of granting long- 
term guarantees became general. At present these are so uni- 
form that they are no longer a basis for distinguishing the product of 
one manufacturer from that of his rival. Shortly after this uniformity 
in guarantees was achieved, an editorial in a trade publication pointed 
out the consequences: 

IS THE 6-yEAR GUARANTEE NECESSARY? 

A recent trip into the field reveals the fact, that electric dealers are highly dis- 
satisfied with the epidemic of 5-year guarantees which seem to have broken out 
in the national advertising of the electric refrigerators. The point is, of course, 
that the advertisements are worded to give the customer the impression that the 
merchandise purchased is warranted against interruption of whatever character 
over a 5-year period, whereas that is not intended at all. The manufacturer is 
guaranteeing his wares only against defects for which he is responsible. 

Originally the guarantee found an excuse for itself in that it was the exclusive 
promise of one company and so formed a sales argument for the salesmen handling 
that line. Now, when practically every manufacturer makes the same promise, 
it does not even offer a talking point against rival makes.^^ 

In summary there seems good reason to doubt the efficacy of these 
nonprice sales techniques as means of expanding the markets for 

'* Electrical Merchandising, December 1936,< p. 22. 



CONCENTRATION OF ECONOMIC POWER 141 

electrical appliances, once saturation has reached a relatively high level 
among those who can afford to purchase at the prevailing prices. 
However it is possible that some future revolutionary change in me- 
chanical detail and construction might improve the refrigerator to 
such an extent that the replacement market would be greatly stim- 
ulated. 

Credit terms. — Before turning to the level of prices as such, it may 
be well to consider briefly the structure of credit terms on conditional 
sales. Thel"e are four basic elements to the credit transaction which 
may be examined as offering possibilities of stimulating sales. These 
are: 

1 . The size of the down payment. 

2. The period over which payments are to be made. 

3. The effective interest rate. 

4. The degree of emphasis upon the purchaser's financial status. 
During the period of increased demand in 1936 and 1937, efforts 

were made to liberalize each one of these aspects of the credit trans- 
action. In part, at least, this reflected the activities of various. 
Federal agencies, such as the Federal Housing Administration- and 
the Electric Farm aud Home Authority, which financed equipment 
sales at low interest rates. Similar practices were adopted by the 
industry generally and by private financing companies. Down pay- 
ments were gradually reduced until, in many cases, none at all were 
required. 

The period for payment was gradually extended from the earlier 
practice of 18 to 24 mouths; first to 30 months, and later to as long as 
36 months. Interest rates were cut, particularly by public utility 
companies and by large department stores. Apparently too, pro- 
gressively less effort was made to examine the prospective customer's 
financial position. It has been mentioned above (p. 137) that distress 
among consumers during the 1937-38 recession resulted in a large num- 
ber of repossessions, part of which, at least, reflected the liberality with 
which credit had been extended. In an effort to avoid a recurrence 
of this experience, some attempts were made to tighten the credit 
structure. Apparently, however, the only important difference 
between conditions today and those preceding the recent recession is 
a somewhat greater surveillance of the prospective customer's financial 
status. Otherwise, down payments are still small or not required, 
interest rates low and the period of payment long. 

It is true that the decision of many prospective purchasers is often 
governed more by the size of the required monthly payment than 
by the aggregate amount which they are called upon to_ pay. If 
monthly payments could be made smaller, sales might be increased. 
On the other hand, the interest rate charged by many sellers is now 
so moderate that further reductions would be unlikely to affect the 
size of the monthly payment appreciably, and the period oyer which 
payment is extended is probably as long as is consistent with sound 
financial policy. Consequently, further liberalization of credit terms 
does not seem to be a promising method of stimulating the market 
for these appliances. It is the retail price which is the basic element. 

Price reductions. — The most obvious means of stimulating original 
sales among families in the lower income brackets is a policy of price 
reduction. Between 1932 and 1939, however, the prices of these 



142 CONCENTRATION OF ECONOMIC POWER 

products were maintained at relatively stable levels and, except for 
refrigerators, these levels still prevail. While this has represented 
the general policy there has nevertheless been some effort, particu- 
larly in the refrigerator and washing machine industries, to introduce 
so-called "stripped" lines. 

Since 1937 most of the major refrigerator companies have introduced 
special, low-priced 6-foot models. These models are "stripped" of 
the many special features and accessories found on the regular models. 
The trays do not slide out; there are no special devices for removing 
the ice cubes from their container and various other similar features 
are omitted. 

Only in the 6-foot line — which retailed at about $175 in 1939 — has 
the new model been introduced. During 1938 and 1939 the reduction 
in price by most producers was approximately $35, or to about $140. 
This price was still beyond the range of many potential purchasers of 
limited means, but it did serve as an attractive price line for some of 
the lower income families. 

The new line was introduced primarily as a "leader," Thus adver- 
tisements often proclaimed that a 6-foot box of a well-known producer 
.was to be offered for sale at the "amazingly" low price of $149.50. 
Customers who were attracted to the store by such an advertisement 
were frequently urged by the salesman to purchase one of the "de luxe" 
or "regular" models instead of the low-priced "leader," ^^ 

The "leader" sales technique is also utilized in the electrical washing- 
machine industry. In this case the "leader" motive, while perhaps 
uppermost, is accompanied by an even keener awareness of the poten- 
tial market for such a product among lower-income groups. Thus, 
washing-machine manufacturers have acknowledged indebtedness to 
the stimulation of their sales resulting from relief payments. Pre- 
sumably, therefore, these cheap lines of washing machines have con- 
tributed materially to sales in their own right, and not merely in their 
capacity as "leaders." 

Vacuum cleaner manufacturers have apparently made little effort 
to introduce similar "special" lines. Partly this may reflect the 
nature of the product- partly it may be due to the physical difficulty 
of selling more than a single line through the house-to-house canvassing 
system. Where price leaders have been utilized in this industry, old 
cleaners have been reconditioned to serve this purpose. 

Despite the emphasis on the "leader" aspects of these special lines, 
they reflected a realization by the manufacturers of the increasing 
role which price consciousness among consumers is pla,ying in the 
market for these electrical appliances. To the extent to which serious 
effort was actually devoted to selling these cheaper lines to purchasers 
of moderate means, they have resulted in some expansion of the poten- 
tial market. The price difference was sufficient to attract certain 
marginal buyers that could not afford the regular models. However, 
this effect was probably somewhat narrowed by the practice of many 
salesmen in treating these models as substandard, since some con- 

» In sales terminolof;y this selling technique is known as the set-back method. The customer, attracted 
into the store by the "leader," is first shown the most expensive de-luxe models. If he indicates that the 
price Is too high, the salesman leads him to the standard or regular models, which are still at least $30 above 
the price of the model advertised. If the customer insists that he wishes to see the advertised model and 
(sannot be interested in anything-else, the salesman will finally show him this model, saying that, although 
It is a very good refrigerator, it cannot be compared In service and desirability to the regular models. 



CONCENTRATION OF ECONOMIC POWER 143 

sumers preferred not to buy at all rather than to buy articles which 
were indicated to be inferior. 

Much broader prospects of sales expansion than those derived from 
the introduction of these special models would flow from a general 
reduction in prices. In other words, a resumption of the price trends 
which prevailed between 1927 and 1932 would, if feasible, be likely 
to widen the potential market materially. The precise degree of 
expansion which might be expected to reward any particular decline 
in prices cannot, of course, be predicted. 

The crux of the problem is contained in the phrase "if feasible." 
Presumably further price reductions must reflect lower costs. Broadly 
speaking, savings in cost may be achieved in two directions, (1) by 
reducing costs of manufacture, (2) by cutting the costs of distribution. 

Reductions in the cost of manufacturing. — When interviewed during 
1939, manufacturers in these industries did not seem to be especially 
sanguine as to the prospects of materiaUy reducing manufacturing 
costs. In the refrigerator industry, for example, the smaller ma,nu- 
facturers apparently beheved that important savings in manufac- 
turing costs could be initiated only by the three or four largest com- 
panies in the industry and there was considerable doubt as to whether 
such savings could be possible even to this restricted group. There 
seemed to be some effort to explore the possibility of achieving econo- 
mies by reducing the number of distinct models produced. The very 
marked change in the situation in this industry since the beginning 
of 1940 will be discussed subsequently.^* 

Reduction of costs in the manufacture of washing machines appar- 
ently encoimters certain special obstacles. Most producers in this 
industry are specialized, producing washing and ironing machines 
exclusively. The industry is largely one of machining and assemblage. 
Most of the manufacturers purchase a considerable portion of their 
materials partially or wholly fabricated.^^ Opportunities to lower 
the cost of manufacture are correspondingly limited. However, one 
or two very large corporations have recently entered the industry; 
this may result in materially reduced production costs. 

In the electric-range industry, reductions in production costs may 
be expected to continue if the volume of the industry's sales maintains 
its present rate of growth. Members of the industry confidently ex- 
pect that when the industry reaches a higher output basis, production 
costs will be materially below their present level. 

Distribution costs. — The foregoing comments with regard to manu- 
facturing costs were largely inferential, since there are few data upon 
which to base a more informed appraisal. Somewhat more informa- 
tion is available regarding costs of distribution. 

In general, the distributive margin in these industries constitutes a 
very substantial fraction of the retail price. In the case of refriger- 
ators, for example, the retail price during the past decade has con- 
sistently approximated slightly more than twice the manufacturer's 
price. In other words, between 1928 and 1937, the combined whole- 
sale and retail mark-ups have slightly exceeded 50 percent, measured 

« See p. 154 below. 

» National Recovery Act Code History, Washing and Ii oning Machine Manufacturing Industry, pp. 2, 3. 



144 CONCENTRATION OF ECONOMIC POWER 

in terms of the consumers' list price. The spread between factory- 
price and retail price during this period is shown below: 

Table 14. — Distributive margin of electric refrigerators 



Year 


Average 
factory 


Average 
retail 


Margin 


Year 


A.verage 
factory 


Average 
retail 


Margin 












price' 


price > 


Actual 


Percent 




price' 


price' 


Actual 


Percent 




Estimated 


Estimated 








Estimated 


Estimated 






1828 


$166 


$334 


$168 


60 


1933 


$83 


$170 


$87 


51 


1929 


134 


292 


168 


64 


1934 


84 


172 


88 


51 


1930 


132 


275 


143 


62 


1935 


78 


166 


88 


53 


1931 


129 


258 


129 


50 


1936 


81 


164 


83 


61 


1932 


101 


196 


94 


48 


1937..— 


86 


173 


88 


51 



1 Source: National Electrical Manufacturers' Association. 
' Source: Air Conditioning and Refrigeration News. 

During 1938, the spread between factory and retail prices for the 
cheapest 4-foot models produced by three important manufacturers 
ranged between $64.62 and $67.80. It is apparent that a very mate- 
rial reduction in the retail price level could have been achieved had it 
been feasible to reduce this distributive margin. 

Somewhat the same situation exists in the washing-machine indus- 
try. One prominent producer operates on the basis of the margins 
shown in the following table: 

Table 15. — Distributive margin of electric washing machines 





Manufac- 
turer's 
price to the 
Jobber i 


Suggested 
price to the 
consumer ' 


Distribu- 
tive 
margin 


Distribu- 
tive 
margin as 
percent 
of retail 
price 


Model A. 


$23. 26 
27.25 
33.76 


$39.95 
49.95 
69.95 


$16. 70 
22.70 
36.20 


41 


Model B 


46 


Model 


52 







» Not including freight charges. 

The distributive margin for the highest-priced washing machine, 
model C, amounted to 52 percent of the retail price, or approximately 
the same ratio as that shown for refrigerators. This percentage 
represents the actual situation in the industry more adequately than 
do the figures relating to the two cheaper models, since only a minority 
of sales fall into the lower price brackets.^^ 

" The actual distribution of sales of electric washing machines in 1938 by price classes is shown in the 
following table: 

Table 16.— Distribution of sales and average value of electric washing machines by price lines— 19S8 



Retail price classes 


Units 


Average 
retail 
price 


Percent 
of total 


Below$40 


88,916 
161, 002 
450, 077 
331,358 


$36.63 
48." 11 
63.22 

105. 46 


9 


$40 to $49.99.... 


16 


$50 to $69.99 


44 


$70 and over 


32 






Total 


1,031,363 


72.14 









Source: National Association of Washing Machine Manufacturers. 



CONCENTRATION OF ECONOMIC POWER 



145 



In the vacuum-cleaner industry distributive margins on sales through 
the orthodox wholesaler-retailer channel are of approximately the 
same order. However, the house-to-house canvassing system used 
by some of the leading companies is even more costly. Thus one 
prominent vacuum-cleaner manufacturer, selling through regular 
channels, was able to offer his cleaner which cost him altogether 
$10.30 to produce at a retail price of $25, less 50 percent discount to 
the dealer. This allowed him a profit per cleaner of only $2.20. 
Thereupon, he decided to embark upon a program of house-to-house 
canvassing. When this system of distribution was established, he 
found that in order to cover the cost of canvassing, he had to raise 
the retail price of the cleaner to $49. 50.^'' 

A similar example is cited by O. W. Blackett: 

The management of Eureka Vacuum Cleaner Co., which had average annual 
earnings of well over a million dollars prior to the depression, lost so heavily in 
1931 that it reconsidered its whole method of retail distribution. It has used 
various methods of promotion, but had inaugurated a system of direct sales to 
consumers in 1922 which had proved so successful that by 1930, the major part 
of the sales volume was obtained in that way. The method was, however, very 
expensive since it required branches and subbranches to handle installment-sales 
accounting, to care for local advertising, and to carry a sufficient inventory. The 
decline in sales necessitated the cutting of expenses, which was accomplished by 
substituting dealer outlets for the company's own branches. It was possible to 
predict roughly the saving in expense througli elimination of branch offices. The 
major uncertainty was how much reduction of sales volume would follow the sub- 
stitution of other outlets. The management fully expected such a reduction, but 
hoped it would be more than balanced by the saving of expense. In this instance, 
the management made what for the moment, at least, was a wise decision, since 
the change enabled them to show a sizable profit on reduced volume in 1932. 
Only time will tell whether the immediate gain justified the abandonment of a 
system of distribution which had aided tht company to increase its sales from 15 5 
percent of the industry in 1921, to 27.2 percent in 1927. In very recent years 
the company has returned to its former policy of direct sales but to date has not 
regained the dominant position relinquished for the sake of immediate profits in 
1932.28 

The one important exception to these high costs of distribution 
relates to products marketed. through mass distributors. The follow- 
ing table presents a comparison of the costs of refrigerators and wash- 
ing machines distributed through a mass distributor and through 
orthodox retailing channels. 

Table 17. — Distributive margins 
[Sales througb mass distributors and regular channels] 





Retail 
price 


Manu- 
facturer's 
cost 


Cost of distribution 


Type of distribution 


Actual 


Percent 

of retail 

price 


Refrigerators: 

Typical standard brand sales orgaoizatlon 


$207.60 
158.00 

155.00 
89.50 


$93. 34- 
100.00 

64.00 
56.00 


$114. 16 
68.00 

91.00 
31.50 


165.0 


Mass distributor 


36.7 


Washers: 

Typical standard brand sales organization 


«58. 7 


Mass distributor 


31.2 







• However, the margins shown in this table for the orthodox channel of distribution are somewhat higher 
than those shown in tables 14 and 15 above (p. 144) for the same year. This dlflerence may be due to the fact 
that this table is based upon comparatively expensive models. 

Source: Compiled from Thomas, John F., Varying Functions in Distribution, Their Costs and Influences 
on RetaU P rices, Journal of Marketing, July 1938, p. 6fl. 

" Rost, Fred O., Distribution Today, 1933, pp. 180, 181. 
" Economic Problems in a Changing World, a symposium. 
Rlnehart. p. 421. 



Edited by Willard Thorp — Farrar and 



J 46 CONCENTRATION OF ECONOMIC POWER 

These figures illustrate the possible savings which may flow from 
greater efl&ciency in the process of distribution. The distributive 
margin in the case of the company using direct distribution was $58; 
for the refrigerator distributed through the regular channels the spread 
amounted to $114.16. In the case of washing machines the distribu- 
tion cost for direct distribution is $31.50; for the product distributed 
through the regular channels it is $91. There is some difference of 
opinion regarding the comparability of these models, but this does not 
affect the contrast in distributive margins. 

In addition, the mass distributor sells a. vacuum cleaner at $49.50 
which, according to the company, is comparable with other makes 
retailing at $79.50. It is claimed that the saving is made possible 
by its more economical system of distribution. 

At the present time, sales through mass distributors apparently 
constitute the most aggressive effort to reduce costs of distribution, 
although at least one other large producer is endeavoring to cut dealer 
margins. Jn fact, some members of these industries have expressed 
the opinion that distribution costs are already as low as they can be 
brought, and that any further reduction would result in a loss of vital 
sales outlets, dealer cooperation, and necessary advertising. 

Members of the washing-machine industry claimed that distributive 
margins in the industry had not changed materially in recent years, 
and that their reduction could not be expected in view of the guarantee 
for repair parts and of the responsibilities for servicing which the dealer 
has assumed. 

In the vacuum-clean.er industry it is said that some of the large 
companies which are now utilizing house-to-house canvassing are 
planning to distribute extensively through ordinary channels. How- 
ever, unless the canvassing technique is largely abandoned, it is un- 
likely that any savings in cost due to the partial utilization of regular 
channels will be translated into lower prices to the consumer. It would 
be impractical for a company to charge different prices for its product 
when sold by a visiting salesman and by a retail store. It seems prob- 
able, therefore, that the prices charged on store sales will be maintained 
at the same level as those on house-to-house sales, and that that level 
will be largely determined by the costs of the latter system. 

It is apparent, consequently, that there have been obstacles to any 
program of extensive price reductions in these industries, whether such 
reductions applied to the manufacturer's price or to the distributor's 
margin. During 1939 most manufacturers in these industries appar- 
ently believed that the era of price reductions had terminated and that 
further cuts in price would not be rewarded by a sufficient increase in 
volume to make the venture profitable. Thus, it has been mentioned 
that the smaller refrigerator manufacturers believed that only the 
largest members of the industry, comprising corporations which had 
extensive interests outside the refrigerator industry, could afford to 
take the risks incurred in any material change in price policy. 

On the other hand, there has been increasing awareness among both 
manufacturers and distributors that the price element is becoming 
increasingly important as the market among families in the more 
prosperous income levels is becoming saturated. As early as the 
spring of 1939 one large manufacturer had become convinced of the 
need for lower prices. An editorial in Electrical Merchandising, 



CONCENTRATION OF ECONOMIC POWER 147 

published in January 1937, expressed this point of view even before 
the sharp contraction in sales which forcibly focused attention upon 
the problem. 

Electrical distributing trades, both wholesale and retail, may eoon be forced to 
face the problem of justifying markets. Wholesalers and retailers have always 
upheld the need for more margin, although they agree over-all distribution costs 
are high. Now a question as to whether retailers and wholesalers are performing a 
service equivalent to their remuneration. Costs in 1937 are bound to increase 
because of rising costs of raw materials and demand for higher wages. But 
manufacturers a're faced with the necessity of keeping prices down. A survey 
indicated 42 percent of refrigerator business in 1938 will come from lower-income 
families, a market definitely conditioned by lower prices. Yet, it is possible that 
appliance prices may be forced up. Profit from present market — a market dis- 
tinguished from former years by higher costs and lower prices — can be in some part 
derived from greater production efiiciency. But there is the question as to how 
much further manufacturing efficiency can be increased; this leaves only distribu- 
tion expense to be trimmed, and manufacturers are asking if it is possible to reduce 
by some percent the present high cost of distribution. 

Difference between manufacturing cost and selling price is high — for many 
appliances the cost of selling is two-thirds or more of total retail value. 

Wholesalers have given much study to reducing operating costs. Chains 
already claim efficiency and savings to the public, but independent retailers have 
given little study to operating costs and possible savings * * *_ Qur guess is 
that distribution costs are in for an acute scrutiny. 

The same periodical later (1938) published letters from appliance 
dealers which revealed their concern with the problem, and particu- 
larly with the competition offered by low-cost mass distributors: 

Appliance business will be more efi'ectively and profitably handled when — 
manufacturers sell direct to dealers and eliminate jobber on several lines and on 
other lines — such jobbers who now exist should be converted into direct-selling 
retail specialty companies. 

From 18 to 20 percent margin is now being absorbed by distribution or those 
endeavoring to sell to the dealers — which amount of percentage should come to the 
retail distributor to use for direct sale promotion. 

And— 

All manufacturers keep prices up knowing dealers have to have long margin, 
the general public compare all standard makes with catalog houses, which is from 
$10 to $15 lower. Catalog houses get the deal and consumer does not mention 
his old trade-in, so I am heartily in favor of taking smaller percentage of profit, 
provided distributor and manufacturer will lower their profits. This, I think, is 
only way you can lick catalog competition. (Electrical Merchandising, The 
Appliance Dealer, 1938.) 

Obviouslj'- this awareness of the problem must be somehow trans- 
lated into a positive program for reducing prices if the market among 
lower income groups is to be widened appreciably. Until 1940, 
however, there was no concrete evidence of such a trend, except for 
that provided by a few mass distributory organizations. Their 
relatively low cost of distribution permits them to compete on a price 
basis. As a result, their share of the market has expanded materially. 
Between 1932 and 1937, sales of the lower priced equipment by mass 
distributors increased four times as fast as sales for the industry as a 
whole. It is also noteworthy that the decline experienced by mass 
distributors during the 1937-38 recession amounted to only one-half 
as much as that of the entire industry. The success achieved by these 
concerns merely demonstrated the efficacy of low prices as a sales 
argument and emphasized the need of serious attention to the problem 
by the concerns utilizing regular channels. 



148 



CONCENTRATION OF ECONOMIC POWER 



THE REPLACEMENT MARKET 



Need jor considering the replacement market. — The second majoi 
avenue of sales expansion for these electrical-appUance mdustries is 
the stimulation of the replacement market. For any industry pro- 
ducing consumers' durable goods, the replacement of worn-out or 
obsolescent merchandise necessarily constitutes an ever-increasing 
share of the market as the industry matures. In fact, it is this pro- 
gressive shift from original sales to replacement sales which con- 
stitutes the basic significance of market saturation. It is obvious 
that the mere fact that a family already possesses a refrigerator or 
washing machine or a vacuum cleaner does not automatically elimi- 
nate that family from consideration as a sales prospect for a new 
model. On the other hand, the considerations which will determine 
such a family's decision to buy are in many ways different from those 
relating to original prospects. Consequently a program designed to 
stimulate replacement sales must give due weight to these differences. 

Moreover, it should be emphasized that the development of the 
replacement market is not to be considered merely as an alternative in 
case it should not prove feasible to extend original sales among fami- 
lies in the lower income brackets. Regardless of the success of the 
latter course, the replacement problem will be of growing importance. 
The consequences of saturation may be temporarily minimized or 
avoided by altering price policies so as to widen the number of original 
prospects, but eventually they must be met notwithstanding. In 
other words, a shift from original to replacement sales is inherent in 
the very nature of consumers' durable-goods markets. 

Extent of replacement sales. — The outstanding example of an in- 
dustry whose market has largely shifted from an original to a replace- 
ment basis is the automobile industry. As far back as 1926, 73 per- 
cent of all new passenger car sales were accompanied by trade-ins; 
that is, they involved the replacement of an older model. Since 1929 
this ratio has increased further; in 1937 approximately 88 percent of 
all new passenger car sales were for replacement. 

In the electrical-appliance industries the ratio is not nearly so high 
as yet. However, it is increasing rapidly. The trend of replacement 
sales as a percent of all sales in the electric-refrigerator industry is 
shown in the table below. The data are for two leading refrigerator 
manufacturers; they seem sufficiently parallel to be considered 
indicative of the general trend in the industry. 

Table 18. — Replacement sales as a percent of total sales of electric refrigerators 



Year 


Company 
A 


Company 


Year 


Company Company 
A 3 

1 


1929 - 


3 
2 
3 

1 
3 




1934 __- 

1935 ... 


9 
10 
13 
15 
19 


7 


1930 




10 


1931 - 




1936 

1937. 


14 


1932 . . 


1 

2 


16 


1933 


1938 


18 













The ratio rose particularly sharply from 1933 to 1934. Since the 
latter year it has increased steadily. For the year 1938, the figures 
of these two companies are slightly below an estimate made by Air 



CONCENTRATION OF ECONOMIC POWER 



149 



Conditioning and Refrigeration News. This estimate, based upon 
reports of manufacturers, distributors, and dealers, indicates that 
about 20 percent of the United States sales of household electric 
refrigerators during 1938 involved the replacement of a unit pre- 
viously used by the same family.^^ 

In the washing-machine industry it is estimated that the ratio of 
replacement to total sales is currently as high as 46.3 percent.^" For 
vacuum cleaners, the replacement ratio is believed to be between 35 
and 40 percent. 

Factors influencing replacement sales. — In any program designed to 
stimulate replacement sales as a means of expanding the market for 
these products it is necessary to emphasize the specific considerations 
surrounding the replacement market. It has been pointed out that 
the factors which would induce prospective purchasers to replace 
used equipment are in many ways distinct from those governing the 
original market. These specific considerations may be conveniently 
grouped into three categories, (a) durability, (6) obsolescence, and 
(c) trade-in allowances as affecting the cost of replacement. These 
will be considered consecutively. 

Durability. — The importance of durability is apparent. When a 
product is worn out so completely that it is either useless or extremely 
expensive to operate, its replacement can no longer be delayed. In- 
creases in durability, such as have characterized these appliances 
during recent years, may to some extent be expected to retard re- 
placement. For example, the increase in the life expectancy of the 
average electric refrigerator is shown in the following table: 

Table 19. — Estimated durability of electric refrigerators 



Year of manufacture: 


Life expectancy (years) ' 


Year of manufacture: 


Life expectancy (years) 


1920 


6 


1930 


13 


1921 


7 


1931 


. 13 


1922 


8 


1932 


13 


1923 


9 


1933 


13 


1924 


10 


1934 


14 


1925 


11 


1935 


14 


1926 


11 


1936 


14 


1927 


12 


1937 


15 


1928 


12 


1938 


15 


1929 


._. 12 







1 The figure for each year is an average of data compiled from a sample study which was made by a large 
manufacturer of refrigerators. 

Similarly, there is evidence that the durability of washing machines 
and vacuum cleaners has been increasing. Thus, according to the 
Secretary of the Association of American Washing Machine Manufac- 
turers, a modern machine will, with reasonable care, last at least 10 
years. The Secretary of the Vacuum Cleaner Manufacturers Associa- 
tion estimates that the average life expectancy of a cleaner is approxi- 
mately 12 years today, in contrast to only 6 years for a 1929 model. 
This trend conforms with the concept that it is not in the public 
interest to reduce durability in order to sell more appliances unless 
there is a marked decline in prices; even then it may be undesirable. 

Obsolescence. — However, the importance of absolute durability 

" Air Conditioning and Refrigeration News, Januar.y 1939. 
" Electrical Merchandising, The Appliance Dealer, 1938. 



^5Q CONCENTRATION OF ECONOMIC POWER 

may readily be overemphasized. Although some owners will continue 
to use products of this kind until their utility is entirely destroyed, 
the introduction of more efficient or more attractive products often 
results in inducing replacements long before the article in use has 
become completely worn out. 

The persuasiveness of obsolescence in stimulating replacement 
varies with the nature of the product. In the automobile industry, 
for example, changes in style are apparently of far more importance m 
determining the rate of replacement than is durability as such. As 
far as durability is concerned, there has apparently been a distinct 
lengthening of actual car life during the last 10 or 15 years. Thus, 
studies of cars in use in 1926 and 1935 show that, whereas in the 
former year 50 percent of the cars survived between 6 and 7 years, 
in the latter year 50 percent survived about 9 years.^^ Yet, despite 
this increase in durability, frequent changes in style and improve- 
ments in comfort and lower operating costs have resulted in maintain- 
ing replacements at a high rate. 

Conditions with regard to obsolescence in the appUance industries 
are not entirely analogous to those in the automobile industry. It is 
doubtful, for example, that the desire to own the latest model of 
refrigerator can ever be quite as impelling as the wish to display the 
newest style of automobile. Nevertheless, according to an official 
of a leading refrigerator manufacturing company : 

In America, Mrs. Housewife will insist on buying a new electric refrigerator a 
couple of years after she bought her last one, because the new refrigerators are 
streamlined, more efficient, or decorated in delphinium blue or have some new 
trick gadgets '2 . . . Therefore, in all our thoughts on saturation, don't let us 
forget that the American public will always continue to discard their electrical 
devices long before they have worn out, and buy new ones provided, of course, 
we manufacturers can keep on changing the models and our utility and dealer 
friends aggressively point out the new advantages to the public.^' 

Moreover, the same official suggested that the tendency of operating 
costs to increase after a few years of operation might constitute an 
added inducement to early replacement. 

These considerations have their obvious limitations and there is 
evidence that the viewpoint expressed above is by no means unani- 
mously held in the industry. Nevertheless, changes in style^ or in 
mechanical features will, to a limited extent, stimulate the desire for 
replacement. In the case of such products as washing machines and 
vacuum cleaners, mere changes in appearance can probably have little 
if any effect. Neither of these products is a display piece; their 
purpose is purely utilitarian. Obsolescence must, therefore, be 
induced by basic changes in operating features rather than in appear- 
ance. The new "all purpose" washing machine and the tank type of 
cleaner may represent this type of major technical improvement. 

Cost of replacement — The trade-in allowance. — Assuming a desire on 
the part of an owner to replace obsolescent equipment, a basic con- 
sideration determining his decision is obviously the question of cost. 
The cost of making a replacement is dependent not only upon the 
price of the new product but also upon the allowance granted by the 
dealer for the used article. High trade-in allowances will obviously 
stimulate replacements — low allowances will discourage them. 

" The Dj namics of Automobile Demand, General Motors Corporation, New York, N. Y., 1939, pp. 47-49. 
" Seme n anufacturers, however, question the efBcacy of this technique of Inducing rapid replacement. 
" Quoted In Printers' Ink Monthly, August 1937. 



CONCENTRATION OF ECONOMIC POWER 151 

Probably the outstanding feature of the automobile industry's re- 
placement policy is the highly developed character of the used car mar- 
ket. Trade-ins are accepted by dealers as a matter of course. On sales 
of new vehicles, the automobile turned in by the new car buyer is, in 
turn, resold and on that resale there "is usually another trade-in. 
During 1937, trade-ins were accepted on 88 percent of new car sales 
and on 56 percent of used car sales. ^^ Used car values have become 
well standardized. What is perhaps most important is the fact that 
these allowances are sufficiently high to induce most car buyers to 
replace their automobiles after only 2 or 3 years of use.^^ 

In general, although the acceptance of trade-ins on the sale of 
electrical household equipment is becoming increasingly common, the 
market has not yet reached the highly organized state of that existing 
in the automobile industry. Nor are the allowances granted usually 
as liberal. A comparison of the percentages of the retail list price 
allowed for popular priced automobiles and for refrigerators of differ- 
ent ages is shown in table 23. 

For a 1937 automobile, the trade-in allowance was approximately 
50 percent of the original price whereas for a refrigerator of the 
same age the allowance is only 32 percent. This same type of diver- 
gence applies to most of the older models. 

In the case of washing machines it is understood that the trade-in 
allowance on recent models usually ranges from 25 to 35 percent of 
the list price. Often this allowance is fixed regardless of the type, 
make, or condition of the machine offered in trade. 

For vacuum cleaners, the allowance is generally about 25 percent 
of the list price but rarely exceeds $15 for any model. 

Actual allowances on any specific sale are of course determined by 
the dealer. Consequently, these figures must be considered merely as 
approximations. They serve to show, however, that the amount 
which an owner of used equipment can expect to recover on a trade-in 
is materially smaller for these electrical appliances than is true in the 
case of automobiles. Since it is this allowance which determines the 
actual outlay required for replacement, it is apparent that the induce- 
ment offered to o ,vners of used equipment to change for new models is 
correspondingly lower. 

To some extent these differences between the equipment industries 
and the automobile industry reflect differences in distributive mark- 
ups. The average retail mark-up for a popular priced automobile is 
only 25 percent of the retail list price as compared with about 40 
percent for refrigerators and washing machines. It is evident that a 
dealer is unlikely to grant an allowance for used equipment exceeding 
the cost to him for new equipment. Consequently, as soon as a 
refrigerator, for example, has passed from the retailer to the consumer 
it has suffered an immediate depreciation equivalent to at least the 
amount of the retail mark-up. In this way, high distributive margins 
not only restrict the original market by increasing the retail price; 
they simultaneously discourage replacements by limiting trade-in 
allowances. 

'< Automobile Facts and Fipures, 1938 edition, p. 67. 

" Trade-in markets have also become established in other industries. In the agricultural machinery 
Industry, for example, a recent survey by a leading producer showed that out of a total sale of nearly 9,000 
machines, by 50 dealers, trade-ins were taken on over ."JiOOO machines. Moreover, the bulk of the machines 
on which there were no trade-ins were of relatively small size, such as knife grinders, walking plows, etc. 
Eighty-two percent of tractor sales involve trade-ins of various kinds. 

247149—41 — No. 1 12 



3^52 CONCENTRATION OF ECONOMIC POWER 

The second factor governing the character of the trade-in market 
is the disposition of the used models turned in. This disposition, of 
CQurse, depends to a considerable extent upon the condition of the 
used equipment. Some of it is unfit for future use. Even in the 
automobile industry some of the cars received from trade must be 
junked, though the proportion is very low. (During 1937 less than 
8 percent of all trade-ins were junked.)^^ 

In the electrical-appliance industries the ratio of junked equipment 
is materially higher. A survey conducted during January 1938, 
covering 820 independent dealers scattered throughout the Nation, 
showed that about one-fourth of all used refrigerators taken in trade 
was considered unfit for resale. In the case of washing machines the 
percentage was even higher. According to the same survey, 41 per- 
cent of used washers were jimked.^^ For vacuum cleaners the ratio 
was also about 40 percent. 

These relatively high ratios reveal, in part, the tendency of many 
owners of electrical household appliances to postpone their replace- 
ment until the equipment has bocoDie completely worn out. In 
addition, dealers in these industries are possibly not as well equipped 
to recondition used equipment as arc automobile dealers, who usually 
maintain complete service stations in connection with their salesrooms. 

Allowances granted on equipment whose destination is the junk 
yard merely constitute price concessions, indicating a willingness on 
the part of the retail dealer to forego part of his margin in order to 
make the sale. To an extent the original equipment may be over- 
priced in order to meet just this situation. 

However, the majority of equipment accepted in trade is resold 
either with or without reconditioning. In the case of refrigerators, 
approximately 44 percent of total used equipment received is resold 
"as is" while 32 percent is reconditioned. In the case of washing 
machines 30 percent is sold as is and 29 percent reconditioned.^^ 

The amount which may be recovered by the dealer on resale of 
second-hand equipment is affected by the manner in which it is recon- 
ditioned. This resale price, together with the cost of reconditioning, 
are in turn important elements in determining the trade-in allowance 
which may be extended. 

Facilities for reconditioning equi'pment—the Crosley plan. — It has 
been pointed out that many electrical-equipmeat dealers, in contrast 
to automobile dealers, do not possess the service facilities needed for 
efficient and economical reconditioning. Recently, however, several 
efforts have been made to remedy this deficiency. 

For example, an experimental policy was recently adopted by the 
Crosley Co. This policy covers nine models, seven of 1937 and tv/o 
of 1938. A list of national trade-in allowances has been established 
for these nine models. Dealers receiving Crosley refrigerators on 
trade-ins may have the units reconditioned in the service department 
for two-thirds of the price registered in the standard trade-in schedule. 
Refrigerators other than Crosley may be reconditioned by an organiza- 
tion known as the General Refrigerator Sales & Service Co. for a flat 
fee of $20, or may be sold to this organization for one-half of the 
listed trade-in price. A 90-day warranty is offered with the rebuilt 

'" Automobile Facts and Figures, 1938 edition, p. 67. 

" Electrical Merchandising, The Appliance Dealer, 1938. 

>8 Ibid. 



CONCENTRATION OF ECONOMIC POWER 153 

units, but only "reasonably operative" boxes will be accepted for 
reconditioning. One-half of the pick-up cost of the old refrigerator 
will be borne by the Crosley distributing company and the other by 
the dealer. The national trade-in allowances as announced under the 
plan range from approximately one-sixth to one-fourth of the list 
price of the various models. ^^ 

The Philadelphia plan. — In Philadelphia an independent company 
knouTi as the Associated Refrigerator Plant, Inc., has been organized. 
This organization is equipped to recondition 300 used refrigerators a 
week and is said to be the only plant in the United States offering 
reconditioning service on such a scale. Under its agreement with 
dealers, the plant will recondition all types of refrigerators in one- 
door models up to 10 cubic feet at a flat price of $20. This fee includes 
free service on the miits for a period of 90 days from the time they are 
installed for new users. Where the dealer does not desire to have 
the traded-in refrigerator reconditioned for resale, the company will 
purchase the refrigerator from him for one-half the listed trade-in 
price. In this way, the firni points out, dealers who trade for used 
refrigerators may either have them reconditioned at a flat rate for 
resale, or may dispose of them directly to the firm itself. 

Reconditioning exchange system in vacuum cleaners. — Large vacuum 
cleaner manufacturers have an interchange agreement on replaced 
equipment. Instead of attempting to recondition machines of another 
make, each manufacturer exchanges the trade-ins to the original man- 
ufacturer where the reconditioning is done. In addition, there are 
quite a number of small concerns loiown to the industry as "fly by 
night" reconditioners. These companies purchase old cleaners at 
very low prices, recondition them — often it is said inadequately — and 
then resell them. 

Summary. — Regardless of whether these specific efforts are successful, 
they are significant of the growing concern of these industries with the 
replacement market. They are also important as demonstrating the 
probability that some steps can be taken to handle the trade-in prob- 
lem more efl"ectively than has been the rule in the past. 

Moreover, the very fact that the major fraction of the used equip- 
ment received in trade can be resold with or without reconditioning is 
evidence of the possibility of expanding the replacement market. It is 
apparent that many owners of these kinds of equipment will not con- 
tinue to use them until they are completely worn out before contem- 
plating replacement. Obsolescence is a factor which must be con- 
sidered. 

Any program designed to expand the replacement market materially 
must be basically concerned with the question of allowances. The less 
expensive it becomes to exchange equipment for new models, the more 
rapid will such turnover be, and the larger the potential scope of the 
market. In turn, the used equipment which is received in trade can 
be reconditioned and resold to families of lower-income brackets who 
cannot afford to pay the prices demanded for new equipment. This 
does not mean that there is any probability that the rate of replace- 
ment for electrical household appliances can be made to approach that 
of automobiles. Nevertheless, it does seem that it can be stimulated 
materially beyond the present rate. 

" Air Conditioning and Refrigeration News, October 20, 1838, vol. 25, No. 8. 



J54 CONCENTRATION OF ECONOMIC POWER 

CURRENT TRENDS IN THE ELECTRICAL-REFRIGERATOR INDUSTRY 

During the early months of 1940 a major change in price structure 
occurred in the electrical-refrigerator industry. In the second week 
of January the Nash-Kelvinator Corporation presented its 1940 models 
at prices which were substantially lower than its 1939 quotations. In 
the announcement accompanying these reductions major prominence 
was given to a 6-foot stripped model offered at a retail price of $119.95 
delivered east of the Rocky Mountains. This was the lowest price 
ever quoted for a comparable model by any leading manufacturer 
utilizing the traditional wholesaler-retaUer system of distribution. It 
was well below the $129-$ 134 level which the other leading companies 
had earlier announced for competing lines. Moreover, the new price 
was not far above that quoted by large mail-order companies for their 
6-foot stripped models. 

This action by the Nash-Kelvinator Corporation precipitated a 
wave of similar reductions by its competitors. General Motors, 
General Electric, and Westinghouse, among the larger companies, 
all offered comparable 6-foot stripped models at a consumer's list price 
of $114.75 delivered in the zone nearest their respective plants. In 
each case this involved substantial reductions below the prices which 
had been previously announced for 1940. 

Companies which had been selling at levels below those of the 
"Big Five" also lowered their prices. The Crosley Corporation re- 
duced the price of its 6-foot stripped model and also cut the prices of 
its other models. Sears, Roebuck offered its stripped 6-foot model 
at $89.95 and reduced the price of its de luxe 6-foot model from $139.50 
to $129.50. To meet these new reductions Nash-Kelvinator, in turn, 
announced another 6-foot stripped model for $114.75. Some of the 
other leading companies thereupon cut prices further to $112.75. 

Other changes in price structure were made simultaneously. For 
example, the Nash-Kelvinator Corporation discarded its former zone 
system and is now selling refrigerators on a delivered basis anywhere 
east of the Rocky Mountains. The Norge division of the Norge- 
Warner Corporation is offering an all-porcelain refrigerator at $159.95, 
a figure which is said to be considerably below that of any other all- 
porcelain model. The Philco Corporation is presenting a 7-foot 
refrigerator retailing at $119.95, instead of the usual 6-foot model. 

In order to reduce costs to correspond with these new prices, econ- 
omies were sought in both manufacturing and distribution. One 
method utilized has been a reduction in the number of different sizes 
of box produced. Thus, the Nash-Kelvinator Corporation has con- 
centrated its 1940 production on 6- and 8-cubic-foot models, a policy 
which, according to its officials, has resulted in important savings in 
costs. 

At the same time, this company eliminated many of its dealer out- 
lets in an effort to cut the costs of distribution. Although dealers' 
margins remained unchanged in terms of percentage, the lower price 
level involved a corresponding reduction in the actual dollar margin 
on each unit sold. 

For most companies the widest price reductions have been for the 
stripped 6-foot model (now generally retailing between $112.75 and 



CONCENTRATION OF ECONOMIC POWER 



155 



$114.75). On other 5- and 6-foot models the reduction from the 1939 
price is considerably narrower. This is indicated in table 20, which 
compares 1939 and 1940 prices for a number of leading companies. 



Table 20. — Retail published list prices of electrical refrigerators, 1939 and 1940 
{delivered, Washington, D. C.) 



NORGE 



1939 






1940 


Model 


Cubic 
feet 


Price 


Model 


Cubic 
feet 


Price 


Q3 ., 


3.25 

4.22 
5.19 
5.25 
5.07 
6.11 
6.11 
6.18 
6.07 
8.25 
8.08 


$119.95 

146. 95 
172. 95 
194. 95 
219. 95 
149. 95 
189. 95 
219.95 
249. 95 
259. 95 
299.95 


VR3S 


3.25 
3.33 
4.22 
6.62 
6.62 


$119 95 




VR3 


119 95 


G4 


VR4 


144.95 


G5 


DR5 


197 50 


N5 


SR5 


219 95 


S5 


UR6 




Sp c. 6... 


159 95 


Q6 


MR6 . 


6.75 
6.65 
6.65 

8.75 
8.75 


189 95 


M6-.. 


DR6 


219. 96 


S6 


SR6 


244.95 


MS 


DR8 


249.95 


S8 


SR8- 


279.95 









WESTINQHOUSE 



U3 


2.90 
3.25 
4.25 
6.25 
6.25 
5.25 
6.25 
8.25 
13.50 
20.10 
5.25 
6.25 
8.25 
13.50 
20.10 

6.20 

22.70 
24.80 
39. 80 


$119.50 
119.50 
146. 00 
171.50 
190.00 
192. 50 
217.00 
254.00 
419. 50 
489. 50 
213. 50 
242.00 
280.00 
469. 50 
549. 50 

159. 50 

440.00 
695.00 
785.00 


U3 


2.90 

5.25 
6.25 
5.25 
6.25 
8.25 
13.50 
20.10 

6.25 
8.25 
13.50 
20.10 
3.25 
4.25 
6.20 
6.20 
8.25 
6.25 
8.25 


$119 76 


H3 


H5 




H4 




H5 


169 75 


H6 


H6 


179 76 


A5 


A5 


189 75 


A6 


A6 


204 75 


AS.-. 


A8 


254 00 


A135... 


A135 


419 50 


A200 


A200 . . 


489 50 


E5 


E6 .. . 




E6 


234 50 


E8 


E8 .. 


279 50 


E135 


E135 


469 50 


E200 


E200 


549.50 




S3. 


119. 75 




S4 


129.76 




LS6 


114 75 


S6 


S6 . 


139 75 




S8 


179. 75 




D6 


224.75 


WF25_. 


D8 


264.75 


A2525R 




A4025R.... .... 









KELVINATOR 



KS3... 
KS4... 
K4.... 
KS5... 
K5.... 
PK5... 
Spec. 6 
KS6... 

K6 

PK6... 

Kg 

PK8... 



3.25 


$119. 50 


4.20 


144.60 


4.20 


159.50 


5.30 


169.50 


5.20 


187.50 


5.20 


209.50 


6.20 


149.50 


6.20 


187.50 


6.20 


212.50 


6.20 


237.60 


8.24 


254.50 


8.24 


282.50 



SS6. 
S6... 
HS6. 
R6.. 
HD6 
S8-.. 
R8.. 
HD8 




j56 CONCENTRATION OF ECONOMIC POWER 

Table 20. — Retail published list prices of electrical refrigerators, 1939 and 1940 
{delivered, Washington, D. C.) — Continued 

FRIGIDAIRE 



1939 


1940 


Model 


Cubic 
feet 


Price 

$119.50 
139.50 
159. 50 
179. 50 
159. 75 
214. 50 

149. 75 
179. 75 
204. 50 

229.50 
244.50 

249. 50 
274. 50 
289.50 


Model 


Cubic 
feet 


Price 


DAB 


3.1 
4.1 
4.1 
5.1 
5.1 
5.1 

6.0 
6.2 
6.2 

6.2 
6.2 

8.2 


SV3 


3.0 
4.0 

6.1 

5.0 
5.0 
6.0 
6.0 

6.0 
6.0 
6.0 
6.0 
6.0 
8.0 
8.0 
8.0 
8.0 


$119.50 


DA4 


SV4 


119.50 




Masters 




Master 5 


149. 50 


Specials 


Cold Wall Master 5 




Cold Walls 






169. 50 




De Lux 


174.50 




SVS6 


114.75 


Super Value 6 


Super Value 6 


129.50 


Special 6 . ._ . 


Master 6 




Master 6 


159.50 




De I,ux 6 


189. 50 




Cold Wall Master 


184. 50 


Cold Wall 


Cold Wall 


214.60 


Cold Wall (porcelain) 


Cold Wall (porcelain)..- 

Super Value 

Masters 

Cold Wall ... 


239. 50 


Masters 


169. 50 
199. 50 


Cold Wall 


8.0 
8.1 


254.50 


Cold Wall (porcelain) 


Cold Wall (porcelain).. 


279. 50 









GENERAL ELECTRIC 






JB3 


3.2 
4.0 
5.0 
6.0 

6.0 

6.0 

8.25 

5.0 

6.1 

8.24 

6.1 


$119.75 
146. 50 
175.00 
192.00 

191.00 
218.00 
260.00 
217.00 
238.00 
283.00 
1.'9. 90 


JB4 


4.0 

5.0 

6.0 

3.0 

5.0 

6.0 

8.25 

5.0 

6.1 

8.24 

12.0 
16.0 
6.0 
3.0 
6.0 
8.0 




JB4 


$129. 75 


JB5 


JBS 


169. 75 


JB6 


JB6 


179. 75 




B3 


119.76 


B5 


B5 


197. 75 


B6 


B6 

B8 


214. 75 


B8. 


259. 75 


PB5 


PBS 


219. 50 


PB6 


PB6 . 


239.50 


PBS 


PBS 


279. 50 


SP6 


PB12 






453.00 




PB16 


557. 00 




LB6B 


114.75 




LB3 

LB6 


119.76 
139. 75 




LBS 


179. 75 



It is highly probable thai this reduction in prices contributed 
materially to the sharp expansion in sales which was recorded during 
the early months of 1940. Sales of electric refrigerators during the 
first quarter of 1940 totaled 814,000 boxes, compared with 611,000 
for the same period in 1939; an increase of 33 percent. According 
to the New York Journal of Commerce of May 10, 1 940 — 

While manufacturers' shipments of refrigerators are not holding at the high 
level of the first quarter, sales to dealers for the first half of the year will show 
about a 30-percent rise over last. 

These figures seem to illustrate clearly the possibility of expanding 
sales by reducing prices substantially. It is still too early, however, 
to determine the extent to which these price reductions represent a 
lasting change in industry policy, rather than a temporary price war. 

One important question bearing upon the interpretation of sales 
policy is the extent to which manufacturers and dealers actually try to 
promote the sale of the stripped models upon which the major reduc- 



CONCENTRATION OF ECONOMIC POWER 



157 



tions have been announced, or alternatively use them as leaders and 
attempt to divert consumers to higher-priced models upon which the 
reductions have been much less drastic. There is evidence that at 
least some manufacturers are adopting the latter rather than the 
former policy. For example, according to the New York Journal of 
Commerce — 

Favorable consumer response to the new low-priced "stripped refrigerators" 
caused dealers to increase orders sharply. Major manufacturers are finding it 
necessary to ration deliveries of these models, to discourage dealers from promoting 
their sale at the expense of the regular, higher-price lines.^" 

The Air Conditioning and Refrigeration News on March 20, 1940, 
makes this significant comment: 

An interesting phenomenon is the "inability" of manufacturers to make ship- 
ments of the lowest-priced boxes. Hundreds of dealers are reporting to prospects 
that they are temporarily "sold out" of the rock-bottom jobs. Shipments are 
exceedingly slow in arriving from the factories. This fact forces them to "sell up" 
to the higher-priced boxes. 

The same trade publication on March 27, 1940, carried the following 
advertisement by the Nash-Kelvinator Corporation addressed to its 
dealers, in which the policy of selling higher-priced models wherever 
possible was strongly advocated : 

Yes; the evidence is pouring in — and it proves the soundness of Kelvinator's 
1940 program. Look at the chart showing the percentage of Kelvinator's sales 
by models and prices, and then compare these facts with your own sales. The 
evidence shows clearly that Kelvinator dealers are selling higher-priced mer- 
chandise. 

Those who sell Kelvinator have more than a selling plan * * * they have 
a working selling plan. And it is working because it was carefully planned months 
ago with logical and easy-to-sell step-ups between models. There are low-priced 
models for the vast low-income market * * * and beautiful, full-featured 
models (including the new "Moist-Master" controlled humidity system) specifi- 
cally designed to get the rapidly growing replacement business. Throughout 
Kelvinator's line of sixes and eights the salesman can step up sales because plus 
features in each step offer visible and provable added value to the customer. 

79.8 percent of the Kelvinator' volume is in refrigerators with the greatest 
margin, the greatest gross dollar sale. The average unit sales price is better 
than $160.« 

According to this advertisement, field reports received by the 
company up to March 19 showed that actual sales of the various 
models were in the following ratio : 



Price 


Model 


Percent 


Price 


Model 


Percent 


$114.75 


CSX-6 

SS-6 

S-6 

HS-6 

R-6 


6.4 
13.8 
30.3 
13.5 
12.5 


$179.95 


S-8 
HD-« 

R-8 
HD-8 


7.3 


$124.95 


$209.95 


8.1 


$139.95.. . 


$209.95.. 


4.1 


$169.95. 


$239.95 


4.0 


$179.95.. 











« New York Journal of Commerce, May 10, 1940. 

<i Ad rertisements addressed by other manufacturers to their dealers are of the same general tenor. For 
example — 

"Dealers— this is the type of Norge that Mrs. America is buying, not a promotion model but a big 
de luxe model that carries a big, full-sized profit— the kind of profit you need and must have to stay in busi- 
ness. 

• ••»••" 

"Of course, Norge makes low-priced models, too, spectacular promotion models and full-profit volume 
models, all useful in selling the whole market— and in helping you to 'sell up' into the big profit figures." 
(Norge advertisement, Air Conditioning and Refrigeration News, April 10, p. 17.) 

"Here's the best 'step up' of the industry; 18 models. $10 and $20 steps— each logical and easy to sell. 

"Shelvadors sell at $99.95 to $249.95 with models designed for easy sales steps all the way up. You can 
instantly fit any family need and pocketbook. There's no high jump into long profit models." (Crosley 
advertisement, Air Conditioning and Refrigeration News, April 17, p. 3.) 



25g CONCENTRATION OF ECONOMIC POWER 

The relatively low proportion which sales of the stripped model bear 
to total sales, according to this advertisement, is striking and suggests 
that dealers are cooperating fully in this "step up" program. In fact, 
one dealer reports proudly that he has not sold a single stripped model 
a,ll season: 

More refrigerator sales during the first 4 months of this year than in all of 1 939, 
and not a "special" among them — that's the record of Roy L. Eidman, Kelvinator 
dealer. 

Mr. Eidman has one of the $114 models on his sales fioon — the same one he 
"started the season with. But it's never been anywhere, because Mr. Eidman 
and his four salesmen (two full-time, two part-time) have worked the "step-up" 
plan with considerable pleasure — and profit. 

Most of the company's 1940 sales have been in the $140 range, but a substantial 
nimiber have been made above that class, Mr. Eidman said. 

******* 

Prospects can readily see the extra dollars' worth in the more expensive models, 
he finds, and so the process of working them up from the leader models hasn't 
been at all tough. In general, his sales method is to show the prospect the model 
he comes in and asks about — and start the selling-up tactics from that point 
(Air Conditioning and Refrigeration News, July 24, 1940, p. 2). 

Another dealer in describing his efforts to avoid sales of the less 
expensive refrigerators voices a somewhat different reaction: 

Manufacturers may be hearing songs of praise in many quarters for dropping 
refrigerator prices this year, but one dealership they'll never hear from in this vein 
is General Radio & Electric, Westiughouse retailer, if Clifford Biggs, one of the 
two owners of the place, has any say-so about it. 

As far as he's concerned, about all the "specials" have accomplished is to make 
higher-priced models harder to sell. 

"They wouldn't have had to cut the prices this year to help my business," Mr. 
Biggs said. "If people want good refrigeration, they're willing to pay for it. 
We sold plenty of high-priced models when the mail-order houses were 'way under 
us, and I believe we could have kept right on doing it. 

"We'U work almost as hard trying not to sell a 'special' as we do in trying to sell 
a de luxe model. There's no money in specials, so we've kept away from them. 
Right now one of our best models is the $160 job" (Air Conditioning and Refrigera- 
tion News, July 24, 1940, p. 2). 

It seems obvious that the extent to which decreases in price will 
result in savings to the consumer and in expansion of sales may be 
largely determined by the popularity and acceptance of the "stripped" 
leader. If, however, the bulk of the sales continue to go to other 
models, the net savings to the consumer will be much more limited. 
Phis may also mean that the stimulation of sales will be less substantial 
and less lasting. 

Nevertheless, it is evident that refrigerator manufacturers are in 
the process of recasting their sales policies to meet changing conditions. 
Problems such as the relative emphasis upon the stripped model, 
important as they are, may well solve themselves if consumer demand 
for these cheaper lines proves to be sufficiently insistent. The im- 
portant point is that prices, which had been stable between 1932 and 
1939, are again in the process of reduction, a trend which may well 
result ultimately in a sustained higher level of sales. 

THE ROLE OF GOVERNMENT 

The solution of the market problems confronting these industries 
is at present being evolved by the business concerns affected — either 
gradually by day-to-day decisions or as a more conscious industry 



CONCENTRATION OF ECONOMIC POWER l^Q 

policy. Directly, Government has not taken any steps to influence 
these decisions of business policy. In the present organization of 
the industry it seems evident that little could be accomplished through 
regulatory action. However, certain programs undertaken by 
Government have had important effects upon these industries and 
afford an illustration of the manner in which Government action 
can influence industrial markets. 

An important factor in the market for these products has been the 
programs which are focused primarily on rendering electric power 
more widely and cheaply available. The regional program of the 
Tennessee Valley Authority and the work done by the Rural Electri- 
fication Administration to encourage the extension of power lines into 
rural areas are principal examples. By thus increasing the availability 
of power, these activities have created new markets and increased the 
number of potential users of electrical household equipment. 

In addition, the Federal Government has acted directly to stimulate 
the sales of certain kinds of equipment to families in low-income 
groups. The Federal Housing Administration, for example, w^as 
authorized from June 1934 to April 1937 to insure modernization loans 
made by private lending institutions for the purpose of repairing, 
modernizing, or improving homes and other properties. Through 
May 1937, Federal Housing Administration had insured loans of 
$2,000 and less for single and multiple family residences totaling 
$392,000,000.^^ There is no information available to indicate what 
proportion of such loans was for electrical household equipment. 
However, repossessions were high and later regulations excluded 
household equipment after April 1, 1936. 

Another important step in the direction of market stimulation was 
the creation of the Electric Farm and Home Authority, which was 
organized to finance the retail purchase of electric household and farm 
appliances of various kinds. The Authority originally confined its 
activities to electric refrigerators, water heaters, and ranges; the list 
has since been increased to 19 kinds of equipment. 

In its activities the Authority functions in cooperation with retaU 
dealers and privately and publicly owned utilities. Prospective pur- 
chasers whose credit is found acceptable contract directly with the 
dealer for the purchase of equipment. The latter, in turn, endorses 
the contract of sale and receives the amount of the unpaid balance 
from the Electric Farm and Home Authority. The purchaser pays 
monthly installments to the utility which provides service, and these 
payments are transferred to Electric Farm and Home Authority. 

When the Authority was first established, 5 years ago, its activities 
were confined to the States in the Tennessee Valley region. During 
the past three and one-liplf years, however, the plan has been extended 
to many other areas in a total of 33 States, where the rates for domestic 
power consumption are considered to be sufficiently low to justify the 
use of electrical appliances by families with restricted incomes. 

Since the purpose of the Electric Farm and Home Authority was to 
render the use of these labor saving devices available to low-income 
groups, efforts were made to reduce the original price of appliances 
eligible for financing. When the Authority started operations, it was 
believed that much of the equipment on the market was too expensive 

" Federal Housing Administration Annual Report for Year Ending December 31, 1937. 



160 



CONCENTRATION OF ECONOMIC POWER 



for families which it was desired to benefit. Consequently, an effort 
was made to induce manufacturers to offer a cheaper product. The 
Authority drew up specifications for a 4-foot refrigerator designed to 
retail at $79 to $89 in the Tennessee Valley area. Later a 2-cubic foot, 
chest model refrigerator with a lift top was substituted to retail at 
the same price. At first manufacturers cooperated, generally, in this 
program of price reduction. However, manufacturing costs increased 
in the latter part of 1934 and 1935, partly due to the influence of 
N. R. A. code agreements. Since that period, the Authority has 
made no direct attempt to influence the prices of equipment. Only 
certain designated makes are eligible for financing, and in selecting 
these makes the Authority considers "such factors as the financial 
responsibility and reputation of the applicant^ quality and design of 
equipment, and prices." *^ 

Through June 30, 1939, the Electric Home and Farm Authority 
had accepted 151,000 financing contracts. 

The Rural Electrification Administration, in addition to its primary 
function of rendering electrical power available to the farm population, 
also promotes the sale of electrical appliances by assisting in the 
financing of water pumps and heaters. 

The Rural Electrification Administration has conducted two surveys 
designed to measure the extent of use of electrical appliances eligible 
for Electric Home and Farm Authority or Rural Electrification 
Administration financing in Rural Electrification Administration 
territory. They indicate a very widespread immediate purchase of 
certain equipment, such as electric irons and radios, followed closely 
by washing machines, refrigerators, and toasters." 

To a considerable extent the purchases reflected in these surveys 
represent net additions to the electrical appliance markets which 
might have been difficult to achieve without the aid of Government. 



Ten leading 


appliances in each of two studies 




July 1938 survey (6.0 months' service experience) 


January 1938 survey (8.4 months' service experience) 


Item 


Percent of 

families 
purchasing 


Item 


Percent of 

families 
purchasing 


Hand iron 


83 
80 
56 
30 
25 
19 
17 
15 
11 
10 
3 


Radio 


86 


Radio 


Hand iron -. 


81 


Wtishing machine ... 


Washing machine . 


47 


Refrigerator 


Refrigerator . . . 


26 


Toaster 




24 


Vacuum cleaner 


Water pump 


17 


Water pump 


Vacuum cleaner 


16 


Hot plate 




12 


Motor, up to 1 horsepower 


Motor, up to 1 horsepower 


9 


Cream separator 


Poultry lighting . ... 


9 


No appliances .^ 




3 









Source: Rural Electrification News, January 1939. 



" Electric Farm and Home Authority, Annual Report forthe Fiscal Year Ending June 30, 1938. 
** Purchases of electrical appliances by families participating in Rural Electrification Administration 
programs. 



CONCENTRATION OF ECONOMIC POWER JgJ 

CONCLUSIONS 

It is clear that for some of these electrical-appliance industries at 
least, the early period of easy and rapid growth has reached, or is about 
to reach, an end. The sales policies which were well adapted to intro- 
duce these commodities to the more prosperous sectors of the popula- 
tion may be on the verge of outliving their usefulness. Certainly as 
the market for original sales among this group of consumers dwindles, 
it becomes imperative that these policies be seriously re-examined. 
Certain governmental activities designed to stimulate sales among the 
lower-income groups may confer limited benefits, but it seems clear 
that the basic solution must come from the industries themselves. 

Two major fields for future expansion have been suggested. The 
first is the potential market among families who have not been able 
to afford to purchase these products at their present levels of prices. 
The second is the stimulation of the replacement market, by increasing 
the incentive and reducing the cost of exchanging old equipment for 
new. 

In both of these fields price is of paramount concern. The question 
has been raised as to whether it is feasible for these industries to re- 
sume the policy of aggressive price reductions which characterized 
their earlier history. It has been shown, for example, that during 
recent years sales strategy has shifted from price appeal to nonprice 
channels ; it has been suggested that this may have resulted in increas- 
ing rather than reducing costs and prices. Is there any prospect of 
reversing this trend? Is there any hope of expanding the market 
sufficiently by further price reductions to achieve manufacturing 
economies adequate to make the venture profitable? 

Or has the limit of important technological advances been reached, 
at least as far as manufacturing economy is concerned? Undoubtedly 
these are questions with which the members of these industries are 
seriously concerned. The recent experience of the refrigerator indus- 
try suggests that there may be a very real possibility of reducing prices 
sufficiently to tap new markets. 

A basic problem is the cost of distribution. It has been shown that 
this cost ^v. :u .(S for approximately one-half of tlio retail price. It 
constitute^ an imposing obstacle both to price reductions for new 
equipment .iii to attractive allowances for used equipment offered 
in trade, '^hcre seems to be some evidence that thli jost can be 
reduced through the use of mass-distribution me. hot i? Whether 
similar economies can be achieved through ordinary Iistrii ative chan- 
nels is an important question. Apparently some manii^ cturers fear 
that reductioi. in distributive margins would result in tl 3 loss of cer- 
tain retail out its. On the other hand, this might not necessarily be 
equivalent to .. loss of sales. It is conceivable that a sTialler number 
of outlets, operating at narrower mark-ups and consequently lower 
prices, with a larger volume of sales through each outlr^t, might pro- 
vide a more efficient and more economical method of disiibution than 
the one at present in use. 



162 



CONCENTRATION OF ECONOMIC POWER 



Finally, there are problems which the industries seem now to be 
attacking, such as the disposition and reconditioning of used models 
accepted in trade. Here there is little reason for doubting that im- 
portant advances in technique will soon be achieved. 

In short, the saturation of a substantial segment of the original 
markets does not necessarily mark the end of the period of expansion 
for these industries or for others in like position. It does, however, 
make imperative a searching re-examination of sales policies generally 
and of price policies in particular, and an appropriate revision of 
these policies to cope with the changing character of the market. 

The importance of the industries which have been described in the 
foregoing pages does not lie primarily in their size nor even in the 
relationship which they bear to other segments of the economy. It 
consists rather in the fact that the problems with which they are 
currently confronted typify a pattern of much more general application. 
All industries producing consumers' durable goods must, at some 
stage in their individual histories, face a transition from a market 
composed largely of original sales to one in which replacements pre- 
dominate. It may be noted in passing that the decline in the rate 
of population growth, which has been stressed by witnesses before 
the Temporary National Economic Committee,*^ aggravates the 
change by narrowing the possibility of original sales to the successive 
increments of population. 

Such transitions in the character of the market are inevitable for 
industries of this kind. The manner in which the firms involved 
adjust their marketing techniques and price policies to changed con- 
ditions will largely determine the subsequent growth of these indus- 
tries and the opportunities which they will offer for employment and 
investment. 



Table 


21.^ — List prices of ele 


dric ref 


rigerators 1938, principal companies ' 


Size, cubic 
feet 


Frigid- 
aire 


General 
Elec- 
tric 


Westing- 
house 


Kelvin- 
ator 


Crosley 


Leon- 
ard 


Norge 


Stewart 
Warner 


Uni- 
versal 
Cooler 


Cold- 
spot 


3.0 to 3.9: 
Size 


3.1 

D3 

$119.50 

4.1 

N4-3S 
$144. 50 

5.1 

Sp. 5-38 

$164. 50 

6.1 

Sp. 6-38 

$184. 75 

7.2 
Sp. 7-38 
$204. 75 

8.25 
M8-38 
$264. 50 


4 
B^ 

$144. 50 

5 
JB-5 

$164.95 

6.1 
JB-6 

$184. 75 

7.1 
JB-7 

$204. 75 

8.1 

B-8 

$204.50 


3.2 

nDS-32 

$119.50 

4.2 
HDS-J2 

$144. 50 

5.2 
HS-52 

$169. 50 

6.2 
HS-62 
$189. 50 

7.2 
HS-72 
$209. 50 


3.16 

K3-38 

$118. 95 

4.15 

£4-38 

$142. 95 

5.16 
KS5-38 
$162. 95 

6.13 
KS6-38 
$182. 95 

7.19 
KS7-38 
$202.95 


3.16 
KB5-31 
$117. 50 

4.3 
KB5-43 

$142. 50 

6.07 
KB5-50 
$162. 50 

6.0 
.KB5-«0 
$182. 50 

7.1 
KB5-71 
$202.00 


3.14 

L3-38 

$118.95 

4.1 

L4-38 

$142.95 

5.12 
LS5-38 
$162.95 

6.09 
LS6-38 
$182. 95 

7.3 
LS7-38 
$202. 95 


3.12 

R32-8 

$117.50 

4.14 

R41-8 

$142. 50 

5.15 

S52-8 

$162. 50 

6.15 

S62-8 

$182. 50 

7.14 
S71-B 
$202.50 

8.11 

R81-8 

$259. 50 








Model 








Price 








4.0 to 4.9: 

Size 


4.5 

458 

$144. 75 

5.64 

550 

$164. 75 

6.3 

770 
$179. 75 




4.2 


Model 




3804 


Price 




$114.50 


5.0 to 5.9: 

Size 

Model 

Price 

6.0 to 6.9: 

Size 

Model.... 

Price 

7.0 to 7.9: 

Size_ 

Model 

Price 

8.0 to 8.9: 

Size 


5.25 
AD-538 
$164. 95 

6.51 
AD-C5S 
$184.95 

7.45 
AD-758 
$204. 95 


6.3 

3816 

$169. 50 

8.6 


Model 














3838 


Price 














$179. 50 





















> Prices are on lowest price comparable model in each size group. 

Source: Air Conditioning and Refrigeration News, Business News Publishing Co., Mar. 9, 1938. 

« See Temporary National Economic Committee Hearings, Part 9, pp. 3504-350& 



CONCENTRATION OF ECONOMIC POWER 
Table 22. — Percent of concertration, 1937 



163 



Item 


Production of 
first four 
companies 


Percent 

of 

total 


Total pro- 
duction 


Number 
of com- 
panies 


ELECTKIC REFRIGERATORS, DOMESTIC 

Capacity under 6 cubic feet: 

Number . . 


754, 130 
$58, 464, 364 

728, 660 
$73, 739, 375 

(■) 
$2, 406, 123 

717, 900 
$28, 515, 327 

(1) 
$22, 986, 563 


69 
69 

74 

77 

0) 
77 

49 
53 

(0 
70 


1,093,026 
$84, 458, 077 

991, 022 
$95, 985, 895 

(') 
$3, 130, 046 

1, 478, 480 
$53, 759, 751 

1, 190, 782 
$33, 016, 817 




Value--- 


21 


Capacity 6 to under 10 cubic feet: 

Number . - . - 




Value .- - 


25 


Capacity 10 cubic feet and over (including those not re- 
ported by size): 
Number ^ 




Value 


14 


WASHING MACHINES, HOUSEHOLD USE aNCLUDING APART- 
MENT SIZE) 

Number - - .- 




Value - 


32 


VACUUM CLEANERS, FLOOR 

Number 




Value 


29 







> Data not available. 

Source: Bureau of the Census, Department of Commerce. 

Table 23. — Cash value on trade-ins 
[Cash value as percent of list price, delivered '] 



Year 


Electric refrigerators 


Automobiles 


7-foot > 


6-foot 3 


5-foot > 


4-foot » 


Coach < 


Coach • 


1933..- - 


Percent 
10.0 
11.0 
21.0 
23.0 
32.0 


Percent 
13.8 
17.9 
22.2 
24.2 
32.4 


Percent 
10.3 
16.6 
21.3 
24.7 
31.6 


Percent 
16.6 
18.5 
24.1 
25.5 
34.8 


Percent 
15.1 
22.2 
30.6 
39.0 
52.6 
63.1 


Percent 
11 7 


1934 , 


18 6 


1935-. 


29 3 


1936 


39 5 


1937 


49 8 


1938 


63.3 















' Refrigerators: Manufacturers' suggested retail delivered price; northeast zone. Automobiles: E.sti- 
mated delivered retail price, Washington, D. C. 
' Company A. 
' Company B. 
< Company C, 
• Company D. 

Source (Refrigerators): The National Market Index, published by the National Refrigrator Index 
Publishing Co., Inc. (Automobiles): Blue Book, Executives' Edition, published by the National Used 
Car Market Report, Inc. 



164 



CONCENTRATION OF ECONOMIC POWER 



Table 24. — Average expenditxires by families of employed wage earners and clerical 

workers by economic level ' 





■5 




Electric re- 


Washing 


Vacuum 


Electric 
stoves and 
hot plates 




S>. 




frigerators 


machines 


cleaners 




£g 






















i 


.2 


3 


.2 


^ 


.2 


^ 


_» 


5^ 


Economic level— family spending 


fen, 




B tD 


•3°iL 


B tB 


'St. 


B bc 


"5? 


§Sf 


'3 1!. 


per expenditure unit per year 


S-- 


.■a 


i§ 


a>? 


•oS 


n>> 


•o'i 


pi? 


o 3 


a^ 




a ^ 


g 


o-B 


o-a 


Q.S 


aa 








X 3 










<uX3 






























^ 


la 


bo 2 
OS O. 


a Q. 


sa 


a o. 


as 






> 


S 
i-t 


fe 

> 


S 


u 
U 


S 


> 


8 


> 




■< 


■< 


P4 


< 


PM 


< 


Ph 


< 


(U 


< 


All families 


3.32 


$1, 538 


6.0 


$9.77 


5.9 


$3.70 


4.6 


$1.97 


0.7 


$0.38 


Under $200 . .. 


5.96 
4.79 


1,021 
1,219 


1.1 
1.4 


1.98 
2.30 


3.4 

5.2 


2.43 
3.00 










$200 and under $300 


1.9 


,91 


.2 


.04 


$300 and under $400 -- 


3.84 


1,352 


2.9 


4.90 


6.3 


3.74 


2.5 


1.03 


.6 


.24 


$400 and under $500 -- 


3.30 
2.94 


1,487 
1,606 


6.0 
6.9 


9.31 
11.34 


6.6 
6.0 


4.11 
3.81 


4.5 
60 


2.02 
2.63 


.6 
.6 


.29 


$500 and under $600 


.40 


$600 and under $700 _ 


2.62 


1.694 


8.6 


13.69 


,5.7 


3.88 


,5 3 


2.12 


1 ?. 


.48 


$700 and under $800 


1.99 


1,787 


8.6 


14.61 


4.9 


3.32 


5.6 


2.32 


1.0 


.51 


$800 and under $900 


2.27 
2.20 


1,868 
1,984 


11.1 

11.7 


19.95 
17.65 


5.2 
6.8 


3.04 
5.31 


8.5 
3.7 


3.88 
1.21 


1.8 
.6 


.77 


$900 and under $1,000 


.64 


$1,000 and under $1,100 


2.23 


2,102 


12.1 


21.57 


5.8 


3.93 


10.6 


5.19 


2.2 


2.00 


$1,100 and under $1,200... 


2.17 


2,255 


12.1 


20.42 


7.8 


4.97 


9.1 


6.02 


.5 


.51 


$1,200 and over .. . . 


1.94 


2,395 


12.9 


20.13 


3.9 


2.67 


15.1 


6.62 


3.1 


2.39 







' Economic level is determined by the amount spent per expenditure unit, a measure which takes into 
account total family expenditure and family size and composition. An e.xplanation of the method of com- 
puting this measure was given in the Monthly Labor Review for March 1936 (pp. 558-559). 

2 Average for families in 42 large cities from unpublished data o' the Bureau of Labor Statistics based on 
total number of families in group, not on families purchasing. 

Source: Bureau of Labor Statistics "Study of Money Disbursements of Wage Earners and Clerical 
Workers." 



APPENDIX I ' 
MEASURES OF PRICE FLEXIBILITY 

PURPOSE 

In the course of the discussion of price flexibility contained in 
chapter II of this report, reference was made to the various ways in 
which price sensitivity may be measured. (See ch. II, pp. 27-31.) 

A distinction was drawn at the outset between criteria designed to 
measure the responsiveness of prices to the specific economic forces 
affecting their markets, and criteria based solely upon the observed 
behavior of prices. It was pointed out that, although criteria of the 
former kind were in some ways more significant, practical considera- 
tions made it necessary to use behavioristic measures at the present 
time. 

It is the purpose of this appendix to present data relating to the 
flexibility of 784 ^ individual price series included in the Bureau of 
Labor Statistics weighted wholesale price index, as measured by vari- 
ous aspects of their behavior. A total of 14 different measures is 
presented; 2 of these were prepared by the National Resources Com- 
mittee, 1 1 were developed in the course of the present study, and 1 is 
based upon an earlier analysis by this Bureau. All of these measures 
were based upon the behavior of these price series subsequent to 
January 1926.^ 

The criteria presented are designed to measure three general aspects 
of price behavior: (1) The frequency of price change, (2) the ampli- 
tude of cychcal price movement, (3) the timing of changes in price 
trends. 

Twelve of the criteria (A to L, inclusive) are based upon some one 
of these aspects alone. The two remaining criteria (M and N) are 
designed to measure the combined effect of frequency and amplitude 
of change. 

In computing these measures, 169 of the individual price series 
reported by the Bureau were grouped into 50 composites in conformity 
with procedure utilized by the National Resources Committee.* For 
example, prices are published by the Bureau of Labor Statistics for 
six different kinHs of wheat. These sLx series show closely parallel 
movements and may therefore be satisfactorily represented by a single 
composite series. The purpose of using composites was to avoid 

' Appendix I was prepared by Saul Nelson and Walter G. Keim. Joseph W. Lethco assisted In pre- 
paring the statistical data. 

' During January 1938, the index was expanded to include 813 individual series, and during January 1940, 
it was enlarged to 863 series, but data for the additional series are inadequate to permit their inclusion in 
this analysis. 

' This date marks the point at which the Bureau of Labor Statistics wholesale-price data were materially 
revised and many new series added. Measures of price behavior prior to 1926 are included in The Behavior 
of Prices, by Frederick C. Mills, National Bureau of Economic Research, 1927, and also in Prices In the 
Trade Cycle, by Qerhardt Tintner, Vienna, 1935. 

* The Structure of the American Economy, National Resources Committee, pt. I, June 1939, p. 186. 

165 



IQQ CONCENTRATION OF ECONOMIC POWER 

imputing excessive weight to the items comprising them in the calcu- 
lations and correlation charts. For example, the retention of 18 
individual butter series, in place of a single composite, would m effect 
give butter a weight 18 times greater than that for other products 
which were represented by single series. 

The criteria of flexibility for the composites were derived from the 
criteria for their individual constituents. In the case of measures J, 
K, and L, reflecting the timing of price change, the criterion for the 
composite is the median of the measures for the series included. In 
all other cases the arithmetic mean of the criteria for the individual 
series was computed to obtain the corresponding measure of flexibility 
for the composite. In this way the tendency of composites to yield 
misleading measures (e. g., composites generally show a greater fre- 
quency of change than any of their components) was avoided. 

These measures are presented with full awareness that there are 
inherent inaccuracies in the basic data for this purpose. It has been 
pointed out repeatedly that the Bureau of Labor Statistics wholesale- 
price indexes are not ideal for the measurement of price flexibility. 
Thus, for some commodities, price changes take forms such as rebates, 
concessions in terms of sale, or modifications of the nature of the 
commodity which are not reflected in reported price data. Allowance 
for some of these changes may later be made possible in the course of 
the Bureau's program of revision and refinement of its price series. 
Other difficulties, such as changes in the nature of the commodity, 
may prove difficult or impossible to correct. Nevertheless, in view 
of the current interest in the subject, it was considered desirable to 
present these criteria of price flexibility on the basis of the price data 
now available. 

THE CRITERIA UTILIZED 

A description of the specific criteria to be presented follows: 

(1) Criteria based upon frequency of change. — 

A. Number of monthly changes in price, 1926 to 1933. This cri- 
terion was first presented by Gardiner C. Means in Industrial Prices 
and Their Relative Inflexibility.'^ It has been somewhat amplified 
and revised by the National Resources Committee and is inc' ided 
in the recent report of the Committee, The Structure of the American 
Economy.^ 

B. Number of montlily changes in price, January 1926 to April 
1929. This criterion is designed to present a measure of frequency of 
price change during a period of relatively full resource utilization. 

(2) Measures based upon the amplitude of cyclical price change. — • 

C. The amplitude of downswing during the 1929-33 recession, as 
measured by the percentage of decline from January 1929 to Feb- 
ruary 1933. The bulk of these data were presented in an earlier 
publication of the Bureau of Labor Statistics.'^ 

D. This is a measure of the amplitude of cyclical upswing. It is 
based upon the percentage of increase from the depression * low to 
the 1937 peak, computed as a percentage of the former. 

> S. Doc. n, 74th Cong., 1st sess. 

• The Structure of the American'Economy, National Resources Committee, Juno 1939, pt. I, pp. 186-204. 

' U. S. Department of Labor, Bureau of Labor Statistics, The Trends of Wholesale Prices, June 1929 
to 1933 (mimeographed). 

' For purpo.ses of convenience the term "depres.sion," if not otherwise modified, will be used to denote 
the 1929-33 downswing. 



CONCENTRATION OF ECONOMIC POWER lg7 

The last two criteria described measured downswing and upswing 
separately. The next three (E, F, and G) combine elements of up- 
swing and downswing. Each of these three measures is based upon 
a comparison of the depression low price with the average of the pre- 
depression and post-depression peaks. One of the purposes of this 
technique is to make some allowance for secular trends during the 
period 1929-37. For example, the prices of such commodities as 
rayon and electric refrigerators experienced a broad secular down- 
trend during most of this period. Consequently, measures based ex- 
clusively either upon the amplitude of downswing or upon the am- 
plitude of upswing are misleading. 

E. Criterion E was developed by the National Resources Committee 
and is included in The Structure of the American Economy.'^ It is 
based upon the difference in index points between the 1932 annual 
price average and the mean of the 1929 and 1937 annual prices, 
expressed on the basis of 1929 equals 100. 

Criteria F and G may be distinguished from E in two respects. 
In the first place they are based upon monthly rather than average 
annual data. Consequently they reflect the extreme peaks and lows 
somewhat better, but on the other hand they are influenced by seasonal 
price movements. In the second place, the difference between the 
depression low and the two peaks is expressed as a percentage of the, 
average of the latter rather than on the basis of 1929 equals 100. It 
is considered that this procedure is somewhat better adapted to 
compensate for secular influences, 

F. Criterion F is based upon the difference between thfe mean of the 
monthly peaks during the years 1929 and 1937, and the low month of 
the depression, expressed as a percentage of the former. 

G. Criterion G is distinguished from F merely in that the post- 
depression peak month was taken during the period between January 
1936 and March 1937, inclusive, instead of during the calendar year 
1937. This was designed to eliminate the influence of the sharp rises 
in the prices of certain otherwise insensitive commodities which took 
place during the latter part of 1937, well after the general down trend 
was under way. 

Criteria H and I are similar to the two just described, in that they 
measure the relation of the depression low to the predepression and 
postdepression peaks. They represent two alternative devices for 
minimizing seasonal influences. 

H. This criterion is based upon the percentage of decrease between 
the average of the 1929 and 1937 annual prices and the 1932 annual 
average price, expressed as a percentage of the former. This use' of 
annual averages eliminates seasonal influences. This criterion is 
similar to the National Resources criterion E, except that the decline 
is expressed as a percentage, rather than in index points. 

I. Measure I is based on the percentage decline between the average 
of the February 1929 and February 1937 prices, and the February 
1 933 price, computed as a percentage of the former. The use of the 
the same mr th in each year should largely eliminate seasonal varia- 
tion. The month of February was selected because prices during 
February 1933 were close to the depression lows and prices during 
February 1937 generally approximated the recovery highs. 

• Op. cU, loc. cit. 

24 7149 — 41— No. 1 1.3 



168 CONCENTRATION OF ECONOMIC POWER 

(3) Measures based upon timing of price change. — J. This criterion 
is the month during which the predepression peak was reached, based 
upon the period January 1929 to December 1931, For most com- 
modities, of couise, the peak month occurred during 1929, but in some 
cases the downtrend started much later. Some commodities showed 
no decline at all during this period. 

K. Measure K is the month durLug which the depression low was 
reached. The period included is from January 1932 to December 
1934. 

L. Criterion L consists of the month during which the postdepres- 
sion peak was reached, preceding the 1937-38 downswing. Data are 
based upon the period January 1936 to December 1938. 

(4) Measures combining frequency and amplitude. — Criteria M and 
N are designed to yield measures reflecting both frequency and ampli- 
tude of change during a period of relatively full resource utilization. 
Price behavior was observed during the period between January 1926 
and AprU 1929, inclusive. For each price series, the aggregate change 
in price during this period, regardless of sign, was totaled. 

M. Criterion M is obtained by dividing the aggregate change in 
price during the period January 1926 to April 1929 (computed as 
explained above) by the actual number of price changes displayed 
during that period. This yields a measure of the average number of 
points by which each price index changes when it does change; i. e., 
of change per change. 

N. From the aggregate change in price during the period January 
1926 to April 1929 was subtracted the net change in price between 
the beginning and end of this period. This procedure was designed 
to yield a measure of the total amount of price movement which did 
not result in an ultimate net change in price. It may be considered 
to constitute a rough approximation of the total casual and seasonal 
variation experienced by each series during this period. 

PRESENTATION OF THE DATA 

Tables 25 and 26 present the flexibility of each of the individual 
price series and composites as measured by each of these criteria. 

In table I the actual measures themselves are shown. It will be 
noted that measures are omitted for some of the series for some of 
the criteria. The character of the data made this necessary. In 
some cases the available data did not cover a sufficient period of time 
to permit the computation of certain measures. For other items 
criteria A and E were not available in the tabulation of the National 
Resources Committee. Moreover a considerable number of com- 
modities showed no change whatever between January 1926 and 
April 1929. For these commodities criterion M — average change per 
change — could obviously not be computed. 

For the purposes of table 26 the series were ranked in ten groups, 
or "deciles," on the basis of each of these criteria. Group I included 
those commodities which displayed least flexibihty as judged by the 
measure in question, and group X included those commodities which 
displayed most flexibility. As far as possible, an attempt was made 
to include the same number of commodities in each group, but the 
character of the data precluded uniformity in the process. In two 



CONCENTRATION OF ECONOMIC POWER 169 

cases deciles had to be combined.^" Table 26 presents the results of 
this method of ranking; it shows the decile into which each series 
falls as judged by each of the measures used. 

RELATIONSHIPS BETWEEN THE MEASURES PRESENTED 

Since these criteria measure different aspects of price behavior, it 
is to be expected that the relative degree of flexibility exhibited by 
specific commodity prices will vary with the measure used. On the 
other hand, it was poLuted out in chapter II (pp. 31-32) that under- 
lying differences in market patterns lead to the existence of certain 
broad relationships between different phases of behavior; as for 
example between frequency of change and ampUtude of cyclical 
movement. 

In order to facihtate comparison between the various measures 
compiled, a series of 18 tables (tables 27 to 44 inclusive) has been 
prepared." Each of these tables compares the decUe ranking of all 
the items for which data are available for two measures of flexibility. 
For example, table 27 compares the percentage of decline from June 
1929 to February 1933 (criterion C) with the percentage of rise from 
the depression low to the peak of 1927 (criterion D). Thus this 
table shows that, for the 65 items ranked as most insensitive under 
measure C, data were also available under measure. D; that 31 of 
these 65 items were also in the most inflexible group under the latter 
measure, 16 in the next most rigid group (group II) five in group 
III, five in group IV, etc. Similarly 42 of the items which were 
classed as most flexible under criterion C were also in the most flexible 
group under criterion D. 

These tables are presented in the following order: 

Table 27 compares depression decline (1929-33) with recovery 
(1933-37). 

Table 28 compares the timing of the depression downturn (1929-31) 
with that of the initial recovery (1932-34), 

Table 29 compares the timing of the depression downturn (1929-31) 
with that of the 1936-38 recession. 

Table 30 compares the timing of the initial recovery with that of 
the 1936-38 recession. 

Tables 31 to 34, inclusive, compare frequency of change with amp- 
litude of cyclical movement. 

Tables 35, 36, and 37 compare frequency of change with timing of 
movement. 

Tables 38 and 39 compare amplitude of cyclical movement ■v^th 
timing of movement. 

Tables 40, 41, and 42 compare average change per change with 
frequency, amplitude of cycHcal movement, and timing of movement, 
respectively. 

Table 43 compares frequency of change with aggregate change less 
net change. 

10 This occurred for Criteria L and N. Measure L relates to the peak month before ■downturn daring 
the period January 1936 to December 1938. For 158 series, or more than two-tenths of the total, there was 
no downturn through December 1938; hence groups I and' II were combined. Measure N relates to ag- 
gregate change less net change for the period January 1926 to April 1929. For 198 items, or about three-tenths 
of the total, this criterion was 0.0; hence groups I, II, and III had to be combined. 

" These 18 tables present what appear to be the more significant relationships betwec these measures. 
In addition 13 other tables of the same kind (Nos. 46 to 58 mclusive) have been prepared end are appended 
for the convenience of those who may be interested in such comparisons. 



lyO CONCENTRATION OF ECONOMIC POWER 

Table 44 compares amplitude of movement with aggregate change 
less net change. 

The relationships depicted by these tables are summarized in table 
45. This table shows the extent to which decile ranking varies for 
each pair of criteria. For example, criteria C and D are compared in 
the first line of this table. Twenty-nine percent of all the items in- 
cluded fall into the same rank for both of these measures; 63 percent 
show a difference of one rank or less; 81 percent show a difference of 
two ranks or less; 89 percent show a difference not exceeding three 
ranks; none show a difference of nine ranks. (Relationships involving 
criteria L and N were omitted from this table because the grouping 
of deciles prevented the use of this technique.) Obviously a high 
degree of uniformiiy between the ranking for any pair of criteria 
imphes a close relationship between the two aspects of flexibility meas- 
ured. The relationship to be anticipated on the basis of purely chance 
distribution is also shown. 

The significance of these comparisons is summarized below: 

Depression decline compared with extent oj recovery. — There is appar- 
ently a marked relationship between the extent of decline between 
1929-33 and the percentage of recovery from 1933 to 1937. The per- 
centage of items falling into the same rank under both criteria is 
almost three times as great as chance expectation. 

Relationships between various aspects oj timing. — There was some 
tendency for prices which declined early in 1929-31 to recover early 
during 1932-34. Approximately the same degree of relationship exists 
between the timing of the depression low (1932-34) and the recovery 
high (1936-38) and also between the timing of the 1929-31 peak and 
the recovery peak. However, these correlations are not very close. 
Only 16 percent of the items fall into the same rank for criteria J and 
K as compared with chance expectation of 10 percent. Evidently the 
order of price movement changes materially at successive turning 
points. 

Frequency oj change and amplitude oj cyclical movement. — It was 
observed in the course of the general discussion of price flexibility (ch. 
II, pp. 31-32) that prices which change frequently show a marked ten- 
dency to move widely in response to the broad upswings and down- 
swings of general business activity. Tables 31 to 34 present four 
aspects of this relationship. The closest correspondence is evidently 
between criteria A and F. Presumably this is due to the fact that 
both of these measures are affected by seasonal movements. In cri- 
teria H and I the effect of seasonal forces is largely eliminated; the 
former is based upon annual price averages and in the latter the same 
month of each year is used. Table 45 shows that the pattern of rela- 
tionships between frequency of change and each of these two measures 
is very similar but is not as close as that existing without seasonal 
correction. The comparison between criteria B and I shows that the 
relationship between frequency and amplitude of movement is of about 
the same order whether frequency be based upon a period of relatively 
full resource utilization (measure B), or upon a longer period including 
a major downswing (measure A). 

The Pearson ian coefficients of correlation for these comparisons 
have also been compu<^ed on the basis of unranked data. These are: 

Correlation between A and F +0.83 (standard error is 0.013). 
Correlation between A and H -+-0.74 (standard error is 0.018). 
Correlation between A and I +0.77 (standard error is 0.01 3). 



CONCENTRATION OF ECONOMIC POWER 171 

The correlation between frequency of change and the National 
Resources Committee measure of depression sensitivity (criteria A 
and E) is somewhat lower; the coefficient is +0.70. The difference 
in principle between the National Resources Committee criterion E 
and criterion H has been pointed out above (p. 167) and may explain 
the reason for this variation. 

Frequency and timing. — Tables 35 to 37 show a distinct relation- 
ship between frequency and the timing of change. Table 45 indicates 
that this relationship is of approximately the same order as that 
between frequency and amplitude of cyclical movement. Thus for 
criteria A and J (frequency of change and timing of the 1929-31 
downturn), 24 percent of the items show no change in rank, while 
for the comparison between frequency and timing of the depression 
low (criteria A and K) 22 percent of the items are unchanged in rank. 
The Pearsonian coefficient of correlation computed from the unranked 
data is +0.59 for the comparison between A and J, and +0.49 for 
the comparison between A and K. These coefficients are materially 
lower than those relating to the comparisons between frequency and 
amplitude of cychcal movement; however, this difference may be 
partly due to the fact that the relationship between frequency and 
timing seems to be curvilinear rather than linear in character. 

Amplitude of cyclical movement and timing of change. — Timing of 
change seems to be related to amplitude of cyclical movement in 
approximately the same degree as it is to frequency of price change. 
This is shown by the pattern of tables 38 to 40, inclusive, as well as 
by the summary in table 45. The Pearsonian coefficient of correla- 
tion between criteria I and J (cyclical flexibility and timing of 1929-31 
downturn) is +0.58; that for the comparison between cychcal flexi- 
bihty and the timing of the depression low is +0.54. 

Change per change compared with frequency, cyclical flexibility, and 
timing. — Tables 40 to 42 show that there is no apparent relationship 
between the amount of change per change (measure M) and other 
criteria of flexibility. This inference is borne out by table 45, which 
shows that for these three comparisons involving criterion M the 
distribution closely parallels chance expectation. Apparently, the 
amount by which a price, changes when it does change is not an indi- 
cator of other aspects of its behavior. 

Aggregate change less net change. — Tables 43 and 44 show a high 
degree of relationship between aggregate change less net change 
(measure N) and both frequency and amplitude of cyclical movement. 
Unfortunately so large a proportion of the total number of items 
shows an aggregate change less net change of 0.0 that it is impossible 
either to present a summary of these relationships in table 45 or to 
compute a meaningful coefficient of correlation. Nevertheless, the 
similarity of pattern shown by tables 43 and 44 make it probable that 
this kind of measure, combining as it does elements of both frequency 
and amplitude, may serve as a useful index of pric(; behavior. 



172 



CONCENTRATION OF ECONOMIC POWER 



'«oe4'«-«i '0< a> '<< o> to 00 o acoO'<«-o«e4cO'«'«ooaoMoooaoo<oeoaoocic40 

^ tp-^^?^^ eo »o »-* ro >d ci ^ AOodoo -^o6c4ioocc>c^ coc^ t^o»(^Me4 ^a»*c ^ACJo 

•iSiNNrH « .^ c« e» S5 rt « ^ CO c» ■«' CO ■* lo CO c5 .-I N -nRr^t-i ■-loO've^n 

^ ^t^Nooo r-i rH t>. I— ^ N t- (x>a>^aooot^ooc4t>0'4it.co>o>Hoaci t-aot>m<-<C4oo 

IS ujiotocom o6>dcd'dad>o<s '^0(»c^'oc4Ti<oo^co^co^too>nrJmi--<<dcoe4oo 



eT>^^^^^ 



t. tcr « t* 



t^flCiDt*h>r«aot«QO-aoN.ot*-r-oo'iD<0<o 



v^i^t^oS^CN^* cO^«s<^otf^«^«^<#K^'s)aNos^^^'i5N«ve^^ve5Nr2^'«Kofl^eV'Ors3>^« 



^^^M v^^MvMvT*^ ^^ri vM vM y£4>^ vM -Tl ^C^ %£4 >M ■>^ n^ >M ^ sT* ^ Nf) ^ •^ >M o^ ^T* >^ >«4 






Noo^t-.-<«"<'i~ ■>ii<e<5r-^eoTj<o»t»«o>eoeoot~«C'Oi-ioo'Ooo>et~eooo 

t^Qoiioanr-^^ co'«od>oooQmT)!coe«it-:<-<>4^a>cj>o^aoQ'Hadi^o^ 
^3>oioSio^ to>S>0'*'<<>oeo^Hvt-i«u5e^r~u3t»ioirt3oot^«x5to 






ooc»50>o«>e^o 03'HTi<iOT(it-eocOT»"0-^eoioeoo>oo>ot^o>oOi-icoN<0'-i 
•o >Q '« CO <o >o CO "O CO CO ^ CO us e>» CO ^ CO CO 1-1 CO es to "J* o « CO o <o o^'* 



t»o>-ioo« 
coaid'Ji-i 



lo vH -^ a» o) kc o 

•O 0» >2 5^' 00 CO Q 
CO CO CO t^ t^ CO ^ 



o^oc^oa»e*QO■-'eo©e^>oeoa»^"eoc^eo•o•-laoaoao■-"o> 

oocJcQ'«>de<iaicooriaW'^cdo^r~^>aeoeorH<-'°coi^'^ 
t^co^^^*o^«cou^c0^r^rau^eooo<o^«vcocooooo^-t^t^ 



r~oot»t»ce 



CO r^cot^r^c 



o «o CO o N rt t- >o»^eoe<'<»<coeor-oooeoco«»oopcoo>t- 
c5 1>^ d 00 1~ >o "i •-« CO cp 06 CO •"< t>i Q 'p 1^ ><» M eo-i-i «■ CO ^ ci 
r^ CO b> S> lO t» CO CO CO 9 1« CO U9 CO S <o t^ CO <o CO 00 00 r> t> t> 



73 

;3 



e<OO>0rH 



O 0> 0> O CO o •<«< 



COOON 



<ooooco«"eov^ococ«c«'"*oooocO'<<'«<oo^ 

«>ooo>oo>o>i~^i-4do>rH<>piio^cQcoco^>or^ 
C4 ^ rH 74 CO Ci '«■ i-l CO --I CO <o l» ^ CO S S ^^-^ 



cooo>o>o^ 



-H « t» ■♦ OS O t~ 

d go t; r^tr "5 « 



»-<i-H«CO< 



coco'4<>o>nacocoiococ^aor~>oc«o>coo><OrHO>ococ>ico 
rf* S ^ ?j S2 3? g <* ffi >» SJ ?a t: t: w OS r)* t; ^ tC S SJS 



^00 t^cot^ooooc»c>op<co*coa>'<<i^-<t»eo»o w« CJ05C 






CO »0 O t* CO -^ OS 
lO t^ CD CD CO >0 >0 



C*CON^OaaWt^»0<DCDO»Ot^05003»OCN|WcDQOOOC« 

S*uSir5ooosos«or>^b-i^»6cflt>oicc-HeoM3tDC^Q'Hi*^QO 
»o»ocD»ocD^»o^eo«C'^»oNt^^t^»o»o^eooo»« w5 



CO CO CO coco 



Oft oa a» o) 00 oa oa o> Aa»t*o»cDasaba)cDoae^^'^^jgkOagco 

CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO CO c~ 



*-H ^ COMC 



5^00 OOC 

3 wrtSse 



ua lo to lo ko 

O Ok Ott 0> Oft 



SSc 



lo lo-^^ iioeo *o»o --H CO ^oiocoeo •-* o»oeo»«co '^oO'^os 

OS ^^03 iO>00OaO)O)0C'd^(NCO^^t>>CDwO&00O>O>Q>b*O)QO 



s 

n 



•a. 

59 a o oa >>r; 
JmOOP5^ 



3 2 .: 

o S 

tt-a 

a > 
2 OS o 



gJ 



iS-oS- 



■ ■ ^ 



.2 fen 



S 03 



00 -0 

_2 S 






^ M O 03 

la-s 



III 

$ 03 C8 






-",«' 



i-t CO iQ t* oa ^ 5 



CONCENTRATION OF ECONOMIC POWER 



173 



lOtOC^Tfiao wo C4 00 C4 ^OOOOO^ MO Til C4 O^ ^ 00 CO C4 oc^ioooe^oo^o^oo 



coSicjeo me!! to -h ooogiogco ^^^ o -^ »-< o» ■* « o> ob o> •«< <o ro ■-" "-"O co oo "S N 





•<«1 CO 1-J -H CO 


^_^0 »-i Ob ^ ^^(D ^^0» O -^ M W •* C^ -^ M O »0 


o^'^.-Jci'^cDcocd'^cocooii-Iec^iococSt^ 




C« (D OO o t^ 


t^ .-K fJS ^\ C^ *^ -^ C4^ r^ C^ i>^ vi^ M3V rN ■0' > t0^ M N oCTs 0^ 


r^o(r-k$^«vc(rv>5^|5^e$^eKwso!N^^ ^t^^r-k«-Ka^«s 


^^ 


S^H^ 


*Ss e<3^ «^»^ cV- ris d^ w^ 5^ ^ -Js e^N e5^ c^ 




2;s 


9 a o o) 01 







r^cOC400& CO -^ CO »-< t^ CO OS OS t>" 00 «D (O CD i-H «0 <-l O 00 N 00 CO ^ •-* O 'H lO WS C^ »0 00 1^ I t^»OCOCl rH^ CO 

^-Hid'^'eo u?Ti<-*cDrtidcsoc«'«r>ooQa6'oa6co-HO>t5 >or»ocoo-<eooscDodt-^^ icDt>^cOTi<od«og; 

iCOseC*00 to O l^ C^ t^ C*l »-» OS t* CD i-< 00 CD CD CO ^H r» ^ CO »-ICOOOBCONt*CD W •-•'^^ ^^^ >O^hO00»-< 

coos-^ooi-H ■oc-J'*o-<eoe»<3-H'>ri'^"QOso6osoc--oso6 rtio'ast-^oiaJ^^Of'C^^'odeooqes 'csijcj 

■3< CO •-< ?!> T)< leoco^ j.Jl'* J5m ■*^tDeoco3>-icort NMeSc<N«-**i-i-*io 4. i-<c5co cow 

^OSNCOO 10 Tt< ■* OS OS to t- OS N ■"! -- "5 O t^ O -H O ■»!" »-" >»" CD CD O CO ■* CO >-l N ■-< N 0> "O "O O * OS >0 00 N 

S'coxjcoo cJTiicDTii ■<N'fl>'e3Tt<Ti<Qoci-H-«ii-iaoc^'coo NC^ujidodoocoeacpgJgC'H^goeooda'oeo 

uSM-S-fiS comco^ rt loSco -Hi3>ooO'*oo3— lioio co co eo •* co « is co N co co 9 •>»< « Si -« »-i M ■»■<»• 

00>C-^CDO C0>0^ t^OSOt^OSC900*-)CI ^^ b- F-iCOOO O ^ lO O CD r« t« 00 Ob C^ C^ CO CO lO lO CO CO OS 00 t> kO 

S"eocd>oo "dcocouj 'n-ifcit^>oa6cie^-«cideiuit^ c<i'«i'rtirfooQ<oqoceeooO"-H'icoodo'oO's'2?2 

S5i-H-5"S5 eScoeort iiiSSco K <c oo ■* oo t- —i "5 •" co co ■^i ■«< S ^ C 55 m co 3 ■>«> ■» M co ■>»< i-i i>» ■<" •* 

t-tr-OOi-^O CSW OCOOO •-< COCOOS CDt^cD coo CDOOOO W CO ■<*• COOO t^CDOCSCOCDW^OCONOf-lCDCl 00 

^cO"-<c<co I C0CO.-1 I I ifrtcs CO CO t~ "«< t» lo --I CO ■-< « N c5 « Pi c5 CO CO coco | ^nm eo--" 

ooosooso o c< c^ "o t* o ^ o CO 00 »-< •-< CD *o CO i-^ t^ t^ »-< 00 1^ c< 00 00 ^H ^ -^ O'^ c* oco cow ooco w oot" 

S* ^ h^ C4 c5 I^O OO *^ W CO O 00 00 COb* OS to OS 00 CO O O lO t^ CO OS 00 "^ •-^ OS f* 00 CO OS c4 CO ^H ci CO *# « rH 

5 S© SuSaSsS ScoS-gi SJoSojioSc^SHp. •* co 35 5* iS lo o oo m o> os co oo co >o to ci eo ^ eo 

t^f^t^OS« « -^CS OSCDOO COOOCO t^O« ^ W CO'^'^O ^ooot^otoo ^o*t* Wt^OOOSOOtO ^OSO 

g"ioeo»-^Q eoo6>oo6ei t^e-Jc^'cocicocoodcd^cooscD Os'ooo^j^oodas'oQQ'cjjgeoosjjar-jfflooo 



lOOS 



«CO 



OSPJ 



:SS 



o»oacogQu3 oo»o^eooosoco»-«oioogot^ooMi-HN 



COCOMCi ^ ^ 



CCCO CCC4 



McO'<i<03'^o>eo»oeoect*OiOOeO'^oo5^-oooo 



ss^ss 



CO O CO CO cc 



goeo^ootjooc 



Tj^-^QCCDN ■^t^cD»C«Oi-<W5'^^»-H»ONiOC*«»OQOOOC^ 



OiOiCOCO^ ^H^H^i 



03 1— ( 1— ( OS 03 03 CO CO 00 •-< 00 t* 



SiSSS 



iio^Ar-a:C4C^Q^iO)-icoio<ou3 



SSSi 



•oC4ooaocoooasaoioc^C4>ocoiO'«<eo 




ss 



■OHiSfe 



a,->^ a> a a ^ 
"oja o > o 
EJ«QOWPh 

Q 



-^-J'^- 1' a) 



^Js ^ fc -1 a 3 « 
aooZZro So fc 

gPQP5pqBPQUOO 

o 



03 V 



■^11 



fell's "3" 



j^ j^ t." I-"-- 3 






o " 



a> S bo p. Q.X3 

o;g g o! 08 o 

S p "SScd — '^'O'O 

O O |i4 -^^ "* H^ CO 03 03 



« 3 a « 8 «•§ a 



'O'CaoJeOoP.O.m"- 

o§p'0'0'0'a'0-9§ 
o 3 0-2 .2.2^.2 " a 

o3o8cO>-<>-'^^iM03a3 




II ii^ss S8ss$s;ssss||ss22^22 Ss^lS^BSSBiSsssissss 



174 



CONCENTRATION OF ECONOMIC POWER 



^US'^tOOO'^'^'^dM'^OO 



•<< N « ■tfKO O <D © 00 <0 -O" •«)< O to •* O N W O 



0> W -^ 'H t^ S ^ O OOT^ "5 ^ »-• rH 00 P3 ^ ^ to t^ y ^H «a« 00 00 ^ C^ CO to i-H »-t » 

1-1 rH N CO —I i-l •-! -H ■-( N W ■-> i-l •-' ■-' .-l«l-l 11 eS 



tO«'000-<|<'<'-<l<0-HOQCt-M 

ujiotoo6uj-^-^coc«9c&t^^'^ 



I CO 1-1 ^ oi 00 CO C* -< 0> CO ■* to 00 N O 0> >0 00 O N ^^to 

■ C/.5^e<s wco cit-<tDe>ac<5odi-<tO'<i<t^c4od^^t»teeoe>i wci 









(DCSOC^(3i'-*C0O«0C000*00> CSt^r.00WC0»O'^»0Ol^N'^09C000*OC000»0?et^^*0»0eO 

Tf«C0C*3:^*OcO»O'^'^»O»OC0CO Ti-t CI»-HCOC0»OMCSC4W»OC0CQi-t»0 ■<ir»0'^lO COi-l 

t^ ^ kO t^ r«l to 00 t^ 1^ CO 04 00 t^ r-^ »-i fsl tO •rf O "^ t^ 00 •H ^ O P< 1^ <0 t*» ^ »0 CO h^ c4 00 CO O CO 

»0 0> 0> C» »0 >C •»** CO U3 t- »0 00 00 W -^ O <-« t^ «5 CD -^ r^ CD CO ^ CO 00 CJ OiCD^ |CO«-Hb-CO 

^^ ^ ^ CO CO •-< i-( N -H I .1 CO 1-i W T-ir-i I 

l^-^ 000000*0 Wt^»M»-(0 i0<0r*0000t*McDOWC000C0>0rHC0>0t*05»0»-iC<C0C0'«t*^ 

o><-J»dcot^o6^^^cou3^cDC^i ^^•^r^^-^^o»Oit^o^*'-*c^^^*'^ooi^o^»oQcoo»-^'^^•^ 

is *0 ■* -^ lO 25 CO »0 »0 CO »C ■* »0 ^^-^ ^ CO -^ »0 »0 Jo -^ -^ •«* U5 CO CO CO CO 1-t CD iO uS 00 i-l-^W 



»OO000CC00S0C0Sb-0»0&CD0a 
COCOCOCOCOCOCOCOCOCQCOCOCO 



^ooo*oo>oo-^oco»-tt--b-'^'*Noowo»«DOs-^t*oao 

€0 COCOCO.-<C*C<ClCS«»-t CO— ("tCO CO CO 



)^^'«t*c»r^Q»OQco»o»oeo 

>t>>O^Odt^C090>^030%000> 



C*0'^»oa>'<*''^t^ooocDQQO'^cot*-^t^O'^c«'<*<'^r-t^w 

r-t 0» Oa 0> QO CO *0 *C CD iO »0 -^ 1-H OS •-« ■* t^ CS OS ^H ^ fi 0» 






JMJ«i 



10:2; 

■otT 



j^'-gja-S-e 






si .£3 







s 



■2« 



Q uco-^iotot^aoasQi-iesco ^>Q<Ot«oca>Oi-ic^ra^>5tor^oQS 
9 1-1 ^ ^'^^ ^ 9 -^ 35tou5u5 «&i6ti5«OkCto^co to toto^d toS to 



o>Oi-<e^co«<<>ocot^ooa> 



CONCENTRATION OF ECONOMIC POWER 



175 



<&co^coooooo^oooo 



0» ■* «o ■* 00 to o CO t~ o i)<t^O<CO^ 



coao>-> NMM 







CO CO «o »-* ec r* 00 <D 00 N cowst^csoous 
r^ 00 -^ CO id ci M d c^ -^ oJo6odcoo6»d 



»5s -3k e^ ^ w^. -3s. ^>. ^ cflS c 



t^f^pJv^v^St>^|2^vX.i^v4s O9S0S JK^^c^^. 



OS flO^ tjv ijv |Js ^v ^s ^X Cf^ ds 



s «s tOx ^ t§^ ^^ eSs « 



S? ^i? ^5? "^ ^' "^ "^ ^^ "^ '^^ '<'' ^^ *<* ^ S9 ^^ 



;s:R^jj°ssi;s$i:rs2 



S^^J:?:^ 



00t»»H00»<t»>OO>00'«< 
c!lt~'»SO«OW>J<<050M 

ooooM05«<5oo>-ie<« 

ect*^b»tDb»^l>-cpc4 

Ni^-oo'oeo.-iM-Hwo 

MC4coa>e<iooaooaoo 

06Q0»OidO00C0t^w5Q 

3>oo>oeoi-it^iomo>o» 

^Qt^«C'O&»OO5cp00«-t 

w CO -^-vioto rococo 



<«• >o 00 m o 00 o> c^ C4 C4 OTi<o»OP»t~ 
^ooo6o6«d>dT)<T(N5D od<3>«>:a>.-<<d 

W N ^ i-i ^H .-( M CS »-l N CC CD to -Tf< CO t^ 



w»o«ooi-*cs^eoooo 
'*eo'^»c-HMC^r-Ncoco 



c^ a» 'tf* ccrec o ^ -^ *-t 00 <Okcodto<oC4 



e0t-MtD00Ot~i-110t0 



si 



"5 *^ **? C5 oi ^* ^^ ■^ c^ C3 wS CO »-I oc ^ o> 



WuS-^tOt^C^fHOOi^O 

•^oiotd'O'OOJoccco 
^m>5>o<-iccc^c4meQ 






O >0 b- CD "tf" rt o» ^- «n >-l eO-fCIONO 
00 -^ <d fj •'5 ■-" 00 CD CO 50 r^oo^-ioocDO 



tOO»-i05t^C^»-i^O'tf' 

'*'*ioiOi-icoWNcoeo 






•owo^eoto wo-*o totD>Qt-a>o 

K i-l in e*! i-H c< ei .-. « ©COCOtCiOI^ 



oo^^oo^co^oooo>o 

C^C<ltD»Ot^tdo»OCO'^ 

eocicoeo .ifrJiN 



IOCS 

S7 



00 o> 00 00 a> CO C4 m r- CO >oco>oooc^ 

•6 .-< CJ 00 i-< 00 Q i-i 0» lO --QCOQt^^t- 
■* W CO CO CO CO io ^ »-« W O CO ^ OQ N 



00 ^ ^ O 05 t* ""S* ^ t^ ^ 

i^t>^<dcoocDcD3i;'a>cJ 

C0'*000.-CC4COIN«OIO 



0> Oiico 

f-H O ^ 00 CO 

CO ootos. 



00 OS CO ■>*< © 00 .-I M N t~ eotDCit~t~oa 

M .-I r-; <d CO ^ o ■* es ■* coor^wt-ied 
eococort r-i9c<ii-ico r~ t>. CO "<< CO lo 



t~e>iiocot^o>oeotoooo 

C00CCCD'««O5^^»-^CDC^C^ 

'^^CO'^'O.— 'COCOf^COCO 



00 00 00 t* t^ 

citde>i>o>rf 
e<"-i^eo"5 

+ 



OSOt^N-^OlOOQOOO^ 
CO CO CO C> CO fl-Cl i-H M 



lO •* T)< <o U5 o» 00 CD t^ »0 OOOS' 



e<i CO CO p» CO CO 



C»COOOt.N©rH.-lCCiO 



l«CON»-<»HCOr*CDiO»0 

>a>c^ooioo>cor~coco 



^ 0» C to i-i 5< ■^ -< CM ■* CC«OQt^V< 

.-1 i-i 1-1 I-H N ■*je« i-( rH oooa*t^ooe 



>o>>ot^^>oai'«<'«' 



is^ 



si 

not- 



_ O ® 

■Ji 03 > 

aw O fl^ -^ ® L* 

u. C u. -w^ r" ' — 






5 — a* o -^ 
5PhmO 



: 3 O 

JO* 



o o 



, '.a , ■ CD 

g-o g a fe« > « 



^11^ « III §-&|fel^^-? -sill « 

•O 05 

5 ^ 



Sg 

S > 



. w ■ 

£2 : at 
•852 S 



O O p 

.. §8«2« 

Q ^ ^ <D O ID 



ccE-i 3mSS^S fl 



f-iNeo3|io 5 



odqoooodSoooooooooo 



o^eo or* o o o oe 






176 



CONCENTRATION OF ECONOMIC POWER 



oot^ooeoooooooo 



0000 'O0oo<o<oaoc«a»^<oo^o^ -^ t^'vaoc><C4 

_ _ - --^ uj e^' e« >o «■ CO oi ci »-<■ t>: t-i ■* ei "(J t^ eo o 

■-106 'oooo "oeowcc-^ oeoeoo mt~ lot^a 



!»■.-<« 00 C^eov 



O C CD OK t« f^ O 

/06 CO ec 06 «d m ij* 



m^e«5>o«DOicJ>d«>"«<««>de>5MC>eoTi<e<i 



«N t c5sodKe^^dNeT^^e5s^«N ^»2s»3^ 



V^ ^ (^ tOs utv ^ esN <^ ^ cSn ^ i-f^ 40s t^ <r^ ov *^ vs ^ 



se^seK^Ksflffseo^t^^^ 



wvc*^ ^s ^Ms eo^r2\lvs^i^p5^ wN w^ «y^«^ c5sm^ w^ ^ «fs 



e (x a> o o 



^MNOffvciSsuy'flSscSswsodscS^^ns MSeJsuK 



9oa>»oo»ooooiO)Oai»a>o>a»» 
ujs ,j«v er»«s 0^ osN ^ i-K efls. er^ i^ ws iij^ ws CIS ^ -^ t^\ ^ 



«0 i»H I >0 O Oi O) CI t~ ■<»< 0> 00 O MtT^ 

N imosot-:odec.-<«'«5<D i^>o« 

^ • CO CO C^ 09 C4 C4 CO CC CO lOCfllO 



rH.-l<«< I d C<9 00 r~ >0 >a 03 to CO ^ to it^W'C 



O <0 >-l 10 <0 O "5 '«". W "S" o t- 

cocqT^cocoeoecMNTfieciN 






050e<ic>t~cct~o»e<<ooo>oo«DOt^<o^co 

05ec^*»Ci-*i-HCD'T^ca»ciN;odgDOi<dotN.*»0'1* 
'»«>*i-<jieO'*-^coe'<>oeOTf^«ec'*«e<5ii<'* 



CO CD "3 N OS o» •-I r- "5 o> t^ o co—ios 
w r4 CO *-( o t*' 1-5 CO t-J r-i r^ t^ i-ie^fH 
■*N Tf coe^i<« Ncocoeo ■oco'O 



«o>cD-*ot~o>t»c<it^i-icooo>oo^>oooe« 

»-Jt^-<*5ioo6t^oi-^'c»oi'-5t-HOt^o6cpQCOQ 

cD"<«u5T»iT»>'*T»'««OT)<cocoeo'«>>o«>ow>5 



>ooooieo'*<o»>-cosoN 

e-t I CO e4 ■»!< -H «■ t-: CO «■ qi CD 

^ CO cc ^ 



1 t»CO»H 
«M N CD 



eoioi-i 

ric6ci 

eoeo uscoio 



^00COOSt^»D00»C^t^OSC0MfHO5^»CN00 

T-Jod»o»dodt^'c»coeoos»-;w»-Io6odcDO'^Q 

CO^iC^^-^Sl-^CltO^CDCOeO-^lOC^ICWtlO 



OaCD ^ OW o 

wi iQ o o c4 co' 00 
■««<cq eococoeo 



uici «-i Ob 
N-U" cof5 



100 00 



OOOCOO'-HC^IOSTj^kOCDOOCDIOOOOOCDCOCD 

co" 00 w -^ ts^ o c4 c<i t^ c4 eo' wi CO ^' CO 00 »c •-* t^; 
■<»'re'«'eoeoeococ^-«"cOT(<Ti<e5eo'^'<co'Vco 



ec ■* 00 1~ ■><< o t~ i-i eo^os 

oeo'^"-<«0'OCJi-i<Jc> eiod 
- -^ i-iT)<oo»>o ocoa> 



> CO 00 i-l •«)< 00 « 



corti-<ooscot~.co-!j><oooooooococ»eo'»'oo 
op b" ?^_S; S S9 r* SS r* 3; S I"* S; S3 f^ S f" 



5 -1 1^ r~^ob o M t- e 



) ^ t~ Tt< e^ o o t- 



os'oeoMt^coi-'ooocooooos ooiiot>-ocao>e^>ooast»oot~ocaoiciooc^i-iM'*'co 
■*ideo^cDOsoiococ«t~;coododTi< e^'oT)!N's<ocdcDNOode<ir-;cD'*cdOi-<'«ft-;c6i-^>* 

>0'>rt<CO'* f> 1-1 CO P5 CO CO « « CO CO lO N lO tO CO «3 ■* ■* 10 ■* ^i CO «0 •>«< >0 M5 CO ICl Kl ■^ ■'f "5 lO 






^i-iioc<)0'-<odcococ><oeoia 



"S<0'-ieoo»Oi'Qt~-oo»ioioeD>9<>-iooco 
— -* coco <-io Wi-ieo 



< O "-I CO o» OS "Q 



03 ^ cocoes co*^0^* 'Oir^o»-t 



goMcct^oii-iioooeocoiocooa'cot^ooo 
t~ooc4co>-i>o--ioocooso»i-i-*<oc5iocoeB 




^pqSStHEHfqSSo«CC)POCCESoSSop4^PHEraKSro£^E-i 






cor~ooa>Q<-4C4co-«>o«Qt.coo>o ^oco'^iiQcot^coaso o-<t<>o«DE-ogo>ooio«or-oo 



CONCENTRATION OF ECONOMIC POWER 



177 



00 w^ e» 0000 <c« i-iooO'*>o oo«do«o«d^oooo ^oo«oo« o «o f ■* ■* ^ <o «c oo <Ct»i «o 
c^oob^ scO'-Joooicoor-^f^ot^'^ idpr^irioitDoociooS'Hmi-ito iot-^>rit~.'r."50C>«Crtoo«i-HOo6 



mnein 



Mi-JTiiweocsodcoJr^eiciwci 



rtNifirtOst-eDe^Tfiooust-cit-. 
t^ ciiM 00 i-i « n" 00 -^ i-i ei f-i ei fh 






««Kt2^ffK^ oNocKt^3scK 



^•^ 



r^q^ (^ dscKGN«T^d^cKCT^0ff^^U7^t3\CT^.C^^ 



^V^gS^^CK fiKc5^<iKi3^«Ke^^«$S^^fN 



e¥v^^eT\ ^^^cV*^vs3^^^^t5CtSspKt>te*v tS\^c5^i5^^«5f^i5vo!K5v«N«N«Se^ 






^^ '^'>f] vCO >C0 >M ^«4 oM ^ oXO ^9 tXi^ vrt nM >fO 






ccF-i»oeiGOo6Qt^o^*<p*oo>^ 



t«t^t0r*00CCCDC4C0C3>0'^O0b 

odododo»r^b^ccoae>orHi-4QOO 

C0C0C0*^C5NC0C0C0'V^^^»O 



c4cpi^t><d'^»ociciHc5Nt^^C| 



^s^^$ 






<0 ^^ CO ^^ rH ^H OA t^ h» ^H ^ ^ 05 O 

eoN^ec-ii-icowcccc-^^-^ 



ooeD'*foot*Mt^eoo»ooo»ocoo»t^ 



NOONt^ 

g'daoei 
e»5»o»o 



^ec.-io»e<5<o«i«o>N>-i<oooo 



QOUStHCOOOCOCOCC^DCOCJ^C^CO 



5«o eoeo^ 



»e<5'<»'«-*-*-*x5lO 



COOO-<r>OOOI^COOC<90QOOOOO> 

M*oo>t>t>*dcD«^o^coo^ad^'^^ 
■»»< t» lO M « -^ w fS «D F-i eo>o>oc4 



^ CC »H ^ 06 

co-^xje^od 

■9* CO^ CO ^ 



<C5 tsTic I id 



rHmt^MtDc<5«oo«ooioe<i'o 



idciOQOt~idc«oQQOe»5o5aSa-^id 



-<t>coid 



•flie«t»«o->»<«c«eo«D»ooooM 



^ooNmcao<o<oa«ot^ 

S'^cd-^CJor^cDOidb^ 
e>5N-*»«i-ieceoeo« 



•"I'OO 



ooMtooooe^eooc^c^ooiaooio 
o -H o '»< «D id .H c5 1-' 00 o5 SB id Q CJ 






idoS^ujid 

OOiOM 'W 



OOM iCO 



lOlOiOOOW«<<DOO>OOi-lODO> 

apida^oidcDQ'-H^ai^Qo^id 
BtaoSto^^ooor^oboooo 



« •* o ■»• r- CO •* ■* "5 or~o»>-io 



ssgs^sig^sii^s^jgss 



1 T :j-4<c4a><0'-i lOTtit^o 



o o CO t~ lo OS 00 i-i t^ t^ lo lo e> i-H o>-c* i oN"-"-^ <o-Hooe»^.-<r- 



Q«ooiQ»eiooioioo»rH« ■>* 00 c>t-!2 ' a?eoo?25e'**£3'=2<5U 
■Si ■♦ eo 3 CO M eo CO CO CO •«" -"il •* •* -w'toto iw^coeoto •<nai3co 



" <0 00 O ^ -V MUX) <OOCO<-lMCDt-OOOr> lOOOO'^OXQiO'^M^OaO 



CON CO 



i-H w tt ^ ?^ 



CO CO CO fH 1— ( t-H CO 



SSSS SS^S^j52^2?3SgSS SSSSS 



t» 5(5 OS -.»< Ej CO N o 1-^M eo N CO lo Tji CO OS lo lo lo » >«• 12 o 00 



•-i«4^<-i<^<-ii-ie4e4coco 



>O>00i-lrti6r-4.H-" 



9^-' 



.13 o,3 S §1 



a « >> l:^^ 
o a (s s c 

-HO -a I 

CO ® a> 10 ® 

B S S a a 1 

«> O O 4> O ' 



-II 

■ © w ^ 

So a 

a^aa 



o o o o o 



pp 



d a co-s 



c i- E l: o 

a g s ©"o 05 



■§9^= 



-gife-sa 



ce p, 
o T a g fe g I 









IDZ^ o g o 
cs 03 ►- *; a 
■3og,Sg 



ego «-3-3 35 Sa a g fe-sl I g S S| I ai§as I 

53"S[a. if 

COCQCOl> O 



® 03 .g .9 

S f fe te 



s * 



RnoS 



> — ««■«»• V *> uus o o» o "I ei CO ■»!< to <c t^ o £» 



S in cJSS 



Oi-iMCOiJ'iOtCh.OOOO 55 



F^ "^ 00 00 00 00 cE 05 Oioa C5 m5 cs CO o «o or-<f-4^Mi-(t-t^H^H^^oocsc^c<iirp c«c5NcococococOcocoeoco«5;»-* 
iS* (SNPJiSSSSrSciii^SoSS Jo to CO CO CO CO CO CO CO =! CO CO CO e4 co co co co co eo co eO co co co co cO co 2^ 
cic* Ci '"• f^ n coco CO 



178 



CONCENTRATION OF ECONOMIC POWER 






882 



Sco r^ oc eo CO c*3 f-H t* 

< CO"-! ^ »-C 1-1 



ooooooooooooooo 









ervcK^ eK«seTv 



«5^^s c*^-^»^-J^<fl^»^'^^^^^0^ 



0^'c5^df^CT^e5NeT-.oiJ^d^3Nc*^cf^Os ' d^cN 



;ssi 



3^. "^ »ff^ <^ NN o^v otN tdv «<J^ «Tv 












'^ »C CO O CS CO OM t» lO O 00 O »0 CO ^ »o »o 

^_L.io "^or-^ 00^ ci t> t>^ c^ ^ 00 *o t^ <d t^ 

CSC^t^ O0COt>. OOiO O-^O'^^OeOOiNCD 

_t LI i-i^rH -^c^ ■^poioccMi-iM.-iec'^ 

■*** CO •O CO00»O o>co 00 o> ■^ C^ '«*"* o to t* «o 

(05000 edep^' oJ ooc^oiwcs-'t'cdocSf-J 

^ i-H i-hWN 25m ©lOt- « <C>C0 ^ COQO CO 

CDCOO OOOC^ COC^ t^ to ^ « »0 CO O CD r^ -^ 

uiiood cdcdco o iQ oi CO OS CO N CO CO c5 Q c4 

,-< ,-1 pHCIC4 tC C5 CO »0 h* CO CO CO ■^ CO 00 CO 

OSOOO COCOCO « t-» CO N C^ W 00 »0 00 »0 C^l CO 

co«o6 cit^co oflcs) c<io"^'-H'*<coooi^co 

I I I rH .-( rH iO « *0 CO -^ CO W i-< W ^H CO CO 

>-H -^ -* O ^ »0 0000 CD <-f OS t^ 00 -^ O *0 OS c^ 

odKo iot^t>i irf^l o»ooc^os^cicco6a 

fh c^eoco h* »o CO o t* CO " CO ''t* CO 00 o 

ciwoi oooeo co^ ot-oosooc^ ^ «r* -H 

co*o^* oicocd tfJOi (^^^'«*<uDi-icOTj<ocd 

.-I ^ r-l CO»-l CO CO r- -^ CO CO CO W t-- CO 

+ 



.-ieooo^oooQoorooooo=t~P5N<o 



t^cocDoo.-t'^oasTfco^^oot^oo 
t^«-*0'^^'-<co»ccsooocjoe»ot-^ 

„^ -■ 4- — ' + 



.-ia)oO'*o»a>Meot-.oot^c<Nto 






00«0000NO(NC^'>»'tD»O0CO'* 



5» 1-5 tp o <o <o o c5 o t-' 00 00 !-• lO o 



<D'<i<o®t-^o6o>o6e4<»<diocioo 



MO'* ffioor^ t-^5 



st»o»i-<o>oer~oc 



CO CO CO CO CO CO CO ^^ CO CO CO CO 00 CO CO 



sss 



OlM.-iOOr-(r-iC<00— lOrHOO 



• OSO ^rH 



S0»*t-"'1'C0CD03»O< 



i-«>eo t»« So oo o» 00 o> ■* 00 i-H ■>!' ! 



NP5r-li-l'*C9Tl<IOi-l"i(<CONTl<00 



•2 3 






s 2 § 2 3 



i?j " ' ^ Tj P^ (rt w 

8^ £0(^ «". 



S ai 



o « « 



T •< •" 









.— —I a a 



s gg 

"o o o 



3 a 3 

O 03 o 



O a> 



« 

03X3 



Ic 



0=: 

03*0 

00 



S >S a"^ 
o a aaS 



m- t? S O J m 



|£'3 2^^|^&S 



o<5 



1 CO CO CO CO CO CO * 



lA^tCtOO^tpCOCDC 

cocO€oco»3eocococ 



r-aoo»0'-Mco*io«eh~ooo>S'2 
<o3ot~t-t-t-fct~t^t~F-t-a5op 

CO 00 W CO CO CO 00 CO CO CO CO CO CO CO CO 



CONCENTRATION OF ECONOMIC POWER 



179 



eoi-^oooooooooooooo oooe^'©ooQ-Ha;o.--<o6o«<dQ05«N'oooooo6o6e<ioodi^e4 *•-< 






—1 >-l05«Dt~>0^^0 05CO® C<5t~N "OtO t^ « <0 O « lO ■^ "O i-H 

- e<i ei c< i-i ^ rt' ^ N M c4 1^ pi ci <d ci CO vl^ w C- O^ c5od"-i«e4t>^c<i«ei 






^**oJ^N^N^o^o^»3^ I Nvet^iff^dNeJ-o^*-^N^ off^eTv^^^x 1 WMri^irt^^v^lsioN(^^>i^s<^g(js^ (>ls 1 e^e^^s^^M^'-f^<^irt^^^iff^ttf^uy-(ffv 



N^^ovAvax^^^-^NoaktCv^jfxcsN^^tff^oiv e«^^(ffscV-e*^^l've^e^t3vo>^rtxct^•J^•^rt^^^cK^vcJv-X^vtf^rt^c^e^^^^^^^^t^ 



tO\ cB** r^ ar^ M^ aS^ oK w^ ^ c5^ eV * a»N e^ ej^ (ff\ C3N 






r^«-HeoccMcocOi-<ooi^*Of-fOscccoc<» 



N OS OS <0 OS CO r-( C^ to i-H t>» rH ^ -^J* U5 iO 00 r-l 1^ W »-H CD OS O -^ OS O »0 00 OS O 
»ftOW5MOC*3i-HC00S»OC^CCCDi-HQ»-H'H0d0S *i-Hldoso6«Q>^"CflCDcd-^I-^0 



t~t-t^«ieccsioN>o";r^osooiooTi< 
^coooscsc^os»dosc6ocdccb-^poci 



■^ MlO<0-^C10-Ht^VTj"r»COOOi<5i-lC<l«IOO'ONW«Dt~..-lt^COi-l«OCO«« 

i-^ot^*^ 'ot^t-^csTj«iOf-4^t^fO-TjJr-^csi£i^ 'irsoso6oo'M"^ccosos"cdosf-^ 



«000»O^C^C0«D»-HM5M*Oi-HOSt^0000 
0'0^'^t^C^rH»-H»-^<DCC<OC4<NcdW 



CD l^ t^ -^ rH N t^ CC -"i* c^ c* r^ C<J OS M *o C^ »-4 t>. OS O M t^ OS W3 00 CD OS f-< c^ *o 

^-"o•OT(ocil-H05cold^-;loO'^<lOc6T^■eooQOTM■^-;o^^<3it~;-He<3•-<os■os.-^^ 



>0 Tj" 00 OS —I 00 O "9< 00 h- CT M 1-" OS » 



1-1 NrHOSN0>b-«0WC>NOS0SCJCOC0«O'^00O0bOCDt-00'-"t~CqiOb-t-00 

0600606 ■|>^•4gBr^Jo6gocoOlOo6^^oso696e4c^■^^c>o6©o6N■T^<<^^TJIosa50^ 



Os-HCD-^0»OM I e^OS CO ^ 0*C OS "3 



MCC(N —IN 



) OCO CCC*5C 



t~«'>j">*coor-oor~.ONocqt~oo 
-HC*5QosO'^ost^oso6»-It^'^»oco« 



■* 0S-^c0C<lc0»O00CDO*^CDC^t^C^NOO00»OC0W^00CqC^»O'^iOC0Nt^ 
i-<Oc6cp ■MOt^N»OCpi-<McdirfiCo6e<iTl5i-HOMOsOSC<5rH"irfM— ioOi-HOSO 



•-H « ««< 



•O i-H OS ■* "O OS "O — 1 CO CO CO O CO t- <N 



00 b-Or^t^'^CSeOOOeOO^i-tOOsO^—'OOO'^cDiOCOOOSOO'^OOb-'^O 
<OiO t^ «0 *<»* t* -^ -^ ^ »0 »0 O W T)< W iCtTi-hOO'^ owdoocooo 



O0"*CC^ Ot^ 00O»OC< ■^ CO -^ o 

+ 



CO rtO OOSOO — 1^5^> Ot^cD—icOOOr^ 00rt«lO>OO t-i(Nt~-^l 

^^oos■^oc^t^55g5»ocococDaQcooo6'<J*coooJ^°oo5^;20Nl55gcg 



-H N -H«N MN. 



ic coco w co< 



ooO'-'O^'-HNOcooO'-toooeo ooot^*^ooosTf*coo-^co^Hr^t^o-^NcoooooO'^"^'^cscDosooco 



r-i—l-m .H 



'SSS 



iO'nin-^'^^>oo'onc*e^c*>a<o<o Nocoof5'fl<osooo3cDosoi5oocot~-t~>og»cos;or-it~t~cocoo5— inooo'Oosn 



eocoNco 



C0t~-t~>0«C0^Or-lt~t~C0C005— iNOOO'Ogt 




t^OOOSO— iNCOTfOOOsjHCO'O' _* 

1-1 rt — c e5 c< Jm N « w t- CT CO CO CO 05 



GO go CD 00 00 00 00 00 S OS OS C3S OS OS OS OS S^OQ 
CO CO rt CO CO CO CO CO CO CO CO CO CO W CO CO CO CO ^ ^ 



MCO^»OCOr^OOOSO*-fNCO'^W5COt^OOOsP'-" 

OOOQQOOQa-^'-i'H 



180 



CONCENTRATION OF ECONOMIC POWER 



OOO 00 OCXO^OO <0 CO 04 <0 00 OO CD '^ OOCS i-H CO a-V 0)0000 nco^Ttr 

oVo<ooo-<MTj<oe^cirtO»ide>sMo'oode>50cDoe^ «oo o«d^«<>ocpo>cD>o 

^-4 C* ■**'€^N »-i -^ Ol CI *-( N •* I-H a> ^ CO CD 00 ^ »0 CO "^ 



mco 00 ^-l'^^^^^^ o >o m e>5 o O •-< US -H e>) iH i~ •* co 
n ^'^i-i On n e* 9J ^cQ i-i ^ ^' cj i-i oj c4 ^ C4 c<i to •-! t^co 



>00 Ot^OOOOMt^iOiO^ 

COM •M >d c4 CO ci uj (N oi e<i P) 



>ro>*^ >^ vfO -^ stt sfO >M •io ^ ^ -xo 



«kd^^5^lrisH^>tf^5^•J^t2^K^K^4Nc*^eTv^^^^^^atf^e3^^^fl^u^ t^koBN e5r>.t5\tX«^tSve^rXo*^(I^c^ 



■>»<i-it-0>00'OCDCO»COr-IO»'<>'>OOOmO->»'t>.t~i-cOCOO 



CO ^ C4o^-cooo IC0OC4CO 



o>t~-««<a><-(Osoot~^'-ioo>t~cooot-<0'*ot^'*>-i<»0'-' 

iOCOOCC *^*OI»dcOCD^3C*^S^*OCOCOCO»^'^*c4cO'^CDCO 
1-H M COi-li-1 CO « IN « — < .-I CO C5 rt -M i-H ,-iMf^ 



od" c^o^- V 

-Hco '«<^cd 



OdOCO 

^«.cd'fQOcoo5>oeo 

i »0 CO CD O COCO-^-*** 



OS'»1<OOOSOS^OOOCOOS»OCOCOOOCSOWCOOSCOOOC«COC^O 
h-l-<1*C0t^*<1^0i^C0'-4'^C0^*-^OC0 0iOt^OC50i-^t-'^t^'^ 

rt -H -H oq rt CO 1-1 c5 -H « t~ CO CO CO OJ o) ■»• o « e5 •-I eiesco 



oo oocouscoeo cocooco 
i-ico 00 cj oj TjJ e» o r^ ■-< 1-^ i>^ 

^_i CO'Wt~CO ■^lOiOlO 



O»OC0C0040SC0t^O00*OC0C0»O^CDOOO-*C00»C0^HlO 

os«3t>^og-^c4o5cocdt>coc<i'»j<F4u6c<i^*oQ"i'-HCOcoooooos 
X< rtrtfSrt cor-Je5rHNt~cocococ^ N-fl-eSi o»mM oScSco 



fH c« oo^»ococo cocooaco 
oioo 00 ci ej ■* oi o t>i oi t-i t>; 



(NOi-<I^'-«'«J'OCDOOOasOt^t>.'*COOIO*^OOOOiOO 



OOOOICD^ ^T'^'CO" 



*io ■* eocococo 



ocoa&oooooo09oo*oco*oooo^a3oacDA-^o*o-i«*oa 

-Hr»!odocoQcd'J<o>a5Sr-cooiodocDi-^odr>.'rtcd«D"ij<oo-«' 

C4 _ rt 3 -< S CO CO ■-< CO cj w«r ■«' ■<»< CO t~ 'J" CO CO CO •^■"("oo 



t~.oo lOh-t^eo eo>ct»>o 

^co O^^rijrio^cD'gico 



*-« CO O^ CO CO 03 o o c 



OSOIOS 090-^OCD lOi-H 05 *COt^cO COr^O OICO CO 04-^ 

co»«t^t^t^t^ocD»ot^3fgQOiosco-<i<«5odiooooow^ 

COr-l Nrt>-lrHO«<OC'lCOC5rHrtCO'-li-ii-cC5 " — 



««0 C«0OCOCO'-l t^OOCD 
Tj*CO ^ »0 -^ CO t>^ O ^ OQl^ 



McsN rt oi coM^m ■«»<» 



CO CO O 00 O » t~ Ol Ol O 'J' -a" Ol go Ol Oi CO t-- Tf OS C» 0» IM O 00 "OCD 0>0> 'OOOSMOOOQO 



rH .-< r-l cocoes 



?-H »-H f-H CO CO CO CO CO c 



O»a5r^o-^o»o-^r*u5»oot^-^oot^ — WcooooN»ooo» 

■<f COi-iC^ 00 1~ US CD ^ rt CO CO —C >-l I-H CO CO 



eo^t^ge^wocot^OJ 
i-HOli-HOOOO t^oocot- 



5 o aft 



L, <u S " «; OT 

3«i; g^ « i, s. 

"mOfliraaaWOH&OW 



Is^ 









S^ CO ' ' 



•is 

•- o cj ?■- 



a.b 









no 



CD f^ 00 Oi O ^H C4 CO -nfi *0 CO t^ 00 OS O 1-H CS CO -^ lO CD O O i-H OOO OS O —< C^ CO -^ 'O CD t^ 00 

CO CO CO CO -^ ^ -"t* -^ -^ ■*** -^ ^ -^ ^ lO »c »o W3 lo »o »5 1^ ^ CD ^5> CO r* r^ t- K. t* t* t^ t* r-^ 

^Jl ^ ^1 ^ M*^ ^ HP ^ ^ M< ^ ^ ■^■^ ^i Tjl ^1 ^ ^ It* U5 ^1 ^ CO ^ ^ ^ ^ ^ ^ -^ ^ ^ ^ ^ 



CONCENTRATION OF ECONOMIC POWER 



181 






«O'<!t<CO0O COOO O 00^50 I ^DOO'^COOOW c* o o 

,-).-.,-< rHc^ CO »ob»co it-HiN'^aoweowwc^ 



<-i O O GO 0» CO t* 04 U3 C4 U3 Oa e>9 00 t^ t^ a» 04 

c*c4 w^^e^F-Joiwoi ^eo»6^»d-^-^ci 



CO * r^ ei 00 '^ t>^ ^ w«6 ^ ^ 



04 lOt-HOO 



^^^^^-tOOCOCOO*^ 



ft CDCOO) 1 1^ 04 04 CO CO CO 04 Ol i-i 



f5^w^ffl^-X^ctf\t^<^eS«3^ wserv|ws.(Jsc5^e5N^c^ 



»2^ Ks rt^ c5^ c5n c5h.pK •J^ e^ 



N» sTo -^ "^o ^ -^ -^ y|5 "><o '^ ■'i' ■*♦' ^ 



n^ N^ -^ ^ os^ ■^'^ ■^ 



^s.rtsi5^tov 



M^ (ov cN aj^ id^ e*^ ^ ici^ c5n -^ 



s? s;sJ;s 



w^ e3s 1-^ ^ ^ otN «^ ^ «4^ 



•^ ^ >^ >^ vW i^ ^ >^*r4 >w 
OTv w^ c^ -^ ciTs e*s pj^ c^ co^ w^ 



OS Gi '- ^ 



nW vPi ^ *>e>l vTJ NP5 Nf3 ><0 sC* ■'fS ""f^ ^^ vC-l >£1 v« N( 



vfj N^ ^r* ^ ^f* >P5 ^ >^ ^ 



aoo^a»>o<o«cc-Hoo oo t^ o> 'f o> o ^ >o 
ep ci >-i t^ f-i ec >d t^ tv -^ epu3Q^»oo»0'^ 

^ ^ ^^ •<44 lO to ^ ^ U5 O N lOCSCOCOMCO 



TfJ o6 -H r-1 00 00 1-< ldcot~^^ 
rt rt M rH i-H t-( N icoeo ■* 



.-i.-iooO'H.-ic>jot 



mSi 



> a> o o> a> r~ 00 






^ 00 -^ »C »C OS CO »0 -^ CO CI »0 CO CO *o t^ « OS 

^co>6c^c4>o'o6cjr>^c^ co^o^tct^oow 

■^ CO "-H •» "O « CO •>». ICO C^t-HCO^CO r-iN 



05«ONM«ococo»or*»o»o-^ 

»o^c^'^os»oc*iaao'<i5c»jeo 
.1 64 -H i-H — . IN !n PS CO c5 



i-c eo-<>< 



c>)iOtacococoao>oeoC40iaoc^ 
-- e^csCT'O'O'Tj'M'^e^'-Hio 



'Ji «> rt lO to (>• 00 -^ M >o >o M o> t- o t~ t^ OS 
ci o> t«^ »-^ t>^ *d Q CO »d o ^ ooosoi cooo »o 

lO T}' p^ to «a CO *C iO CO ^ CO ^ »0 C4 CO CO CO CO 



■"J-OO—ICOOOCOOCOCOIOOOCO 

Oso6-Ht^oo6eoc6cooot^op 
•-H « N .-I CO -H e^ CO CO CO ^ 



CO 00 OS 



00>OCOOOC40S'<<0S 
OQCOt^eO'^'^OCJQ 

e<iioiouioidco^co 



"J" CO CD ■«(< t» t^ 00 "-H N lo OS c» o 00 'J' t~ r» CO 
oi as.eo Qt^ioQco>dQ cio6-^oocoo6t>^ 

»0 ^ "CS »0 iO CD >0 u5 CO » CO i-< »0 CO ^ CO CO CO 



OS-^OOCOt^uSt^MCDCOOOO 

Osd*ot^i-io»ooscoo6t*^b^ 



. t-HdrtCOpjCJCOCOCO 



o coooo 
^ o6t^T(< 
e4 co>oco 



00t^C0OOC0C0i-<0> 

SioSusSSeooS 



OOOSOC^C^CO^OOIOOO 

t-^cicDoscd—irjSoococi 
coco-^comcocortoio 



O CJ -H O "O 00 -"T 

CO OS 00 ^ CO CO o 



ot^-os-HMcoe^ooooN-^co 
■ooco>oo6'>a-'*oscococ>i« 

CO « i-H .-< .-H M fl ■* CO !-• 



OOOOOOM'OOO'O'M—IOOSCOCO 

oocscipscd*oco»oot^cot^o6 



CO 0> O ■V* «0 ■* CO CO "O COOS4<CDCOOOCS 

OS ^^ •«< r- >o CT »~ OS CO CO co co •* co "O i-h ^ t»< 



rH<V) —. rt 



OS CO CO c< c^jii >a CO ^t^o co >o 

^ OS CO t-^ Ci 00 CO ^ pH CD 'os 
^^ ^ WCO »-< ^CO«5 »0 CO 



«OC000t~C0"9<OC>»00OTt<^00 

TaJt^^c4o5eoot^i^QC4c4c^ 

(^■*^ocD'*'0-*-<o<«Tj<eMt- 



t^0»0 00 CS 00 ^ t^OS CO CO CD Tf t^ OS 1^ ^ t^ 

ci OS ci OS r^ CD CO CO OS CO o_il'-^os OQcso 

I0'9*i^'^^-^i0*0»0»0 CO I COM -^^^ CO 



COCOCDCDtJ'OCO'^ 

of4o6e4e4>ooocOi-<cbot^ 



CO Cl >-< '-' CJ « >-< CO « CO "S" i-H CO ■»»< M '-"^ ■«• "O ■* O) 



^t^t^OSOOCOOOt^COOSf-HCON 
o6cDI>^'*o6o>'"00«Q'H2'lO 



>-<as oososoe -^w CO N e>) t>. >o CD CD lo 

SClCOrt CO C» NCOCO «N«^.-c 



■-■ t~ CO -H M C» CO ^ O M "I N «o C«t~cD copoosRooc^cocot; 

C4*M rHCO"— »'CSi-HCN»-H»-Hf^CO 



t^ CO -^no »o »o QO t^ r^ 00 1 OB lo ^ 'J* c^ sp CO 
<oScoast~o>2<oeooo <cicO'^c^ciFi^ 



oco^ooajt^r-^t^Nt-cD 



lO f-i OS r^ CI ^ ^ '-I OS OS CO t* 00 c« 

f-t OS 00 C4 •-< C4 OS OS lO CO CO CO CO OS 






xj 2 ^ 



CO M ■ . 
Of OS CO CO 






m S'w fcl •- I T; ^ £ "a ISO.S O ■- w M 'i'O 

i: o5a o- S ^ o S^ oj 03 " a! =55 « « 



i-S 



1^ 



'~ « o aj 



bo 

a 
=3 . 

:3 0) 

3S3 



a ^' 






IZW 






-o i-Bxi'" a" 01 o K ot§^ ^ . Mo "-S £ "i^rt-S-S i 
S ci> g>^ S-3 o:2<g3;i^ -c ^2^ S D.3 3 a a a^' 
»'oo.!3SSS=£5oo^aoSo^«x5>.ooa»«'3 



« -o 



^>H a 

"^ -4-1 



SO -2 CJ CO -2 >0 CO b- OO OS Q -" C< CO ■<>< >0 CO 
__opooooooooooooooor —^ 



S OS OS OS OS OS OS 



r^ 00 OS o ^ N CO Tj* *o CO t* 00 os o i-^ ci co -^ "O co t^ oo os o *-« ci ^ 
o: asasooC''Oooooo o . r-i^H^^»-<^H^^f-t^H,-i,-ic4c*c» cw 

•^•^T)-i0»0>O«5«0i0i0»0»0 ^ JOWSiOiOiOiOtOiOurjlOiOiOiO 



182 



CONCENTRATION OF ECONOMIC POWER 



NtO ONO •«»< ■<< <o <0 -VO ■« to -^ <0 OOOOCCtON to 

t^*ri^aiuio6 OOOOOOOC^Ot^OOQ6cOQOQ-^QcDciot*OU?t^»O^OeO 
COIN ?>o e<5 M —I n^i-h3 >o r~ 00 e5 to Tti t- 



M « M i-H CO "5 wCO T.-' 



^CT N ^_^ V CO ,__«0 Tf«<Ci-IC0t-O00Mt»>O00r"O>^©^ 



uT^ uj-. cj^ cr . (3\ IT 



e5^ilTsc^c5Ne5NNS<SNi^«0" d^^^e^'^v^^^pjvco^c^o^w^iflNO^'a^tJ^^^o'^^MNr^s 



s irtv "^ u5v c5^ iJ^ 






i3^ i2^ wv i3^ cSn »2k c^ '^ e^N «N w^ CT^ e5^ e*^ NN <5^ c5n 



«;:?;;;?j: 



OOOOsrooo 



« ■* TO CO ■W* rt IM 1 



00 1^ oa o "O to 00 >o r^^owo ■* i-h « t- -h to "«" to c«i to to « to eo 

t^tDTO06<O< 



l28+'*®S28:f°°='S^S§Sg'°g?SS§Sg;5«"* 



iC OS 00 N tfi -Tj* 
1^ ^ QO >C CO -^ 

cococ^Sco ^-^ 



000i00C^CDCD0000t>-00(N.t^00Tt<O»OO^t*00NOW»0wCS03O00 



rnWeO CO lO-^CSCD<D 



CO o -^ r^ •-< o 



-^ -^ CO o« •-< »o 
^■^co-^io^ 



COiOCOW»CCOOOO'*t^»OOOOOiOOOOOC^OOOOOt^'^Oi"<*'«D'^ 

r-loicbcse6o4li-HT|J'^coQ"^oCt^o6*6oo>'^t^OQOco«^OTjJco«-5 



lo '•I* o oi --H »o 



^»ooocoo5'^oO'^eor»?oocooOrHWeooc^ooooeot>»^t*^«oeo 
»^o>oQ»cosc^ilcoco'^'^oc^oaoico^QoJ^oscioseo^o^coic5 
w c5 w r-( 2^ "T CNi i5 ^ « eoco^^-^ t^iocor^t^co ih 



(DOS CO QO coo 

00 OOQ Tt< CC CD 
CO CO C5 CO -v^ 



eot>-*ococoM*oooocsb-coec)ooooot^ooicocor*oO'<*»Ma»cot>-t^co 
o6c4i^'-HiM^ i'eoi>o6^ i*i-Jo6t-Ho6-^ooi'^cD--3cst^i-HQ<DcooJ 



C5 t* CD t^ «-<< 



CO CO ^ Oi Oi CO t-» W i-i C^ t>- CO t* t* CO •-< 1-H OJ b* C^ 00 »C W3 03 -^ iO 
idC^OSCDcdc^i-HOo6t^COO*O^CDO"^>'^Oc5t^CS»0^05o6'«4?COt^»0 

cocD'-ir» coo CO rococo *-i 



N CO W WCO I i-H^ 



i-H CO O t^ *0 -^ <-i 

OS 00 O -^ lO »0 OS 
CO CO "^ CO CO ^ CO 



OCOC^t-»»OW CD O CO 00000"^'-*0»'-<COCO'^WC^<NOS 1-H 

c^oaioo6oocDoc6ot^o^'-H»0'-^o6osc4'<5*'^'-5o6coQcoof«- 

M-Hf^lCS'-tCS C4 CO C4 »-4.-lCSWCO«-l^f-HtiiCOCOCO00«-< rH 



COOC^OQ'* W 

rH ^ c5co 



•«**oooow«-*0'^^HOOs»o<o»ooo-^oow:iwcC'OOcoosoiOii-t»o 
> C< ^Hi— tcswcococococo 



0>C«OSCOCO<N iOC^OOCOcDN<-(CCiO'^tN.OCO^piO>^»OCOCO*CWb»M*r^»0»-<0 
coco t^COC^ 1-4 i-H .-( ■^ — • -H W M N CD »-H CO 00 0> i-i OS 00 Oi i-t 



o) H a) 



.9-S-9 



a '3 .2 
sag 

,— • 03 <D S O ? 



, ® fl o © 



„=; a aT3 S-S 5'S S-s-y " g § i^-S '='t^ 3 n a ti t-^ 9'?,5 

g(Uoo»S.®>>02aoO.2a!3oeijpaJE;ja-a-"O®r 



H o 



3.Sg 
d:^ 2 



"So 



CO-^u^COr^OOOS Oi-iC^C0'^M5CDr-000SO'-'C^C0'V>CCCi^000SO^C^C0'^>CC0t^00 

CMC^c^MNCNiw coc5cocoeocoeocococo^'^'^-^'^-gC'^'^^'$*o»cio»o»o»o«o*o»2 



CONCENTRATION OF ECONOMIC POWER 



183 



OBtoMNoooo no o C40 
ooooooeoo>oca>t-^r-<o>dgdoQOOe<s 



' 0000 C«CO -VO OC4C« C4 <«• 

•ooot-iNoggjoggogoocgooo^jooogo 



^^CO *0 CO CC »0 t^ >0 O CO lO <D »0 CD 00 ^^iM ^^CM O 

J^«o ^ ^ rJ fh 00 c(5 1-* ' 'oJcieo^^ciC-cd^ 


eo W ^_^<0 CO CO CD O >0 00 t-H O OCOOOOO*^ ^ b^CDiOOt 

eo lo wco ci N o -^ »o ci CO t^ wcd od co -^ .-J wco w(^ r^ ^ ^ 


■sp rt ^^ nW NTS NfS ^«o >» -^ Nfo >«o %« s« srt N« N« ^« xra >f> >*^ 


t«aocoaoaoKoeaoh>»ooooao«eeaoaoeooh-t<.eo« 


ofl^ cl^ «r^ eis ^ 5^ V^ -Ss ^ .^fs iiji^ e^ e^ tX ^ t^N ^ c^ ^ cN 


e^ Mjv c4s cK e4^ p*^ e^ c*v ris e^ e*^ ,>s ds ^ e*v ^ (5^. e*s (^ ^ d^ «*v c^ 


e^ Ns oy^ aS^ «"' 5^ tcf^ wN >-N r-K -Is (cJs. c3n o5«> c<^ r^ 





'>*t0 0«0'^ t^OOC>OOOOOOOOOC403kOCDO^ 

<CMcooaco'>ot-^N->a».-<>doo«)«;t>^co<ot^eo 

r~<»»Mooa>i-ii-(oooi-<'00>oocomooeo-«<co 
tDo6"ctd'0>ot~^«oc4o6Ni<'«<'-<'-<?4(NT(; 'oJ 

r-l r M i-<l-l_l_C».-H l-H rt rt 1-1 i-H e^ ,-1 CO N 

CO i-iiO'*t~t^oooNos<oa5U5ooo<3>ocon< 
eoocoo&o>>do6^t^^cDt>^>OiOC>odcdc»csco 

C>5 i-lNilr-r I ■♦.-l-HTHi^ N eC CO i-H CO « CO 

eo ^iooocot~oco<ot~eoa>o<oooo^>-i ^ 
cooe>5'i)"«ocoodTiiod^t-^tdidt-^e^oood'd--c5 

t^ CD 00 t^ r^ 1^ O CO 00 00 00 CD O ^ O CO 00 C*3 CO 

to CO »0 t>^ lO wi CO CO C< t^ 1-i CO O CO CO 00 CO CO 'OS 
l-l . M-HW iNl-C rt rn « fH r-H-H 1-1 CO C5 

00 I I 

I ' 

o» c>cocDc>)>-c«^NC»«o>ot^caooo»N>-i 
oioocd^co-^coo6o>t^co»6o6'*wt>»dc6i^ 

■<4* ^ CO ""ij* CO r-* t^ f-< i-( CO W ^ t^ NN O -^ 

I 

t-c^t^rt O'OioooioooscoO'^coocoo o 

CDt^cdoO'^^»OCO^^r^r-^QCDCOQCO»0005 

— j.— cSc'iN CO -H .I —I N 00 rt -H B CO N 

OP»cS'-<'-i'Hcot^'>j<'«'Ocococo-^o>oocooo 
eococo cS w CO 



lOO toco o e<5 CO l-l CO CO CO CO 00 l-l CO "O ■* eo 00 

eo'oooOr;t^02®*^K*eoidcd'<«< X*^' ei es ei •* co o 
•IN iOi-i eo « Jlj_j_-<T j_.-i i-i « .-I 



•<* w N t-i 
r-; ci o •-; o CO 



ococ^r>i-icococo^i-iov>ocoi-ico 
jco»oc6»coe»5eo 

+++++++ 



WCO '»'CO 00 000-<COT»<OOt»e»OCOlON^O» 

rcs5©ooe3t--'o-HONcDoiX5^'^«coodcie4M06e<io 

N CS »0 iH ^ «^N IN i-lf^»-lcON 



•-ICO N veo 00 rt 00 CO ■-< eo CO N i-i r~ lo n i^ o» 

!g350c4oe2«^o-<coiocDos_Lodoocoo>t>;pie<50S<o 



I to CM o 

< i-i o -H o ■* 



>o«ooo>tooco«oooooo«ocoo>oo 



«(ic» CO « t^ •<«' CO to o o a» eo «o CD N eo o >o t" 
idgo^O'Oooootog'dooioioO'^copi'H-voseicoo 



■-<•-! ooot-^^oo>oo6cDooocooo6o>eocico'*io'o 

CON ^<0 eo rtCOi-li-l _1_ 1-1 i-l N -Jl rH 



COt^OCOtOION^CD^kOOOONOOOOeO^^OeOOtOUdCON 



cocoosft^ooiecoeOTtiTfeooot-i-icD^NJ^ 



coeOT(iTf<eooot-i-ico^N«^N 

1-1 1-1 CO 11 i-l CO'*' i-lil N 



1-l^^OCOiAN I ^1-1 ^OSOO^OOt^ CO t^t^ •* ^-^O »0 COC^ 



■^ I iji ^ N rH ^H i-l 



S'*'2SS?' 



Ifc-r.fe 



ill 



irC^o-S-S-o 



fe ■< t, ^ Q Q ^ fLi ^ O cy w m Ph P-i CO m CO ^ c 



•O 00 o - 



0? a) a> 
.■"•WO 

fc ° $ 



fulfil t.ri|liil§ls^li 



5gS 



N 00 

aa 

S oJ'o'o'S 

Port's "a 
mfQouu 



> 4Q to O U2 tC t 



co'^iccor^ooosOi-»c^co'«j«*r5cph*oo^Q»^c^cO'**<»ocDi^ 

SOOOOOOCpODQQOiOiCsOiOSOCTOSOOlQOQQOQQO 



247140 — 41 — No. 1- 



-14 



184 



CONCENTRATION OF ECONOMIC POWER 



o oo«coTt*tocDdWTfTfooo"^ -^roco -^C^ OCOOO OOO ■^'^CO 

M -^C^ C<l 05 »0 CO CO .-t CO ^ »0 C5^0i coo i-t iH(0^ «^»o 



'<rt<0605«OOCO(NOiC^C^OO»C»OcO(C''*COOCOOCOOO>OTt<C^OOC<l 

wo^^co^'"^cs^o^Dr^TJ5c^'cou^cDa>w^c^»o^'^lO»oco^^'-HC<^ 



i-i CO CO i-H C4 C<i Oi w CO »o fO 



c^ C«*N c4s c^ cfv ^ ^x c«Js c^ c 



;;j;2;: 






■^cjNr>,c«r,t^e4" cT^a>^ ot^-^K^j^ 












■NC^^*.-^^tf4Nrt^^.xay^-^e^lrt^oJ^^is,-^os^.ofve^cNO'■e^CJ^CN^^ e^^ere^ar M^ p^.-<jK.-Kt^c^(Os**v;^fflNcr CK 



d^>'3^c5' 5s.i-K»5^ Ol ^ «rt^ "l*^ c5"- MN 



^Oi-iFHt^wot^osoc; 



o «o o CO -^ CO CO -^ -^ o OS t^ r* -^ cx> CO 1-1 ■* -^eocooi 

^'*'" -" ^.^i?5?D rHCOCOeiCOC^CO^COl 



^ -^OINCO 



+ + + 



+" 



— — I 1 <o^co>o 



• u^r^os — oscjw-v^c^ 



■-1 -"Ji IM —KM "-H 



r- loocc Tj<o CO ''j'co ^ t^r* 00000030 t^M ^os^co 

?) — 1 lib N M M c-S — I lo ^ -H -M r~cjtDco 



cico>0i-i0osoor~-^'- o 



eONco-<**oo^p>cciiocOTT* 
c<coc<5nconm-hcc^_»o 



•O O M 00 CO JO ■<»HD ^ CO t>- t^ CO 00 CT> O r~ Cq ■*05'J"tO 

oooooicJ>ofi^ocO'-<od"-<-^"5coocoo<Oi-IoNe~i'<j'C 



NOOt-COOOWOOt^ — — iC 

^'toco^or^^oseDOco' " 

— •) M c- — 



t>-<N«6tO C^ CO CC C^ CO M CO ^ ■<»" 



+-'= 



f-H 'f OS O ^ -^ f- Oi 00 »0 lO O N <D CS C<» CO to CO O O CO 00 

-^o 'ocdad'<fosioi>^r^o6'^cscsioc^'»di-Ieo "^'o^'c^'od'^ 

^ ■^ i-H ^ C^ Cv| Tj* I O I CO'-'oi-^ 



ocowoO'^c^cor-^*-o 
o> Q c^' 05 (^ »o 05 ^ t~^ r-^ CO 



CO 1-t r- w Tj* 00 w CO i-Hio o QO OS -^ r^ o —"co ocot-oo 

odotoocooioc^^r^'-«'-^c^'r^osiocdt^o^T^oo^»--'*oco 
*' — -tc^ioocoeo b- <-i ft cDi-Hcocc 



^(N I 



i:^oo»cooco»ot^oaio — 

ocot^coooooooQiidr; 
•-ic^ooc»-'*<i-'Ccc5^ 1 oc 



O CD O b- 00 -^ C^ CS CO t^ *-" CO O OS lO b* 1-1 Tt« ^OOSi-t 



OOOOOb»QC0CDC0C^0SC^'^»-<C0'^00b-'-ib*'^Ot^»OC0'^ 
CO »OC^COCCC^ rH lO ^-t »-i I _L_j I CDCSTfCO 



+ 



o—ic^c^coc^eDTrf^oa* 
r^ooooCM'ao-^ — i-^'^'-rKi 

CO ■«" CO CO CO T(> ■<)< _1 M 



MT)<c01M'«><I^T»><0tD0»T(<tDC000<0 0f'C0C0-HiOC0t^^OIM00T)> 00'OC^CI'rcD-*C'*'<3- 
CS— irt—c "^COC-ICO — lt->"COC^ — 



CO -"jtt^ Noo w «?o '^ -^ eD«og>coos c^os COCO «or^ ^cooo »OGO ^ 



OC^^^UOCIOOIOC^OOO 

■vc<esoO'>J<^ ■» ■^ 



I'll 









O 03.2 g 



■i^fsg^.s 



o o o o o £. o o t^.S 03 3r3r3 
o o o r:> ri n ti, J ■^ n . r-i <-vJ5 JB 



3-0 3 
5 o >? 

2WO 



lis 

a o'S 



a §5 

(3 to — 



0) k, 03 01 dflx: 
E-OUOUOO 



:— « - 

> O w D 
05 g JJ 



"2 » 



SSS^r^^^^'^^'^oo^©— *c^cO"^»oor*ooc»o^c^ico-^ »cot^ooa>o— 'C^co'«S'»c 
S?s^Sr:ir^r^r:i':i':;':i'^^'^^^'M*Mc^c4c5ficococococo cococococo-^-^j'-'t^vTf-j* 

cocc>CDCOCOeOCOCOeOCD<0«DeO^<OCDCDCOCOCC>OC05D50;D<OeD eo^ooccoto'^^to^so 



CONCENTRATION OF ECONOMIC POWER 



185 






^_^ to ^_^ rH -^ ^ CO ^^ <0 WD 

£-* £n »d t^ ^ £06 N 


ci »o c« ci ^ ^' ^* M CO 




t^t-tQOCO^^^^t^C^lOO«Dt^OO-^^ 00 00 M CO -^O 

^ ^ oi 06 w^i^ coco-^odcood-Hrs: ;^(o r<I ^ c^ c4 co 


oe«ooaoao«coto«eo 
MS e5^ «P wS eVs ^ cK ^ ifls c3n 


tfs. tJv cK ^ »5v ejs cjs e5^ rts Jn 


00 K 


r^aDt^«aoaot^wr«oocDcooo«aoaor<'t<>ot*t-ao 
^v ^^ .>K c^ ejs eJv p^ e4v .-K crs (0S. cTv c^ oK ejs e^v .^K ^ .^ Qffs rX <ff\ 




Ks ^ ^ e^ e5^ e^ cK 0?^ t§^ t5v 


^^ 


-aK ws ■^^ .«j^, OT^ e^ © V ^ co^ u3^ idv rtx uT^ tJ^ offv c^ <->v --i^ r^ wv f-*^^ 


|.I;?|^;I;S^^;§ 


■spiNrO's«v«Nr5NfON«N^sr4>^ 
e^ M5^ 0*^ etv CIV or* cK ^ u?^ ^ 







oooMotet^o>o>j-ico 



lOCON i-l r-l M CO (^ 

+ ++ 



am 

Sis 



^CO00CO»O ' uD ^^ 00 10 1-1 t^ O '<*' OS "^ O '«»' W3 O OC O 



?S?^S;^ iSsSS^Si^SSS^SSSSSS 



«5n "«o^'oO'*'_l1co >d 






t^t^f-i>aioncoo^c4oa>i-it~^^oo<-io3e4co 

oi t-^ CO o -^ _iloo •--c^c5iS«5»dc5i-H<o?pw?»o»o»-5^ 
cocococo Tc!ic^c»-«c^ o5«f5i-i Pi f5 t-c eo co ■-■ 






ClT)<iO<C100rHt-NC000 

t^(^rHidoi^cdc4co^' 
io-*-^i-ic«eo^cocot>- 



rgcio5r^'^'<rgoe4^c4^coooo>cd«d^c>i<d»oo>oi 

■«"»>COCO Si C^ M -H CO CO •-< CO 1-1 CO CO ^ CO CO i-l 



r-)Oit-i->tDMO'>'NOO 

ooocoorJoico'piao 
)«eoi-i 



■—11-1 eoco< 



oio>ocoa>a>^«oi-i(x> 

.00 OJ -H 00 ■-< Ci 00 CO « -"li 



r) o 



c4C4c4r«iciooi-^>0'4*i-Hi4<i-HO)03U3i-Ht^a»cooci 

f^coco CO Pi « 1-1 fi CO i-i ■* r-i CO CO »-i Tj< ^ rH 



tee^-i)iooeoNNcqoo 

— O) I r-. i-l I 



b-ooc^toiocoeoNc^oo 
ocop'»Oi-icOi-ioat>^co 

COC0« rt 1-1 1-1 to 



C^-^OJb-t^COi-iOOCSUSW'^'^C^OOONtO'^OO'^O 



— <■ Q in h^ .-■ ~< a> 10 oj ci 

1«»* C««l « I 



ooo>oop»ootooo«ot~ 

S'^Dcociodoodod^ift 
l^ CO CO ^ Co t^^ Oi 



003 

N?5 



t^OOCOO^ OC^ OOSQO^ CDt^ t^COCOOOt^OO 

*r3as'^^030ioirit^»o«5coi-ioooo6oO'-Ht^o*-< 
ot»r^ic -^ -^ -^ »-i CO CO »o coco^ooio^ 



:i.-5 0CO6t~eO oooc^ 
j«j ■fii-I«DOO'^I>^ 



il<CO ^ O —I to •* t^ <3> 



fojoi-i o r- CO 00 «i t~ 1-1 h- 1-1 cj -H <o >o M 00 o <e 

io»oio^O'^g5o6»OTi<cd|>»oco»oc^'^coa5oi'^iO 
■a-eoco'j' c5 i-c 1-1 rt CO N 1-1 CO o3 " CM c-5 1-1 Pi ■* c4 



= aeococoNC40coa> 



?32 



>o r- >a >o CO CO Til >o 00 toci 

CO ^-H 1-1 « 



i^co«cooo-<i-ieoN'fl<Ncoi-ic»0'0'>i'e<"5^eo 



e> o 'V t> ?) >o t~ CO to oaooo>o;oooeor» 



— OO-H ,-1 (K< ^ _l ,-1 pH 



oo>o;oooe 
« 1-1 -^3e 



-Hioiocooc^r^coa3c^o»co^^t^xc^t»t«t^t»coo 






OS 



a ;.2s o 



S 



sg 






§»Sao2-S 



si |-o|l ill i| aS-il S -a|! 
I|lt||f||||l§|-i|||||sl 

Ul ^ 



«2 
boo 



!8& 

» ® b „ , 






3-^ 

•g _a 03 ft u, ■ 



i-SflSS 33.2.2.22 



00 



.So-; 



a3o32!3'at;^Si^i^aBa)a>».S- 

mmooM<(a5^fefeh:ii-qwwwoooPH(iiM a 



^iJ~^ fe •!-> 



-*^i I 



:|3? 



SiO kO kO kO 10 to ic to u5 to c 
CD CO ^ CD CO CD CD CD CD CO c 



* N CO -^ *o y t) 
7 CD CD CO CO CO r>- 

3 CO CD CO X) CO CO 

-O CO 



cjco'Vtocor^ooo»Oi-<Mco'^*ocot^c 



t*t~»t^t^t^r>-r>-t^aoooooooooo6ooooo6oOOTaaoi _- 

CO ;OCOCOCOCOCOCOCOCOCDCDCDCDCDCDOCDCOCO<OCO 



186 



CONCENTRATION OF ECONOMIC POWER 



CO i-l CO CS N 



r- <o oa "5 00 -^ cc r^ cc -^ co o as t^ o go 



1-1 ^ N 



>Or*00»C5Dt'-OSOS'-HOiCOiO 
CO * ' ' '^CO 'r-J "r^ci 



^ f5v i2s ^ ^IN eJ^ ^^, tO\ ^f . e5 . c-l^ e*N c^^ c^- OTv c*^ N-v 



o(^lCf^r^^evH^.»c^o(^4'^CJ^o>"^o>Nc5^eJv<l^olv^Js^is, l5^tf)N(tfslJvl5^a^•cy^t-^^-^^^>K^«^ 






>ri sct sTi v-M sr> vc-i Nfj ^i s?» ^ >r5 -^ 
O^ «T^ e>r^ c^ *o^ c*v. cN (tfs c4" iff^ oOn iQS. 



tOy,i>^,-Kc5--ttf^W^tf"^^ 



<ooos'«**»^co»oco—<T-<r-«i-ic<)eocDeo 

t>o6QQ<d"^CDCSo6oic6o>05Tt'OiCCD 
WT*<PS.-<CSl<-HCOrt ^ C^COi-HCO 



COt^-'J^eOC^kO^Di-HCOC^Q'^ 

.-H c^ c^ c5 CO CO j_ _j_c5ci 



»OCOOOOOO^«OW3 



^ w d ^ fl w ,-( ,-t 



-«j« M est-- Qot^t--ai»oi-Host-"^cDo coos 



.-iM^i-'i^i-ii-HCSr-l t-t I IM CO I-* 



<0*Or^O0000CM»O0aO'^CD 

P K ri ^ ^ ^ '^ X*^ ""^ '^ 



oio-^-^t^attcscs 



O cc r-4 CO «o lo b- I q 

i-H C5 CS f-H W CO T^ 



CDCS-^OCOCOO^^ 



0«0«f-H-^'*'*<<D'<*<CS«OCMCS»-iCO«OCO 

cot^coo><oi-'5eccso6od*rfosoi'^Qd»r3«D 
»-< N ''t* M .-• cs .-H CO i-H <-i 1-t c^co^co 



000^0»wt^«Dt^»OOS^«0 

03 t- ^ -^ CS 00 00 jl<o X"-* "^ 
^Ncscscoco "T Treses 



»0 O t^ 00 1-- o o> •* 



0(OOi<-*'^c^t*a>eocscDt^<DooocDeo 
o6t>op5^t^^^f^c^oo*ovco<cotocd 

.-iCS^cii-iCS.-HCOCS^i-Hi-<i-HMTjii-HCO 



r^OOi-Ht^lCOeOOOttiOSrHO 



S' CO o t^ go CO ^ CO 
M e^ .-1 fS eq e<< .-c 



MOO 
T-t 2^ CO 



0000O01'*OC^1iOt1<1N 

N r* -H i-i I I e-i CO <-! 



OJ>OOOCOlOMiOCOOOC<500eoe<«0<Mi-iCl 

g"-^e^cO'oa;o6(Ncqc5<0'<><"0'S'oo<3 
O t^ "* Ci ITD UO c5 CO tH 1-H »0 OO 1 



•ooo>coOM'c»oco'*oO(Ne-) 
cocctjKcscot^^'-Hcoc^oogo 



»O^CDod»O^OW 

cocoeo c-)co(N 1-1 



00 ■-< O CO ■* M "3 ■* O t~ t~ t>. -^ t- ■* 

t^-njI-^CO^CDCOCOOOOOcdcDCOOQOiT-^ 
»-H CO W3 C^ CO CO CS CO ^^ i-i »-i oi c^ uo 



0>'^O'^*O00C00iCD»O'«J«^ 

cvicocS(>io-^os»-<-<}*^ict^ 
c^coeoco^co MW 



NCOCOO'Ot-OOO 

c*if-^ocbot^t>cD 



ICO r-l oco ^ -^ coooc* ^ -^ 00 »o «-' 00 ^ CO -^ cq CO w »o 



'j'meoxsooi-HO 



■^■^eo ' ■* ' I »-< 1-t CO r^ lo »o CO Q 00 00 



S Is 






si 






■o.§S 

a CO c3 

<DS3 05 



Ob- , 
„ OS osSs 



cj SX3 o > m bixl 

^ H 5 S 



ppooC-woooS 



" O o ^ 

..Hfloia'ro.'r, 
a ajajacfl a S a ' 



□ «iw$«'2g3jag-3'S£e«ii<nSggj3jai:£iagH« 



m ctl <V 

" o ^ 



■2° 



>«io«r^aoc»o^P'^io<pt^oo^O"-t csco'^io<ot>.oooiO'-icsco*^>«ot^goosO'-<c<i 
5tt^o>oa500^ooooooi-'»-i ^— <i-»^i—i-H^i-Hf5cscscsic'icscsc4p5c5coeoco 



CONCENTRATION OF ECONOMIC POWER 



187 





271.2 

346.8 

64.6 

306.4 


jj' t~ »■ o o o 2 -i^' o 2 2 


00 


C» 00 M O NOOOOCJ ON O 

-<ooo-HOo>oO'-'''ooosoi»<e>50o5o 

CO •-* »-* 00 CO o 


8® i 


o-vco 


CC OOCO lO 


t~aooo«ONoO'«'0»>oo 


o> 


>0 00 CO CO 0> ^^CO >0 ^^Cq CO « CC O •<»< 00 » o ___ 


» ' 


•"jieon) 


t»(3»«00 


■*w*00'»"<O'*e<iNNus 


>o 


■w'-HW'* Z^-^ t^^ci n ei ei 'tf e6 m CO <6Z^ 


<di. 1 



00 00 r« r» r« I 



dKc5^o^ ^JJC^+v^ 3^^3^dKc5N<-fMrrN«^tf^CT^-5\ e5s eQ^eV>e^d^cNe^^o^eQ^«^^c4^M^cT^e3^r^ 



H^ 


1^1^ 




« 




:K^ 


a> » 9 


0» 9 9 Ok 


J^ «dv .d^ w^-^ CN e^ <rfs c5s c5^ ^v 


^ 






MI^OO 


0>0'<«*00 


Ot-*0C^0&00 CCt>.-HCC> 


00 


Tfi->i<i-io>coeooc»oco.-io«oo«oe>r->-ii-i 


^^ 


S?3S 


00— too^ 


coNcoecr-^H '^■^ccco 


s 


^ to id rr CO OS 00 ci oi OS lo uJ e4 Q CO •-' »■ "5 uj 


1— 1 f-H 

" + 



■^c^oos r* t* 00 — ^ CO >o ^ OS -^ c^ c^ 
pi -h' t-: •* id o ci "d CO to ' to id <N -w 

-. -) .^ (M « 



0>00C00SO'*C^O'-"'("0bO->1<0SrtC0e^5DW0SNi000 



Mcqso tococoto eococoN o» cO" 



QC^^CO— ^C<IOaiOCO— ^■^tOiOOSlOOt^COlO'^t^r-iCO 
f5_|_'H^^ I lUOC^COMPj «C<-HriN J_-*i-l+<«< 



ososioi-t tot^t^wio-^ t^^eoo 

idcOOioO -"jil^COOCOOOONtOCO'tD' 

r.t^'Vr. >*cocOcoe^e5 if'j'coco 



"TTC^t-eoooooiotocoosoot^oot^oo 



00 Tj; Q to 00 CO .-t CO t* OS GO O »0 lO O lO lO OS h» lO 

00 ciN^^i-irtM lo 3 3 CO lO « ■* CO 1-1 « Jl 



•-C0O 



coot~- 

t~;o to 



OOIO lO OS 

CD id o> 00 



CO ^ CO t^ t^ ^ t^ 



i-iiOC<t~tOt^Tl<OS 
CO CO lO OS OS t^~ OS 

eoMco ■«■ Tfcoco 



^•^h-i-iiocot^OiooOOOSt^Ot^oOr^OO 
cdcdt^o>id»-«t^t^o>ooi-<idt^oididcot>id 

C<) C4 rH fH ^ rH M lO O tO CO lO C5 ^ CO f5 P» _1_ 



cooococo csooocooo ecoi-ioo 
-^eo--id o>->»«--idco.-<'ooOi-<Pis!J 

tOlOCOCD COCOCOC^ CO «10NC4 



eOOOiOCST}i«-iC4cOcOOOr-00^<O^^OOCOOOOOtO^O 

o>cicicoocidide^'r-^tdNeo>-HCOoo6co->i<idrt^h.' 

— i|-H,-l— I .-ilt^r-lC-^INCOCjNi-li-^CS •*C0|'«< 



OiOCOi-l 

<3idt^O 



o CO CO lo >-i w c> T>> 00 cjt-oscoio oooooscoM woen^r ■^ost' 

id'^'coi-i'^t^coci CO ostd^^^•-^OQldcoo1-iccgsldo^*o^os 
lo 00 i-ic^toto 00 fin i-i »-i is ri o r~ 00 CO ci CO t^ lO -^ CO i 






rtTft^Kjl 00 lO ■»«<•«'■* O OSeOiON 

oaooodc^ ooto"co'ot-^c50coosi>>" 

— c* (M CO CC " ^ 



eoNioosMt-ooooMooeoot^ooos—i ioto>-<eo 

g'jit-^pooooot-idtdt-^^odeo'i^osb^odoosoot^od 
CM N f5 c» i-< CO N CO lo to ^ lo 1-1 CO -Hc^ coK Tf 

++ 



CMCS lOCOTl<tO 



^ CO CO ^ 00 



U3 lO -^ OS t^ ^ 00 ^ W ■^ -- CO <-1000 COO CO 



1— ii-H^H COCOCOCO I— li— <r^ 



—I i-l CO 



00 N CO N N © 00 N o lo 'J" sjs en N a> OS CO CO o 'lOO 



lOO'*"!*" eqt^iOrtooooomN-^c^ 



sooos cocoes 



-HooooomN 



M M M C) OS N rt 



0'4<cocot-'^c^iot>'4t^cxio«ONNoooC4ao^^!P 



"300 l^ 00 i-t »-l » 



©•- 






,3^ 



t.£-2'£S 



u « 9 



t-. *^ rr, <~i /-I ^^ rr^ /-i tn 



1^ 

a o 



dd. 

toTS 



Oj 03—3 (CO • 

f^_fe 2 8 5 - 
S^^dddd..\ 

|BB.r5.f 

IS & 2 5 I 



'teS 



t 03 O O O O 2j3 ^ " 



1 ki h u q^ U b O 

3 3 3 «2 o a« 2 



CONCENTRATION OF ECONOMIC POWER 




Q3g.£f.£f50S| 




S8 



a £ 



o o 

03 ^ 






,^ o oi oi 

fi « !- (^toK g aS 









5|s il 



.-en g M-^ .7; 



e.s.g^.-§ ! g 
c2 £ M 9 •- - 

•HO _: 



S g oj 
■^ -"3 

- rt'O 
bjos > 

§«■§ 
ja-H.2 



g§'-g«S|gS|*3oogSS 



■o g ^ a a oB.E 

rT. ,n o o o c c 

§.ap.p.& 



CONCENTRATION OF ECONOMIC POWER 



189 








190 



CONCENTRATION OF ECONOMIC POWER 



'Si. 






OS 

^ -a 



Si g 

? 2 






'tt o 



•sii 






!=!aag> t^BBSkag a x^ xxxxxsk^ ^>^gH>^>CB 



>» 



» "> 



!>t: > 



>"> 






Sa^aS «aBSaa^ « g^ abfe3«>^a" >^aBaaK>bB 



MaMHB aaBBBHB M » B«Bt:t:HMM B>ak^Ht:BBM 



HMMHM g«HM><Ha M ^M gaHGg><B>; >X>MK«>^HHk! 



» 



> > 



xxxxx HMMHK^a « aa Ma«>aHaB >B»<««Mat><K 



M MM M MMMM 

> > 



t^t-iO^ M )-IM)-l 
> 



M MM M MMM^ 

> 



►^M"^ M MMM 



K«t«it^K ^<!XHH«MB M aa 



>> 



>X>>aBM BB^Ht-IKMaHH 

M '-IMK,M Mti MM 



WHMHM ^jMHtxJMWg « KM t^S^<>j>^^^BX 



mm"^ mm 

> 



aXHfrj^ HKWKt«!><H K ^x^ wBxa><3a 



> > >' 



aK>xaK>^xaM 



HHK«H KKKXKHM K KM MMMMMMMM >S>;MaMMMaM 



> > 



MMMMM MMMMMMX M MM IMMMMMMM 



•9 

a 
.-se 

o a o 
3mo 



O O) 






".9 



!g-a.-a 



t:t:>aaMMMXM 

►''^mmmm m 

>> 






S OS o 

SCO 



S Sf $ a 3 «« 60 a 
S5x! « o . o ea ft 



§-3>>S.;a^ 



n ea ^ ;i- ^ 
►40<lWt 



03 ^ 



*'flar-(03«-_ «„, 

S « o 



^^ o a> 



OO ^ lO «C t^OOO* y C^ CO*^ »0 «0 t^ 00 OS O »-; N 



W CO CO PO CC CO 






^^'^^^^kO*0>0 



CONCENTRATION OF ECONOMIC POWER 



191 



MHH« KM H«t:BB "Bg-g "-H*^ >'"' XXXa H«" B> H»t:BB« 



HKk!« 


HII-I 
B> 


«>WMt» 


s^>BB^ 


> 


MM 


B>BM 


BBM 
>> 


^3 


•M^^BB^B 
> 


^KH^^ 


MB 
t-ii-i 

> 


>M'-'MM 


X^>B- 


^X- 


>M 


MMBB 
""^> 


Ml-H 
» 


MM 


BB>BB>B 




MB 


MB>BM 


>B>B'-' 


-\<t 


>> 


MBBB 

MMP-II-I 


BB> 


MM 


^>BM^MB 
> 




KM 


MtlMMM 


BBBM" 
> 


*-'MB 


MB 


«gg£ 


t— It— tl— 1 


>> 


>>tt§B> 




MM 


MMBBB 


t>BB3'-' 
» 


-'MB 




MMMB 
> 


MMS 


MB 

MM 
> 


>>>>>>>< 


1— IhH 


MM 


> > 


»—(•—)(—• 

»'-' 


"MB 


>B 


MBMB 


MMB 


B> 
> 


K. HH t— ) HH hH »— 1 K*i 


MKMW 


MM 


MBBBB 


t> hH h^ t— t H- ( 


l-lt-ll-l 
HHWI-l 


l-K-H 


MBMB 
"> > 


MM3 


MB 

1— It— ) 

> 


»>«>>« 


kIKMM 


MM 


K^ hH l-H h- ( HH 


K^ t-H HH hH hH 


l-ll-ll-l 

"B" 
> 


> 


MBMB 


MMB 


MM 


K^ 1^ 1— t hH h-l rH V-H 
1-^ K^ t-C HH ►> t-t 1-4 


hHI-D-l 


MM 


HBB>B 
> > 


"gS3" 


"MB 

IHI-C 


>B 


MMMM 


MMB 
i-i 


B^ 
> 


^ hH M 1— t H^ HH )-l 

> 


KMHM 


MM 


MBBBB 


B>>S^ 


BMB 


i-ii-i 

>- 


MMMB 
> 


MM>; 


MB 
"> 


M>i,MMMMkJ 




MM 


MM>BB 


>^>-" 


"BB 




MBMB 


MMB 


BB 
>> 


>BBBB>M 

^»M M 




W 




. 






MMM> 


MMB 


MB 

MM 




kKXM 


MMBBB 


">^«B 


'"'M'"' 


t-l 


>BtiBB>S 
> » 




>> 


MMBBB 


>>>BB 


"M" 


l-(l-H 

BB 


MMMt: 


MMB 

Mh-I 


MB 

MM 
> 


>B>BB>^ 
> » 



^B 






Joss a"s 

<= g « al'o'-'^ 



2 

o 0^ 



S-C-o a, ■}:» 5j; □ 



R 09 <B 

C a « & I 



""III 



•3 a? ^ 



■'=' So.2 2 

0) D-'C ® cfl 3 Q^ 



fll «* «* f 1 rL (TL d Mt 



S 2 ° £m o £-2 „ a 03 C3, a eo 05 I- „ 



SS.8S 



00050M c«mTt<>otD r~oo» om £j ow«>< mtot* ooo> o —' « w s; "« «P 



192 



CONCENTRATION OF ECONOMIC POWER 












'- > 









^xa 



b^a^a^^>^b>^a 



l-lwl'Sk-ll— ll-ll-ll— H-lhHPSWI— I 
t> hH l-H I— I ►-! I— 1 1—1 1— I HH I— I HH I— I 



|-I>>|— 11-11—11— l>-ll>l—i>-l>>Mi— I 

>^>>>a>'^>>«a^ 



M>aaa^aaaaa3a a>a^a 

xa^axxxKXkaaa "aaa> 

xaaaxKxxxxxaa '-'>aa>; 
">>> "" » > 



x>aa> 



K*^ |_t ,^ HH HH t-^ »^ 



xaxx'-'a>;^a"aa> 



x>;xxaa>5:aa>aa 
x>xxaa>saa>aa 

W-HM >>'-l^|>l-ll-^> 

aaaa'-'a>5:a'-*aa>; 
aaaasa^>>w'^>« 



xxxxxxxxxxxxx 



> - 



x> 



xaaaxxxxxxx^s: 



^" ^>a>:a 



xxaxxxxxxxxaa 
>'^^ WW www 



«>"xa 



x>xx>a>aaaaaa 

W 1-K.K^wwWW 



>>- 



xxaaxxxxxxxax 

I— *l-|l^l-H 1— IHH I— IfHhH 



^a> 
> 



xaxxaas:>a>aa> 

WWWWWWI^ Kj. w»> 



xaxxxxxxxxxxx 

WW w 



WWW(^, 



xaxxxa>^aaaaa xaxxaxxxxxxx 






§0.2 So 
o) C il? oo :3 



SSp 






"O — — — — acloai»a<iua)0> 3 

0^ 0^ q; ^ en ^ 



•a rj 0)"— 









2 o-o-o-o °*-"-: ibis's fe g ^ «^ 
a.^s.^.^.a-'iiaqaaaaaq -s H-g S c g j- giS a a 3£ c a'S S S 



H O a a -Of^' 









C-OQaO wNm^>n«Dt~.ooo» Q OM ^ « « r~ ooo>o -h Men ^•Qcor-oo 
Nolc5«coco«Mmec«Mec 9 w ^ ^ m< I" V* ■» iS o us ui >d>aiaio>n 



CONCENTRATION OF ECONOMIC POWER 193 



XK« 



t:BBBsaBB«s:gH>t><>>' 



i^XK 



X ^BBBBBB>X>BB>X,>>> X 



XXX>XI=!XBBSB 



«3" 


x>>xxa^x>;Xt:axx>;B 


S5>S5>533'~'> 


XXB> 


B»B>S 


BXX 


»xxxxaxx'-'Bxex'^aB 


XXX'-'XXXBXXS 
> 


>>>^ 


g>g^>> 


x^a 


BBBBXXB^BBBX^a>;>B 
>>> > > > > 


XXXXBBX5XBS 

> 


>>^> 


>^^$:^> 


XXX 


BB>XX>^>XX>X>X5XS 


r:t:xaxxxBx^x 


l-H (-t k" H-l 

5!> " 


l-H H-t M HM HH >-( 


BBX 
>> 


Ba3gX>g>X>XXXXSBB 


»xaxxxsxx^ 
> " > 


g>fe£ 


l-l l-l l-H 1^ l-H 1^ 


aax 
>> 


g>s>bgS^«riXxxxaBe 


»XBxxxexx> 




>^>>B> 


XXX 


g5g><>^Bg^^r=hh««55g 


>;:xaxxxaxx> 
> " > 


>>>;3 


BB>^-^ 


xax 


^Sg>S><«g^><abd5«5«5 


>^xaxxxsxx> 
> ^ > 


>>^B 


^B>^-B 


>>x 


>>^^bgS5«55^dg--> 


»XBXXX>XX> 


>B^> 


^>^>B> 


^>x 


^BB>x>saxaBxx->Bs 
>> > > > 


>^XBXXXBXXB 


>B^^ 


B>S^BB 

> > HH 


axx 


5gggb>sg><S^5b«"55 


>;^>;;bii:xxbxi*,^ 


>>>B 


'^Bpw'^> 



XXX>XBXBBBB ttt^ 



>t::^B>>> 



BBBt> 
i-i>-i>-it-i 



B>B>>> 



.. c c 



O CS 



S' c 
33 -3 "O « ■? „ 



c. 



I a-: 



3x: £ 



S3^-g I ap * § o §15^ g g «CK = B p 

a,aiOQOQOOljSOOft.K(EOOK E-faOO 



t PA S 



s s -a 



S !»S«o 



K a^.-"^ 



a Si 



l-s 



a 

;p£P;§SS'ag § 
: <a 2 2 * t; -ij 












194 



CONCENTRATION OF ECONOMIC POWER 



i» — 




wC^CO-VWtO t^ 00 O; O t-H W CO ^ 



CONCENTRATION OF ECONOMIC POWER 



195 







>« 


X 


XX 


aas:aaxaxx> 


1— 11— 1 

l-H l-H 

>> 


>aBxx'-' 


XX 


t,'^>>'^> 


> 


HH 


> 


a> 


> 


> 


aaxaa>a>>a 

!—(»—( ►->. »-> t— '^H 


>> 


a>tr:a>> 


>> 


>'-'aa>> 

> 


xa 


^">>>x 




> 


>> 


aaxx>axax3 


HHI-H 
>> 


>2^aac: 


xa 








><^t>>^ 


> > 


> 


XX 


^HHXx>xaax> 


HHI-H 


aa^xx^ 


XX 

l-H 


>> > 


hHt-H 
> 




>sa 


> 


>X 


aaaa>x>x5:> 


X> 


a>aaxa 


XX 


1— ( t— 1 hH K^ l-H Kj, 


>a 


> >> 




« 


>> 


:aaa>xaxx^ 


ax 
> 


labad> 

;> > 


XX 

l-Ht-H 


aaa>a> 
>>> > 


HHH-I 

> 




>^d 


X 

l-H 


XX 


axaai^xaxx^ 


ax 


>axxx^ 


XX 


>>> > 


l-H^ 


^tt^>> 


5>S 
> > 


X 


I— < 1—1 

>> 


aaaa>xaxx> 


ax 


>aaax^ 


XX 

l-HHH 


K>a^S^ 


t-HHH 


§>t><>> 


> > 


X 


>> 


aaaa>xaxx> 


ax 


^aaaa> 
>>>> 


XX 

l-H l-H 


a^a>a 






in i^s^sa 


>3 
> 


X 


ax 

^Hl-H 

> 


aaxa>xaxxr 


ax 
> 


>axaxa 


XX 

hHhH 


xaa>a5 


HHl-H 

hHI-H 

> 






X 


ax 


aaaa>xaxxs 


ax 


axxaa^ 


XX 


a^a- 







>>^dp> 



x>;X XX aa axaa^xaxx> 



>>>•'> > 



XX aaxxx^ xx 



aaxax> at 
>> > > 






ax 



rraa^x>xx> 

"^ 1^ l-H P> 1^ W f-l 



aa >aaxx> xx 



»^»^ aa 



> ;a>>a 



a ax ^a>a>x^xx> 



aa raaxx^ xx 



:=sg? >■ 



K* r* tr J> K^ k" )-( 



® a 
0.4- 



«-= 5 

iS o c c 



5 £ o t-, i 2.s^tn ji!<'^ E 03 03-5^=^ ■§«■;;■" c-^opa 



«2 

.. '- a 



:as 



"O :S rt ''-'•' 



' a d --^ B u.-_2 
!c a) M oj c3 .t; 
aScSga 
o o ® o ts 



; 5 § 2 XI 



Be "S 



* * o 



ifflCQQ Q E cSSoStri^Ec 



o fc- t- 



So a a 



CNIC^JC^MC^C^ WCSCSC^ N WW NWCIWWWC^C^WCS WW WWWWWWW W WWWWWW WW 



196 



^ r-X ~ 



CONCENTRATION ^OF ECONOMIC POWER 

)-t[-l W >^>-l l-ll-l ^ h^l^ ,_, t_(|_(tHK,l-H 






b<!b<!t> "^M*^ M !> *-• W-" b» "-• bf" I-"-"-! '-' '-'*-' l-HI-IM l-H l-H M 1-1 hH l-l 
PSr^K' l-ll-ll-l f«i>^l-lt>Sl-tj'l-l PS ►> l-l l-t hH l-ll-H ►i.b»W t-l l-H b, ►->. t-l S 



>« > 



K >>>K>>> 



Kt 



B>BB5: «K 



H-ll-tl-l I-I M HH tk t-l k^ hi 

>>> > 



»B 
> 



»B 
> 



>»a>» 
> 



^^XXti KB 

> 



W^l-I 
> 



>>B>«K^ 

l-l|-|l-<l-H 
> 



>XM t:B>< «3K>>>> >BBBB XX 

IH ►* l-( l-l>> P-IP-II-I>-I |-|l-l>>>> '-' 



>> 



>> 



xxti 

> 



> 



>BK 



BBM 



BBBKB^B 



hH h-l I— I l-l HH l-IM 

hHHHI— IhHI— I I— irN 



» 



>» > 



BW« 

> 



^^B!»X' 
> 



>BM 



^>X 



I— 1 1— I I-I M I— I >> >> l-< l-l hH I-I I-I b("-l l-'bl'b*' I-I I— I I-I l-H ►> kJ 

w I-I >> "^ I— I '^ '^ I-I IH I-I I— I t-i PSi-i I— iPnPS hh m i-i k^ >* rS 

•>>>'^l— !►> ►> I-I I— I I-I l-l l-ll-l I-I l-l 1— IHHK* 



>>>> > > 



> 



BB BBBBS> 






>>>!r: 



>•-> 






SXX 



>>ti>>xi 

wk^ I-I ^ 






>>> 






B> > 
> 



>>>>> It; 



>> 



KXX 



>>B>>'Kt 



>>B 



>>B 
> 



BBS:XB>> 



bKbb 



XX 



\=iXX 
> ^ 



BBB>>><' 
> 



BB B ;> 



B^BBB^> 



H- ( h- i (-H HH t— t hHtV 

HH HH KH l-H h-H hH ►'S 



>xti 



>BB>>X" 



>xx 



JBX 



1— I I-I I-I f^ ►> ^ M K^ 1^ M M I— I I-I 



>> 



BX« 



>l-l M I-I M 1-1 
^ I-I I-I i-» n h-i 



'>X 



B>M 
> ^ 



I-I ?»i-i;> )H 



►>^ f-l 1-1 HH HH hll— I 

SiB>>> ^B 



MMB 

H- 1 

> 



»BS>B 



1-1 wi-i>^?-> 



>>M 



B>« 
> 



MP* »> >> h-l 



>>> 



y 3 



1 ID 



- crj O 



•O-O 






£h 






jB M«X >>B>>:BB 



>> 



2-9 & 




«5 



, G^- 









"^'g — 



< OOCS C*J c^ » 



O CO O COCCC*3CCCOCOC*5 COfO^HCOCC 



O ^ C^ CO -^ »o '-^ 
t^t.^tN cocococococor^ 
CO CO CO CO CO CO CO CO to T-Z 



CONCENTRATION OF ECONOMIC POWER 



197 



«>x'-'5: 


>>> 


>>> 


xp^ 


SX XXX 


XX >aa 




^»( t-H 1— 1 1-4 


HH 1— ( 1— ( 


BHa 


b>- 


>> xm^ 


>P >r 


£ ££•"> £ 



I— I ^^ 

> 



XXX >>> M>>M ■-> x^s 



>> "rsa 



I^HHh-tl— lhH^»-4hHt— I 



> > 




>x >t:ix s:^ >>> HKHaaaaa^ 

J» MM M M 


aaxi=i> xx> xxa xs 

M>M M M 




> f^* ^ >> -^ f^* >> 


> 




5> KSjj ^^ b*^^ ^"'^"^5^3'^ 

M MMM 


m;>mm^ mMm m 




XS XKB >r >SX BBBIi:SB>>;'-' 

'-> >> ?> !>M MMM MMMM 


-g><s> aaa a>> 5>; 




xa XXX SB >xb<; ►-bb^bbbb'^ 

M MM I^M M M MM 
> > 








a^xs> ss- a>> g> 


XB XXX BB >XX B'^B'~'B3BB'~' 

M MM 1^^ M M MM 


5PK^> B>t «> 




XB XBB >> >BB BBBBBB>>'^ 

> MK.?> M j^M MMM MMMM 


S>XKS GGS >» X^ 

MMM 




XX XXX >;^ >XX BB>B>B>;>-^ 



5BXXB 

(i.MM'* 



»— ( I— I HH h^ HH ^^ »■ 

MM '^'-1 



> 



>xx 



*>X3> 




cocofocc«coeoc*3 



198 



CONCENTRATION OF ECONOMIC POWER 



^ 


HMI-IWMW»l-ll-iMW5>M 
H-IIH M 


^MI-IM 


MMMI-H 


MI-IM 


>"g^>^">: 


§ 


_"_K__^'-'«_a"t=i_><_^B 




€^€^ 


BB>^B" B 


Hi 


"SS iBS«a"'^S3« 


-->s 


^a>'- 


1— 1 

M 


KH i»>»-HhHI— 1 M 


M 




BB>B 


l-ll-l> 
h-l 


B"^«a>BB 


i-> 


> 


>>BH 

WMl-ll-l 


MMQ 


1-ll-IK.I-ll-ll-IMM 
►> "^ l-l l-l ►> l-l M 


i-( 


K^l— IhHI— IMt— 1^1— lb>-^— "-^'— ll-*!— 11— II— 11— '*— 1 
p-MI-l ,-1 1_( ^ HH f*^ l-l h-l M l-l l-l l-l M l-l l-l 
MM l-ll-|l-l|-l I-IMM >H 


1— IK^hHI-l 

B^^B 


B-^B 


>«»>^>> 


W 


1— (1— 11-11— II— IH-IJ>.»>.^I— II— 1^1— ih>.i-ii— II— II— 1 

aaa '~'a *-< aai-iai-ia'~'3'^ 


>>>B 

>-ll-ll-lhH 


a-> 


>">>>>>> 


o 


1— II— II— II— Ih- II— 1^ 1— IK^HHI— II— II— IHHI-HhHI-HI-^ 

a'"""' aaw"^ '~"~"~' B'^ 


B>BB 


--^ 


>«^»^>> 


fe 


BBB"" aB>aaaa 


aaaa 




h-ll-ll-l 
> 


>"^>!>^>> 


H 


aa>'^Ba>>;>aa>a>aaaB 


>>>> 


a«> 




P 


>a>'-'a'^>>>aa>a'- 

l-lBl-l M M M Hr W h-l M 


B2>a 


B>>B 

mmB 


> 


t:^BB>BS> 



3>aB B'^> a'-'>B>»> 



^a"B'^'-'>>B"Bt 



>>;B3Ba"S 



>►— 1 1— I l-fc 1— ( I— 1 1^ 
>>'^>'-l'^ 



o ^ 



"3 ° 



t. <p a> 
C3 c3 o 



o ^ te 
do 2 

b «5 2 



"2 '^ 

OS a> 

I- w 

p. V 

0^-3 



a> oi 
^& 
o o 
fta. 



PhW 






° ° n 
t- I ^7 rt H il> X3 

^^-i-i-"2!20'a'"«>s 



a> 03 



? o CS 03 I'' 03 

)cQCO>2;OE-i 



'J3 03 






I SI 









ot>-ooa>QrHC^?5'!t¥5^t:rcoc»^»:H^c5 



O^OO^ OOiOaO 030^0 oooooooo 



> cc CO CO eococoeo co co ^ 






CONCENTRATION OF ECONOMIC POWER J^QQ 

> ►> >> >i> p» ;> ;> 



> >' 



KX^>:t!t'<a>a>'-' e 



>t>t— "— ' Si I— I t-H HH M t-H t-H HH t— ( H-l (— t M h-l H-l b> ^^ 



>>>;>a^t>< 



„W«W,^W«>.«^>.>.>.>.>.^I-I>.|-| ^^^WW,^>^>^>.J-|^^WWK^MW>.W >j-J 






HH l-l W W ''^ h-l hH >^ HHMhH t-l M I-" l-( 



-»>SB>>"'^>;>!=!^^BSB>kBX>>;Bt:'-' >;>t:Bt=iBBKSXBXt:r»'^t!B>; Bt! 



>»> 



>'-'>' 



^>>>B>B>'' 



^>>BB»'-'>5B>>B-'B> 



B>;B ^B>;B>t'<^>:^BBB>;B>;>;B>;>;> BB 



B>SS>>a>a 

r^ 1^ hH H^ HH 



35'*'BB^^BBBB'*'BBBB^'" 



B>>BBKt;5;>>>S>>>BB»S' BB 



«>5:>;B>B>^ 



;>BKK>'~'>>a>^BBB>t 



K, K' i_i *^ >«i ' 



B >B>B>X>S>>>B>BBB'-'»g BB 



>^>B>'-'>' 



-t:>BXK>'-'>gS>BBBB>B >B>B»<>S>>BB>>B>'-'»t;: BB 






I— (►-^fc-lt— (h-it-Ht— (I— ti— (K>b^M>— '^ 



B>>BBKSS!>>'='«S!>>>«^>S! 
> > 



i^^i:l»'-'>l 



•^BBB>''^S>B^BBBB>t 
>> "^ > > 



B>>B>MS>5:>>Bg>>>B>s!B BB 






^>?^BB5>'-'>S>>BBBBBB >BBB>t><>B>BB5!>B>>">>> B> 



B"^^>5BB 



««^BB>^^BBB ^ 



p— (^>>i-H rS PS I— (l-< t^ ►> l-H l-l ^ ►> l-H P— I >> l-c ^h^ 



B>>>>;^B^' 



'>>B^B>BSBBBBB'- 



^>^BBWBBB>>BS;>>B"BBB 



>>> > 



>-'> 






: c^i2 



tl> ?^ O QJ 



©DO 

„ U o; O 

-'— C O a; 
a> -^ 'A ^ S Q 



S 9 ' "o, 






P " c bti ?> i 






fLc&HliicoOraOPHCoaiCJ 



; 3 a o == 

) CO c ^- CJ 






j«;^_ » m « 
as £ « ® iB 



-2^1 oga-^ 



^ £ 3ac8 « 



■S.D., 

t! 0) a 



se=-: 



oi C (U u; 



i o o o 






lOtpOp'H CM » Pt( 



247149— 41— No. 1 15 



200 



CONCENTRATION OF ECONOMIC POWER 



.8 



TS 
% 

8 



.^6 



-e i£, 



©" 
»> 

i 



1— |H-(i— (t-H I— 1 1— * *^ >> *-j, t^ ►-^ I— t •-> I— I f^ l-i. *-> 1— I I— (1— II— t >-(»-IH-lhH 






'S>^S'^^^^b«K>'^HS^^Kd '-'>Ba>'^'-*> 






a«a><xHB>KKMX>K«x«MX^ aBa>KXXH 



> > 



^XBXX^aXXXBBBBXXBBXK ^B><>B^BB 



'XBkX'-'BBXKBH>XX«BXX« >>;B>BB>> 



BXBMX'-'BBXXBBBBXXBBXM >BB>B^B^ 



BXB«X'-'BBXBBB>BXXB3XX >BB>B5:^^ 



>> >>> > >> 



"XXXX"BBBBBB>BXXBBXX 



>B>BB>> 



"XBXX"BXXBBB>BXXBBXX >>^>BB>; 



B^>BX«BBXXXBBBBBXXXX >"X>BBB> 



^X>XXBBXBBBBBXBXBBXX BB^BB>>>; 



>X>XX'-'BXBBBB>:XBXBBBX 



« d ^' S^ *5 ' ■ ,^ 






■S.fc'? 



•^^>^>^ 



, OJ o w ' 



■B» ; 2-" 00.2 

& u-.Sf oStf-^ " S 

a o.;i-=i 0? « « > 



5 fc 3-S-2 9-03 o a feS aS £•§ >2 c S a e-g-S 05 S « ^ 



'>>> 



X'-'X> 



:gx 



>r''> 



BB» 



B>>> 



B>>> 



3B>B 









BBS> 



>>t>B 



'BB> 
> 



'BB> 



2-3 



c3 a , 



2 a a £g 
^ o o .i: S 



a> o i-H c^ po -iij* »n CD r^ 00 O) o ^ c<i CO Tji m eo t^ 00 Oi o »-' cs c^ tj« »o co 
<c t^ r^ t^ t^ t^ r^ t^ t^ r^ 1^ 00 00 00 00 00 00 00 00 00 00 os os os os Oi os os 









CONCENTRATION OF ECONOMIC POWER 



201 



> > 


>>> 


it>l-ll-llv"-<>-IIHI-ll-l 
1 >>«>^»> 


;B^"Bk>i 




M^MK^MHB" 


B>;> 


MBB>>>B>'-' 


:>>B'^>B 


£ ££££>>£ >£« ^^- - 


'-ii-'»>i-"-KK 


rS>^ H- 1 1— (i-H H- 1 ►-;». HH ►->. rS 


:B3"><B>; 


>-l l-l"*^ 1-1 l-l?*M 
> > 


►^B>B^t^"^« 


>B> 
> 


^3B>>^^>B 

>> > 


B>B><B>< 


>> > 


t-H ^ •— • HH t> ►::> 


>3b 
> 


B>pB>«B>> 


>KBXtftl 
> > 


BBBBBB"^"^>B^BBXKK>K 


ttt |>g=3a 


l-lk>l-l 


>^KK^K>^^ 


BB^BXB 

»-i. I-H »^ i-i. HH t— ( 

>> > > 


>B>>>>^B"><B>'-'B'-'>>BBB 


>>>B>BB>> 
" > > ^ 


> 


BBBBXX 


^S>>;>;>"BBXB"BBBB^BBB 


h;>-i>*^i^>^ i-i*-" 
> 


BX> 


>><XB>B>BK 


^P>^5b 


BB>;>3B'-^>"BBB'-'3'-'B^BBB 


^B«>^> BB 
> 


>><> \ 


>BXB>;B>BK 


>>>>^> 


BB>>BB">"3BB"BB^>BBB 

M,^„ M „ „ > K^HHK^ 


>>r:B><BBB> 


BK>B^K><><>k^>><! 


BBBBXK 


3"^BBb'''^^3B*^^B^B>^3B 


t^>^>>^>t 


B«BB^XKX>t^>BX ; 


BBBBt^B 


>'-!>>>> ">-'Bs!'^^S'~'B'^>BBB 



>>>I^X5'-'BB BB>B>B!><B>B>>WBBB5^BB >B>>>>'~'>"K">'^BB>>B>B 

MMM>M> MM K.« MM^„„ « M „ ^ K, ^ » „ j, M MMM „ „ M M k, M ^ 



BBB>^BBB>; I^XB 
^> 



BBBB>^Bt!X ;^t:BBXB '-^>^'-'"'-^BB'-'>B'-'S>BB>B>B 

"»^ ^>^- >>MMMM M MM M >M^j^ „ „ 



^Bm >;::;t 



>BBB3>BB>: Xt><S'>SXXBBBBBX ;B^BBX> B>BBBB'-'B">'-'BBB>5SS>B 



< ,_| H^ « 1^ l-l M I-- |.^n>-,>^K.'^'^MMMMMl^ ,M>>,MMKN1" 

„„ M M „m;>M?-„MMJ^K.;>k^„ ,K^f>MMM 



B"^''^>>BmB 

> > 



6 iS' 



ffl ^~ a 



5<= — 



cs i!?a^-£i:^— .00) 






■2;'_OmCC = 



3 g 



s 



era 

■" o ox:_ > 
2 = = n ^^TJ 



■§.§ 



0J3. 



a"S.S 



2S o® 



"^SS 



03 -1^ O; l_X: 

— , ca > a"© is 
, •o=-cCi.2§~i2g*oo£'-S'§-£aBa2 S^a-cSS 

a;«oo«-oi>.'*cS3ooOS3ocBoS£x3j3t2o®g.-S 



* '^JH a a, m "^ ?■« » ® 



OOQOOOOCO 



;tC»C»'3»C'C*0iC»CiC»C'Cw^'O»OU7»O*Oi0'O »C»C"^'CiC»OtC»C»CtC"^»0»OiOW5»0*0»0»d*0 



202 



CONCE^TRATION OF ECONOMIC POWER 



■2* 



8 



^T3 


9 


n 


o 






e*43 




•j* a 




.^u 


S 


t> 


a 






o 


1 


e 


HH 


s> 


O. 


?» 


S 



*« 2, 






oS^ 



> 



(-(t-m-m-Hhm— it>>H 



t>.l-l !-'>> HHI-H l-l 



-^ -' ^'-' £^ "^ >£ £^ 






^aK>sGkac x"aa>>aaKS5:aaxaaM'-'K> 



l-c l-l I— I h-l 1— I K-l vj »-l l-H 1— 1 1— 1 1— I l-l l-l t-l M l-l iv bd W l-l *-< I-"-! !> lx"-"-l tx* 

l-l •> b. l-l b* ^ l^ !> l-l l-l l-l HH l-l l-l Pn ri PS l-l i-ii-ii^?Si-i PS 

l-l 1^ ^ w •*■ 1- -> |-,l_Jj.l>|_| M f> M ^H 



sKas^xaaa >«a^>a"saaa>;'-'a>aaaaa 

{>•*■ l-l -1 1-|K»I-I„ >MI-ll-lt-l l-l >.Wf>. ^ 



^ M K*^ ►^ h** t> *^ t-H l-l I— I >H I— t b^ 1— I *— I >— ' ►-H I— ' »^ *-H b» l^ t> b> "^ t^ t-^ ►H I— I 

PS ks b, PS Pi ►> H b» l-l "-^ l-l l-l l-l h-i l-l l-l l-l i' ri "^ t> M i-< l-l ►> 
«»*■ ?• ?• l-l-l p,l-l l-l l-l >*l-lf> >" 



aK^^^ixK^^a >«a^>>;aaaaa>^>;>t;aaa> 



:xt««i5:Mxaaa >;'-'aa>;>;'^>aaa>">;>>>;a"a 



-xx>t'<a>aa ^-'aa>>;"aaaa>;>^aa>xat; 



Ki^^xx„ a a a^wM'-'>aaa^ aaa"> ^ 



a'^> 



3><[x!axwKa>; ^aaaaaa>Mxa>aaa"«"a> 



» 



8 .a 



2 S 



ri c 






330h 



1'^ 









o . 

O 9 ; 

r S is 



>a 



f>l-IIH 



a>' 



at«<xaKt><aaa >'^a5>>'-'s>aa>'-'aa>>a*^a >a' 

Mfj. l-l l-l l-l ,>l-ll-l f>l-lM|_,l-l |_|H< l-IJ^ Jj. Ml-I 



>>► 



>>► 



>>► 



'x«>«ww"a '-^'-'a>;aaa>>^>;>aaaa>;>;a> >a 












CONCENTRATION OF ECONOMIC POWER 203 

*>a"«k"«x"aas:'-' whh mm.-, «;-.«« g«„^gj^„^gj_,j_,^j-j«j-|>^hHi-,wi-,«[>,^i-<«jH 
"> >" -"-' ^>'^ > ^ > >> ^"^>> >^^'-' " >^ 



>aa('<Ka>a« at><>a 
aw K^wa^g-^hH > 




t«!k>t'<aaaa(«!aa>aa«aaa'-'t;aa>t><aa 


'-'-'a-'aa'-'Kt'<>;"HH« 
> '-'>■ 


-"-'«^^aa^'-> 


K ►* > > IH1-I>H)-II-I 


tHI-I^Mt-l^l-ll-I^M^l-IMM 
^ 1-1 l-l HI 




-^^^^Kt^a^^^^xt^a^ag^aa^^a-^Ba 


> 


aa^a->>-a 
> 


«a«">xaa""BB^>a"Baa'^""M>k(«! 


"'-'x>;«a'^a>a"""" 


'^a"aa>a"'a 

►Ht-I P-l 


-««>aa>>aaaaaaa'-'a"'-"-"-"-'wa><« 


a"« :«aaa>a«-"« 
1 > 


-«-aa^>;"a 


"'^">ak>>^>aakaa^aaa'"'^"«>a« 




--aa-a"a>a">-- -■ . ^. . - ^^^. ..... 




> > 




„„gg„„„„^„„g„„ ■" - ' " ■ . ^^^^^^^..^.... 


„„WH, 





a-'x 



'3aa>: 



W >> H-l I— I W M h-l l-l kH HH >-l h-l >>►> I— (>-( 



'-«'-'>aK>>assaKaB' 






a'-'x'-' 


-^a>aaaa-^ 


aaaa " 


^>'-3axa'^aa>'-'aaaaa"^ 


H l-l 1-1 


-xaxx 


U-l 1— 1 1— 1 U-J 1— 1 «— f i— 1 »- 1— <.—. 1—1 .—.■—. .-J ,_.._.■_.._,.. ._,._,,_,wj ^^__^ l-_.l_-.k. ._. l_. _ ._■ t_. . l—l .— 1 1_1 l-_. 1— . 1—1 t-i k_l l_J I J ».. I-J 1 J 


> 


^ ^^« 


««««►, 


1-1 ?*■-* Wl-I l-l 

> 







»aa>a>aa'-'5:>>i=i a'^5:'^>>5:t 



>aa>>a>araaa>>> 



aaa^at>'a 



xaax 

hHt— ll-HhH 

> 






> a!-.> 



-a '-a'-'a>;aa>>;>aa^a>a>;'^>;a3' 



'xaax 



08-0 
2 OS o 



s 

"3 ' 

0ST3 



■g 03"o 
"1 i> 15 



IS"? 



I -I hr 

I St, 03 CO 



OT3 o 

CS Q u 



M <fl 5 
,3 a o-p 



^^"2 
fc g 5 =5 

Ci K/> <^ d ® • 

a.S^2~ o X 









J2 '^S--! '5 
*-• J o! •'^ . Jjd 



.2.3.3.2 -S£.q? SS i § ?5 ^-^ §^ 8 2 5 3-S 3 3^ ^ i 



-<jm 



03— O 03 03 C3 05 O 

psmmooooo 



.Q S " c ca.3^.3.2'o = 



O O C O O «.a 03 3-3'3it 5o= O O C "5 O o: 03 „ 

OOOfeiJZCMOO'raaiOoQajOraooOE-ieP^fM J 



^ a 

aa 

'S'a 

PLiAh 



us u? U3 IC *0 lO >0 IC >0 lO kC tC lO to CD V CD V CO <0 V CC ^ CD 



0-— McCTj'.cccr^ocoso — Mc?' 



I cs c^ c< c^ C^ c 



■ ul tC t^ 00 05 O i— o « ■«>■ f^ 



204 



CONCENTRATION OF ECONOMIC POWER 



>> > > >> 






> 



> £>£ > 



■(l-CJ^l— I ^M 



W M l-C »-lj> 






"'>a^a«K««'^a>S«a"^>>a'^ b^a' 






a>>a>a5:aa"t^"xa'-'aaa>s:« ><S' 



>a G" 



>>> 



>> 



>as>s>S!>S"'xas"a"aaaaa xa' 



'>>x >> 



aJ^aaa'*'a'*'^'~'X'~'aaa'~"~''*''~'aa xa^aa*' 



'a>x >> 



>>^ (_^ K^ H^ K^ HH l-H HH HH H-( I— ( 1— ( H^ t-H HH ^H hH f-> t-H )— 4 K> ^H i-H »—< ^-^ ►:> 



rN i-H l-H »^ ►^ I— * "^ ^ 



a>5x >> 



a>>£i>S;5«g a>a'-"^ >'^a>" sa a^^ 
> i> > > > 



a>^x >> 



^H K. L^ HH )— 1 ^ l-H K. ►-^ t— 1 k> )— I HH I— I >-H t-( H- 1 1^ hH H- 1 h-l HH ►-( |-H t-H t— 1 1— I h 
l_l !■*• PS I— 1 ►-» "* t-1 1^ f^ KS fv^ I— I 1^ l-O-l l-HI— I I— II— I 

i-l >_, i_< »* M 1^ l-H M 1^ 1-C |_|M 



'a>x >> 



">a>s!=!>s>'-'x'-'>aa'-"-'aa>'-* aa'-'>s:>aa>K >> 

^aa^a>aaa^>a^aa"^">aa xa^-'^a^aaax ^^ 

>a^^xa>'-'a>a"X'^as:aa'-'ag aa»>aaxaa a^ 

ra>>xa>aaaa>xa">>>>>> aaaaaaaaaa a> 







o r^ 00 03 o — <M cc -*j« lo o u 



CONCENTRATION OF ECONOMIC POWER 



205 



>>--> 






» 



^>>,^^^^t>>^ 


l-H 


^•^^ 


xxxsa 


>sx>;aa'-"-'sa_x>>xaxx 


>>>""">">>« 


>> 


H-ihH^-* 




" >> > > 


^x^^»>->^>y.x 


x> 


>a« 


xx>xx 


aH>x>H>s^55a--5x>>; 



>>>>w««gaiiia >« >>B >>a>>; aa>;>;>>K>a'-'>'-"-"-'>>aa 



>>>> 



>^^"'^ -^^ ^^" ^^3>" Si 



>i— t^^'^^^l-H^-s.l^l-(l— IHHI— l^^^^l—^l-H 



>> 



>> 









>> 



r» 






i_< w Mw hi M hH ►> i-H w ►> i-ii> »>'-"-< "-I '-1 1> b<! >-* t>L>>!!!! 
i_i I— ( I— 1 1— I h- 1 i_|i^|>^i_4K* K^f^ ^i_(i_i s>!>Cl'^t> ILtL'^'"' 

1— II— l>-l>> >> •^M "^l-H I— ll— I C 1^ I— 1 1-1 1^ l-IW »-| 



, l-l ''M I— I 



i-i i-c 1— 1 1— 1 1— I h-i ►> ►-> 1— 1 1— 1 1— I >it>. i-ii— ii-i ►^ K, >-i 1-1 1-1 >— 1 1— I !> l-l i-< t-l > H t"* t"' >• t> S H t"' H ^ 



>£::> 






W MM i-HI-ll-l « WW 



ass ***'~'aap-< aa """a i-n-iass aa'~'> a^aa'"' wwasa'"' 



>aaa 



>>>> 



i> I— I I.H hH hH >-^ »^M I— l»-l li^ >^ hH I— t H- 1 t— t PT I— < 

l-ll-l hH hH WH (-1 >>•> l-l> 



il-IWI-IH-ll-ll— O-IWI-IM 






) l-i <u« 

• 5? a< 









on 



!" in " — 

•r! i:< fl <D 



o « a 



■ - „ 5 ■ » 1^ S e 



;|o®^ 



I &) lA 



" S & 1b 



•9. 

D 

<pq^(i,;i,H5 W WO 






5ij_o " 5 ■— o" oi -3 



2-9 w 

S2 Z 




.c « 






MW^iO^Dt-aOOiQi-HN 



* N CO-* lo^h^go^ O^ 



d Od Od 0% ^ O) ^ 



CO CO CO CO CO <0 CO CO CO CO 



coco<o^^^*o^*^«•^^^*^•^*^•^* 



206 



CONCENTRATION OF ECONOMIC POWER 



oS^ 









>>»>xt'<>>">> 



^> > > ^ ^ 



s^»^aB-n->> 



> 



:>>>>Ba'-"-"-'>> 

4 l-HI-l K, h-ll-l 



l-l >-<<-< »* Ml-" 



l-l'^2^l-l>ri-ll-l ►H>-ll-l'f^ 



>BB> >>>> 
l-lt-ll-l «-"tH>-lhH 

>> 



„BWH BBBB 

l-Hl-l l-( 

> 



^>>a BB>B 






wi-ii-i i-ii_ii_t 



>>>B >;>BB 






l-H ^ t^ )— • ►^ »-H h-i K^ "--^ t-H ^ I h-" HH K^ "^ 
'-'>'-<^>^>-l>'^'^'-'-' .>-HI-(>l-l 



-J 03'; 



.b 



O •■„ <u o 



S^^-C 



w £'3'OS2«i3 



"03X12 

aooooo" ° 
"- '"a o 
n nx3x:i3x] a § a ® 



ag 

o o o 2 



t:>B HMB« 

>=* ►> M l-ll-l 



b"^ bH>b 
>> > 



^^^ BkBB 

r^r^t-t l-l l-Hl-l 
> » 



MKB «M^^ 



> 



^B^ MMBH 
^ > 



> 



BBB HtxIBM 

>>> > 






BBB MXXK 



HXXM 



^^B ««B« B 

!> > > 



»>B >>BB ^BS: XKB><1 B 

l-ll-IW l-l|_ll-| *^>'^ tt > 



jWaai^S gi^-r > 



coco 



£ «.SS 



■a§^P5ffl(5Smm(5QSMwM3p3o 




CO CO C*5 CO CO CD CO 



CONCENTRATION OF ECONOMIC POWER 



207 




>>'- SB xa^ 



'> W>^> 






IX 



>»>';:: >> «« 



> > 



a> 



> 



X>>-'>'-' !i!>>>M B'-'>>>'-'XMW KB >B>> >BBB 



4^ I— ( K^ w hH l-H HH ►^i, ►-> l-H M h> H-l I— I H-i )— 1 HH ►> J— * t> t> ""^ fc> »-< l-H >— I h- HH H-l I— ( 



'-'>">^B"K 



t-l l-l l-H l-l >~^ l-l l-c 1— I HH >-l kJ •> b> '—"—"—"-"—"-' Ix* I— II— I I— If^b*!— 1 '-lt>t> 



>> 



>BBBt 



1>'-'B 
> 



^^>-> 



)-H M '^ HH 1-^ HH HH *^ HH *^ HH )^ ^ hH ^H hH 

> > > 





BB^^M 


>BBBBB>;'-'t>< 


KX 


VI 
VIII 

III 
VIII 


>B^" 


>B 


>BB"B>"B 


I ;^^>" 


BB>^« 


>;>BBBB>;'-*« 


MW 


^XBB 


>^b'~' 




;BB-B>"5 


B«>-r 


> 


>'-'3>;BB'-"-^t^ 


>> 


>B>> 

> 


B>t!BX 

M "^ HH 


B^K 


B>'-' :'-'> IB 



tiBB'- XXBBX >>bbb"5:bx bb >m>b b»^ 



>5»>'-'. BBSIBK >>>>>>'-"-'t: k« BMBB BB>^B XBB>S:BBBB"^ 



>>'^> 



>««> 



>r-'B"> 



>>«>« J>B>BB'-'>B^ >X BXB^ >>B' 



'BB>' 




= •0 . 

;3S 



fflliilipiliiiiilfl 






a,--^C'o<i>o6£<jj-2c9'5; 



«o 



S^S3!SS E:?2^"5" m- m «o t- 00 o> o — • pj co-* >osDt~ 

^ <q* ^ ^ T}< ^ "^ "^ "^ ^ ^^ »C 10 IC »C Ct »C O O O (O <D CD CO CO 



05 o-<e<«co 



«lOCOt^OOOSO^C^W^ 



r^t^t*r»t*t^r^i 



cDt^r^t^t^- t^r^t^t^t^t^oooooooooo 



t^ t>. t^ t^ i^ t^ r^ t^ t* t^ t^ r^ t^ t^ r* f^ t^ 1^ I 



208 



CONCENTRATION OF ECONOMIC POWER 



Table 26. — Flexibility of commodity prices measured by various criteria ranked in ten 
groups for each criterion in order of increasing flexibility — Continued 

DESCRIPTION OF CRITERIA AND DISTRIBUTION OF SERIES 

[Wholesale commodity price indexes of the Bureau of Labor Statistics, used in each measure, are divided 
into 10 groups, as nearly equal in number as possible, with Items in group I showing least flexibility, 
and group X the greatest flexibility] 



Group 


Group limits 


Num- 
ber of 
items 


Group 


Group limits 


Num- 
ber of 
items 


Number of monthly changes in 95 chances, January 
1926-December 1933 


Number of monthly changes in 39 chances, Janu- 
ary 1926-April 1929 




A 
0to4 - 


619 


I 

II 

III 

IV 

V 

VI 

VII 

VIII 

IX 

X 


B 



652 


I 


75 
61 
60 
61 
59 
56 
62 
62 
63 
60 


75 


II 


6to7 -. 


1... 


40 


III 


8toll -.- 


2 to 3 


95 


IV 


12 to 16 


4 to 5 


63 


V 


17 to 22 . ... 


6 to 8 


58 


VI 


23 to 34 


9 to 13 


60 


VII 


35 to 49 


14 to 20 


63 


VIII 


50 to 77 


21 to 30 


65 


IX 


78 to 92 


31 to 37. 


58 


X 


93 to 95 . . .. 


38 to 39. 


76 










Percent of decline from June 1929 to February 1933 


Percent increase from depression low to peak of 1937 




C 

No change and increases. - . 


664 

67 
67 
68 
67 
65 
67 
64 
68 
65 
66 


I 

II 

III 

IV 

V 

VI 

VII 

VIII 

IX 

X 


D 

Decreases to 4.3 percent increase . 
4.4 to 12.0 


643 


I 


65 


II 


0.1 to 10.9 . ... 


62 


III 


11.0 to 17.9 


12.1 to 23.2 


65 


IV 


180 to 25.2 


23.3 to 33.2 


65 


V 


25.3 to 31.3 


33.3 to 45.7 


64 


VI 


31.4 to 37.5 . .- 


45.8 to 57.0 


63 


VII 


37.6 to 43.9 . 


57.1 to 77.4_ 


66 


VIII 


44.0 to 50.9 


77.5 to 101.0 


62 


IX 


51.0 to 58.9 


101.1 to 172.0 


64 


X 


59.0 to 85.3 


172.1 to 927.2 


67 










Average of 1929 and 1937 indexes, less 1932 index, on 
basis of 1929=100 percent 


Percent decrease, average of 1929 and 1937 peak.<5 to 
depression low index 




E 
-20.6to0.4 


617 


I 

II 

III 

IV 

V 

VI 

vn 

VIII 

IX 

X 


F 

Increases to 8.5 percent decrease. 
8.6 to 16.7 


640 


I 


61 
60 
62 
61 
63 
62 
60 
62 
63 
63 


63 


II 


0.5 to 7.5 


65 


HI 


7.8 to 12.8 


16.8 to 23.1 


65 


IV 


13.0 to 17.5 . . _ 


23.2 to 28.0. 


63 


V 


17.6 to 23.2 


28.1 to 33.6_ 


62 


VI 


23.3 to 27.4 


33.7 to 39.7 


65 


VII 


27.5 to 32.9 


39.8 to 46.3 


65 


VIII 


33.2 to 39.4 . 


46.4 to 57.3... 


65 


IX 


39.5 to 47.5 


57.4 to 65.9 


64 


X 


47.9 to 81.8 


66.0 to 90.0 


63 










Percent decrease, average of 1929 peak and 1936- 
March 1937 peak, to depression low 


Percent decrease from average of 1929 and 1937 t 
1932 




G 

Increases to 7.8 percent decrease. 
7.9 to 15.3 


655 


I 

II 

III 

IV 

V 

VI 

VII 

vin 

IX 
X 


H 

28.5 increase to 0.4 decrease 

0.5 to 7.4 


652 


I 
II 


65 
65 
66 
66 
65 
66 
65 
65 
68 
64 


66 
63 


III 


15.4 to 20.9 . . . 


7.5 to 12.7.. .- 


64 


IV 


21.0 to 27.0.... 


12.8 to 18.2.... 


67 


V 


27.1 to 32.7 


18.3 to 23.4 


66 


VI 


32.8 to 38.5 


2.3.5 to 28.5.. 


64 


vn 


38.6 to 45.4 


28.6 to 34.8 


66 


VIII 


45.5 to 55.8 


34.9 to 41.4 


64 


IX 


55.9 to 65.4 


41.5 to 51.6 ...„ , 

51.7 to 81.1 


67 


X 


65.5 to 89.9 


66 











See footnotes at end of table 



CONCENTRATION OF ECONOMIC POWER 



209 



Table 26. — Flexibility of commodity prices measured by various criteria ranked in ten 
groups for each criterion in order of increasing flexibility — Continued 

DESCRIPTION OF CRITERIA AND DISTRIBUTION OF SERIES— Continued 



Group 


Oroup limits 


Num- 
ber of 
items 


Group 


Group limits 


Num- 
ber of 
items 


Percent decrease, average of February 1929 and 
February 1937 to February 1933 


Peak month of index, 1929-31 




I 


644 


I 

II 

III 

IV 

V 

VI 

VII 

VIII 

IX 

X 


J 
December 1931 


656 


I 


62 
63 
65 
66 
66 
64 
67 
64 
64 
63 


71 


II 


1.7 to 10.0...... 


December 1930 to November 1931 

June 1930 to November 1930 

January 1930 to May 1930 

November 1929 to December 1929 
September 1929 to October 1929.. 
June 1929 to August 1929 


61 


III 


10.1 to 16.3 


59 


IV 


16.4 to 21.0 . . . 


61 


V 


21.1 to 26.2 


60 


VI 


26.3 to 33.3 


72 


VII 


33.4 to 40.1 


72 


VIII 


40.2 to 48.5 


April 1929 to May 1929 


67 


IX 


48.6 to 57.5 


March 1929 


60 


X 


57.6 to 86.8 


January 1929 to February 1929... 


83 








Low month of depression 1932-34 


Peak month of index 1936-38 




K 

December 1934 


656 


I 

II 

III 

IV 

V 

VI 

VII 

VIII 

IX 

X 


L 

December 1938 


650 


I 


80 
56 
50 
88 
52 
71 
40 
82 
78 
59 


158 


II 


December 1933 to November 1934 
August 1933 to November 1933... 
June 1933 to July 1933 


(') 




III 
IV 


July 1938 to November 1938 

April 1938 to June 1938 


40 
67 


V 


May 1933 


December 1937 to March 1938 

September 1937 to November 1937. 
June 1937 to August 1937 


61 


VI 


April 1933 


67 


VII 


March 1933 


73 


VIII 


December 1932 to February 1933- 

July 1932 to November 1932 

January 1932 to June 1932. 


April 1937 to M-ay 1937 . 


62 


IX 
X 


January 1937 to March 1937 

January 1936 to December 1936. . 


71 
61 


Average change (index points) per change, 
1926-April 1929 


January 


Aggrega 


le change (index points) less net 
January 1926-AprU 1929 


change, 




M 
0.0 to 1.6 


577 


I 

II 

III 

IV 

V 

VI 

VII 

VIII 

IX 

X 


0.0 - 


652 


I 


66 
60 
58 
59 
57 
54 
58 
60 
57 
58 


198 


II 


1.7 to 2.2 .. . 


(*).. 




ni 


2.3 to 2.6 


(!) 




IV 


2.7 to 3.2 


0.1 to 0.8 


65 


V 


3.3 to 3.8 


9 to 17 


65 


VI 


3.9 to 4.5 


18 to 28 


61 


VII 


4.6 to 5.6 


29 to 45 


65 


VIII 


5.7 to 6.7 ... 


46 to 79 


66 


IX 


6.8 to 8.9 


80 to 151 


67 


X 


9.0 to 34.7 


152 up 


65 











' The code numbers are those used in the wholesale price bulletins of the Bureau of Labor Statistics, 
except that items followed by "c" are composites as explained below. 

» These measures are explained on pages 166-168 of the text, and also at the end of this table. See end of 
table. 

• These composites include the following individual series (The numbers shown for the individual series 
In parentheses are their code numbers used in the wholesale price bulletins) : 

Composite 2c includes: (2) Corn, No. 2, yellow; (3) Corn, No. 3, yellow. 

Composite 6c includes: (6) Wheat, No. 2, red winter, Chicago; (7) Wheat, No. 2, hard; (8) Wheat, No. 1, 
northern spring; (9) Wheat, No. 2, dark northern spring; (10) Wheat, No. 1, hard white; (11) Wheat, No. 
2, red winter, St. Louis. 

Composite 13c includes: (13) Cows, fair to good; (14) cows, good to choice. 

Composite 15c includes: (16) Steers, fair to good; (16) Steers, good to choice. 

Composite 17c includes: (17) Hoes, heavy butchers; (18) Hogs, light butchers. 

Composite 19c includes: (19) Ewes, native; (21) Wethers, fed. 

Composite 22c includes: (22) Poultry, live, Chicago; (23) Poultry, live. New York. 

Composite 24c includes: (24) Cotton, Galveston; (25) Cotton, New Orleans; (26) Cotton, New York. 

Composite 27c includes: (27) E?gs, Boston; r28) Eggs, Chicago; (29) Eggs, Cincinnati; (31) Eggs, New 
York; (32) Ef;gs, Philadelphia; (33) Eggs, San Francisco. 

Composite 40c includes: C40) Hay, clover; (41) Hay, Timothy. 

Composite 55c includes: (55) Pot.itoes, Boston; (56) Potatoes, Chicago; (67) Potatoes, New York. 

Composite 59c includes: (59) Wool, grease, cloth; (60) Wool, grease, delaine; (61) Wool, grease, half blood; 
(62) Wool, grease, medium; (63) Wool, scoured, fine; 

Footnotes continued on p. 210. 



210 CONCENTRATION OF ECONOMIC POWER 

Table 26. — Flexibility of commodity prices measured by various criteria ranked in ten 
groups for each criterion in order of increasing flexibility — Continued 

Composite 65c includes: (65) Wool, Argentine; (66) Wool, Australian; (67) Wool, Montevideo. 

Composite 68c includes: (68) Butter, Boston, extra; (69) Butter, Boston, 1st; (70) Butter, Boston, 2nd; 
(71) Butter, Chicago, extra; (72) Butter, Chicago, extra, 1st; (73) Butter, Chicago, 1st; (74) Butter, Cincinnati; 
(75) Butter, New Orleans, fancy; (76) Butter. New Orleans, choice; (77) butter. New York, extra. (78) 
Butter. New York, Isf (79) Butter, New York, 2nd; (SO) Butter. Philadelphia, extra; (81) Butter, Phila- 
delphia, extra 1st; (82) Butter, Philadelphia, 1st; (83) Butter, St. Louis; (84) Butter, San Francisco, extra; 
(85) Butter, San Francisco. 

Composite 86c includes: (86) Cheese, Chicago; (87) Cheese, New York; (88) Cheese, San Francisco. 

Composite lOSc'includes: (103) Flour, standard patent, Buffalo; (104) Flour, 1st, clear, Buffalo; (105) Flour 
short patents, Kansas City; (106) Flour, straight,' Kansas City (107) Flour, standard patents, Minneapolis; 
(108) Flour, 2nd patents, Minneapolis; (109) Flour, patents, Portland, Ore.; (110) Flour, shorts, patents, 
St. Louis (111) Fluur, straights, St. Louis; (112) Flour, standard patents, Toledo. 

Composite 141c includes: (141) Beef, fresh, Chicago; (142) Besf, fresh, New York. 

Composite 190c includes: (190) Boys' shoes; (192) Misses' shoes. 

Composite 194c includes: (194) Shoes, calf, blucher; (195) Shoes, calf, 4A; (196) Shoes, cord tip; (198) 
shoes, series 1; (199) Shoes, series 2; (200) Shoes, side oxford. 

Composite 201c includes: (201) Shoes, kid: (204) Shoes, brown. 

Composite 202c includes: (202) Shoes, work; (203) Shoes, elk. 

Composite 205c includes: (205) Shoes, blucher, oxford; (207) Patent ieuher pumps; (210) Shoes, elk, 
colors. 

Composite 206c includes: (206) Shoes, strap; (209) Kid pumps. 

Composite 212c includes: (212) Steer hides, native; (213) Steer hides, Texas. 

Composite 222c includes: (222) Leather, oak bends; (223) Leather, oak scoured back; (224) Leather, union 

Composite 261c includes: (261) Muslin, No. 1, 80x92; (262) Muslin, No. 2, 80x80; (263) Muslin, No. 3, 80x80. 
Composite 270c includes: (270) Sheeting, light; (271) Sheeting, heavy. 

Composite 272c includes: (272) Sheeting, brown; (273) Sheeting, medium; (274) Sheeting, light. 
Compo.<;ite 281c includes: (281) Yarn, 10/1, north; (282) Yarn, 22/1, north; (283) Yarn, 40's, south. 
Composite 284c includes: (284) Yarn, 20/2; (285) Yarn, 40/2. 

Composite 295c includes: (295) Rayon, 150, 1st; (296) Rayon, 150, 2nd; (297) Rayon, 300, 1st; (298) Rayon, 
300, 2nd. 

Composite 299c includes: (299) Silk, Canton; (300) Silk, Japan, white; (301) Silk, Japan, double extra; 
(302) Silk, Japan, yellow. 
Composite 303c includes: (303) Silk yarn, 62/1; (304) Silk yajn, 60/2. 

Composite 306c includes: (306) Silk yarn, crepe; (307) Silk yarn, organzine; (308) Silk yam, tram. 
Composite 318c includes: (318) Suitings, serge, 15-ounce; (319) Suitings, serge, 16-ounce; (320) Uniform 
serge, fine; (321) Uniform serge, medium. 

Composite 325c includes: (325) Yarn, half blood; (326) Yarn, fine. 
Composite 341c includes: (341) Jute yarn, No. 1; (342) Jute yarn. No. 2. 

Composite 350c includes: (350) Retort coke, Alabama; (351) Retort coke, New Jersey; (352) Retort coke , 
Chicago. 

Composite 359c includes: (359) Gasoline, Northern Texas; (360) Gasoline, Oklahoma; (361) Gasoline, 
Pennsylvania. 
Composite 425c includes: (425) Iron ore, Bessemer; (426) Iron ore, non-Bessemer. 
Composite 427c includes: (427) Pig iron, basic; (428) Pig iron, Bessemer. 

Composite 457c includes: (457) Fence wire, annealed; (458) Fence wire, barbed, galvanized; (459) Fence 
wire galvanized. 

Composite 462c includes: (462) to (467) passenger cars, 6 series. 

Composite 565c includes: (565) Plate glass, 3-5 square feet; (566) Plate glass, 5-10 square feet. 
Composite 567c includes: (567) Window glass. A; (568) Window glass, B. 

Composite 574c includes: (574) Individual prepared shingles; (575) Prepared roofing, medium; (576) pre- 
pared roofing, slate. 

Composite 666c includes: (666) Fertilizer, Middle Atlantic; (668) Fertilizer, New England; (670) Ferti- 
lizer, South Atlantic, other; (671) Fertilizer, South Central and Southwest. 
Composite 667c Includes: (667) Fertilizer, Middle West; (669) Fertilizer, South Atlantic, 3-8-3. 
Composite 702c includes: (702) Dinner sets; (703) Dinner sets, spray. 
Composite 751c includes: (751) Rubber, amber; (752) Latex crepe. 
' Groups I and II were combined for criterion L and are indicated as group I. 
* Groups 1, II, and III were combined for criterion N and are indicated as group I. 
« No change in price between January 1926 and April 1929. 



CONCENTRATION OF ECONOMIC POWER 



211 



Table 27. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Percent of decline, 1929-33, compared with percent or recover, 1933-37. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION D 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X 


1 


1 

1 
1 
5 
8 
6 
11 


1 

1 
5 
3 

6 
10 





2 


3 

1 
3 
10 


2 
6 
14 


6 
15 


8 


42 
13 
5 

4 

1 


65 


O IX 


28 
20 
4 
3 


65 


2; VIII 




5 
1 
9 
9 


4 

10 
4 


10 
13 
8 
3 
4 


67 


O VII 


2 
3 
4 
3 
9 
12 


13 
9 
7 
8 
3 
2 
2 


67 


S VI.-. _ ._. 


12 
13 

8 
8 

2 


64 


g v.. 


12 
13 
13 
3 
3 


63 


1 IV 


13 

12 

9 

5 


65 


3 III. 


11 
16 

5 




1 
1 
1 


68 


II 


14 
16 


3 




63 


I 


31 


65 










Total 


65 


63 


65 


63 


64 


63 


66 


62 


63 


68 


642 







Source: Criterion C — Bureau of Labor Statistics. Criterion D— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBIUTY 



Criterion C— Percent decline from June 1929 to 
February 1933: 

Oroup Percent decline 

I... Increase and no change 

II 0.1-10.9 

III 11.0-17.9 

IV.. 18.0-25.2 

V 25.3-31.3 

VI 31.4-37.5 

VII 37.6-43.9 

VIII 44.0-50.9 

IX 51.0-58.9 

X 59.0-85.3 



Criterion D. — Percent increase from depression low 
to peak of 1937: 

Group — Percent increase 

I- Decrease to 4.3 increase 

II 4.4-12.0 

III - 12.1-23.2 

IV 23 3-33.2 

V 33.3-15.7 

VI 45.8-57.0 

VII 57.1-77.4 

VIII 77.5-101.0 

IX 101.1-172.0 

X 172.1-927.2 



212 CONCENTRATION OF ECONOMIC POWER 

Table 28.- — Correlation table of comnwdities distributed according to their ranks by 
two criteria of wholesale price flexibility 



[Timing of predepression peak (1929-31) compared with timing of depression low (1932-34). 
classified in 10 groups — group I least flexible, group X most flexible] 

CRITERION K 



Oommodities 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X 


2 
2 
7 
2 
6 
3 
2 
7 
12 


6 

1 
4 
1 
12 
4 
5 
4 


2 
3 
6 
2 
4 
8 
3 


4 
3 
11 
12 
4 
10 


2 
4 
3 
10 
5 


15 
3 
4 

13 


7 
8 
6 


12 
11 


19 


16 
4 
3 
4 

10 
5 
6 
4 
4 
3 


85 


IX 


10 
10 
10 
10 
6 
5 
5 

3 


49 


*Z VIII 


12 
15 
14 
6 
5 

5 
2 


66 


O VII 


3 
2 
3 
4 
4 
3 


72 


S VI 


5 
11 
12 
4 
3 
1 


72 


g V 


4 
12 
4 
7 
1 


60 


1 IV 


7 
18 
16 

3 


61 


D III 


4 
8 
10 


59 


II 


6 
13 


61 


I 


37 


71 










Total .. . 


80 


56 


60 


88 


62 


71 


40 


82 


78 


59 


656 







Source: Criterion K — Bureau of Labor Statistics. Criterion J — Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion J.— Peak month of index, 1929-31: 

Group— Month 

I December 1931 

II December 1930-November 1931 

III June 1930-November 1930 

IV January 1930-May 1930 

. V November 1929-December 1929 

VI _.. September 1929-October 1929 

VII June 1929-August 1929 

VIII April 1929-May 1929 

IX March 1929 

X January 1929-February 1929 



Criterion K.—liOw month of depression, 1932-34: 

Group— Month 

I December 1934 

II December 1933-November 1934 

III August 1933-November 1933 

IV.... June 1933-July 1933 

V. May 1933 

VI. April 1933 

VII March 1933 

VIII _ December 1932-February 1933 

IX July 1932-November 1932 

X January 1932-June 1932 



CONCENTRATION OF ECONOMIC POWER 



213 



Table 29. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Timing of pre-depression peak (1929-31) compared with post-depression peak (1936-38). Commodities 
classified in 10 groups — group I least flexible, group X most flexible] 

CRITERION L 



Group 


land n 
combined 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X.. 


6 
6 
14 
7 
7 
15 
12 
21 


4 
1 
6 
1 
9 
3 
3 


6 
1 
3 
5 
9 
3 


10 
2 
8 

7 
5 


4 
3 

5 
18 


9 
2 

7 


17 
7 


21 


8 
5 
6 
7 
13 
9 
1 
4 
5 
4 


84 


XI 


23 
6 
2 
9 
3 
3 

1 
1 


50 


vni .. 


10 
9 
4 
3 
6 
1 
1 
3 


65 


•^ VII... _ 


16 
8 
8 
8 
5 
8 

■ 


72 


^ VI 


8 
7 
12 
7 
1 
2 


72 


S V 


5 
2 
8 
9 
4 


56 


W IV .._. 


11 
11 
3 
6 


58 


^ m 


3 
9 


68 


« n.... . 


28 
41 


59 


^ I 


70 






Total-- 


157 


39 


57 


60 


67 


71 


61 


70 


62 


644 







Source: Criterion J— Bureau of Labor statistics. Criterion L — Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion X— Peak month, 1929-31: 

Group — Month 

I December 1931 

II December 1930-November 1931 

III June 1930-November 1930 

rV January 1930-May 1930 

V - November 1929-December 1929 

VI September 1929-October 1929 

VII June 1929-August 1929 

VIU April 1929-May 1929 

IX.- March 1929 

X January 1 929-February 1929 



Criterion i.— Peak month of index 1936-38: 

Group— Month 

I and II December 1938 

III ... July 1938-November 1938 

IV April 1938-June 1938 

V December 1937-March 1938 

VI _ September 1937-November 1 937 

VII June 1937-August 1937 

VIII. April 1937-May 1937 

IX... January 1937-March 1937 

X - January 1936-December 1936 



214 



CONCENTRATION OF ECONOMIC POWER 



Table 30. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale -price flexibility 

[Timing of depression low (1932-34) compared with post-depression peak (1936-38). Commodities classified 
In 10 groups— group I least flexible, group X most flexible] 

CRITERION L 



Group 


I and II 
combined 


ni 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X -- 


7 
9 
2 
3 
8 
13 
33 
29 


2 
2 

1 
1 
3 
3 

4 


9 
3 

1 
1 
5 
6 


6 
3 

n 

1 

10 


1 
9 
3 

6 ■ 


7 
11 


7 
16 


n 


7 
9 
10 
3 
3 
3 
7 
4 
6 
9 


5g 


IX 


16 
19 
10 
3 

2 
1 
5 
2 


78 


vni 


16 


18 


81 


W VII 


9 
16 
6 
1 
2 
1 
2 


5 
5 
6 

2 
3 


39 


is VI - -- 


r"i5 

9 
12 
4 
3 
4. 


68 


2 V. 


6 
12 
5 
3 
4 


52 


g IV 


16 
3 

7 
5 


87 


Eh III 


5 
11 
6 


50 


pj II 


16 
42 


54 


U I 


77 






Total 


159 


38 


56 


60 


66 


71 


62 


71 


61 


644 







Source: Criterion K — Bureau of Labor Statistics. Criterion L — Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion K.—liOw month of depression, 1932-34: 

Group — Month 

I December 1934 

II December 1933-November 1934 

III.. August 1933-November 1933 

IV... June 1933-July 1933 

V May 1933 

VI April 1933 

VII March 1933 

VIII December 1932-February 1933 

IX... July 1932-November 1932 

X January 1932- June 1932 



Criterion X.— Peak month, 1936-38: 

Group— Month 

I and II December 1938 

III July 1938-November 1938 

IV April 1938-June 1938 

v.... December 1937-March 1938 

VI September 1937-November 1937 

VII- June 1937-August 1937 

Vllf... April 1937-May 1937 

IX January 1937-March 1937 

X January 1936-December 1936 



CONCENTRATION OF ECONOMIC POWER 



215 



Table 31. — Correlation table of commod't'ies distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with amplitude of cyclical movement. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION F 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


vni 


IX 


X 


Total 


X 












2 
2 
4 
10 


1 
3 
13 1 


6 
13 


20 


31 

23 

6 

2 


60 


IX .-- 










1 
3 

9I 


18 


63 


< VIII 








1 

7 
9 
9' 


12 
4 
9 


62 


g VII. - 


1 
1 
2 
1 

10 
11 


3 

1 
2 

7 
8 ■ 


4 
4 
9 

n ' 


11 
14 
8 
9 

I 
1 


61 


2 VI... 


i — T 
9 

14 
9 
3 


51 


« V 


8 
7 
10 
5 
3 







m 


E- IV.. 


7 
13 
6 
3 


67 


tf III 


8 
14 
8 


59 


" II 


17 
23 


1 






59 


I 


33 


70 














Total 


59 


61 


58 


55 


56 


62 


61 


62 


64 


62 


600 







Source: Criterion A — National Resources Committee. Criterion F — Bureau of Labor Statistics. 



DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBIUTY 



Criterion ^.—Number of monthly changes, in 95 
chances, January 1926-December 1933: 



Group— 

I 

II..- 



Number of changes 

0-4 

5-7 



III .: 8-11 

IV.. 12-16 

V 17-22 

VI. 23-34 

VII 35-49 

VIII 50-77 

IX 78-92 

X 93-95 



Criterion F. — Percent of decrease from average of 
1929 and 1937 peaks to depression low index: 



Group- 



Percent decrease 



I Increase to 8.5 decrefse 

II. 8.6-16.7 

III 16.8-23.1 

IV 23.2-28.0 

V... 28.1-33.6 

VI 33.7-39.7 

VII 39.8-46.3 

VIII 46.4-57.3 

IX 57.4-65.9 

X 66.0-90.0 



247149— 41— No. 1- 



-16 



216 



CONCENTRATION OF ECONOMIC POWER 



Table 32. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with amplitude of cyclical movement. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION H 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X 




1 


1 




3 
1 
4 
6 
11 


1 
8 
8 


8 
6 
9 


6 

8" 


13 


28 

27 

7 

1 

1 


60 


IX 


1 


21 
17 
6 
4 
6 


65 


•< VIII 




3 
6 
4 
5 
« 


8 
7 
8 


14 
16 
12 
4 
2 


62 


5 VII.... 


4 
2 
6 

4 
8 


1 

2 
7 
Ifi 


6 
8 
10 
9 
5 
1 


62 


2 VI 


9 
6 
13 
8 
2 


57 


« V 


9 
9 
9 
10 

1 


57 


i^ IV 


11 
9 

15 
6 


61 


tf III 


5 
11 
20 






59 


" II 


6 
25 






1 


61 


I 


22 






74 
















Total.-- 


62 


57 


61 


64 


63 


55 


62 


62 


67 


65 


618 







Source: Criterion A— National Resources Committee. Criterion H— Bureau of Labor Statistics. 



DESCEIPTIONS OF CRITEBIA OF WHOLESALE PEICE FLEXIBILITY 



Criterion A. — Number of monthly changes in 95 
chances, January 1926-December 1933: 



Group— 

I 

II- 



Number of changes 

0-4 

5-7 



III - 8-11 

IV -- --. 12-16 

V - - 17-22 

VI -.. 23-34 

VII - - 35-49 

Vm 50-77 

IX - - 78-92 

X - - 93-95 



Criterion H. — Percent decrease from average of 
1929 and 1937 to 1932: 

QrQUp Percent decrease 

I 28.5 increase to 0.4 decrease 

II 0.&- 7.4 

III 7.5-12.7 

IV- — - 12.8-18.2 

V 18.3-23.4 

VI 23.5-28.5 

VII.- -- 28.6-34.8 

VUI -.- 34.9-41.4 

IX -. 41.5-51.6 

X -- 51.7-81.1 



CONCENTRATION OF ECONOMIC POWER 



217 



Table 33. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

iFrequency of change compared with amplitude of cyclical movement. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION I 



Group 


I 


II 


m 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Tota\ 


X 






1 


1 


1 
3 
2 
10 
U 


1 
2 
9 

7 


3 

5 
9 


10 
10 


14 


27 
25 
8 
3 

1 


58 


^ IX 






20 

17 
5 
1 
4 


66 


[j VIII 




1 
4 
1 
2 

7 

8 


2 
4 
6 
13 


1 
6 
5 
11 


14 
10 
9 
6 

1 


61 


§ VII 


3 

1 
5 
3 
U 
12 


9 
11 
10 
15 
5 
1 


59 


S VI 


10 
9 

10 
7 
3 
1 


53 


W V 


7 
8 
8 
5 
2 


61 


& IV 


4 
12 
11 

8 


61 


g ni 

II 


12 
12 






59 


12 
26 


1 


1 




58 


I 


24 


73 














Total 


59 


61 


58 


59 


57 


59 


68 


61 


62 


64 


608 



Source: Criterion A — National Resources Committee. Criterion I— Bureau of Labor Statistics. 



DESCEIPTI0N3 OF CRITERIA OF WHOLESALK PRICE FLEXIBILITY 



Criterion ^.—Number of monthly changes in 95 
chances, January 1926-Deeember 1933: 



Group— 

I 

II. 



Number of changes 
0-4 

5- 7 



III --- 8-11 

rv ---. 12-16 

V 17-22 

VI 23-34 

VII 35-49 

VIII 50-77 

IX 78-92 

X 93-95 



Criterion I. — Percent decrease, average, February 
1929 and February 1937 to February 1933: 

Qjoup Percent decrease 

I Increase to 1.6 decrease 

II 1.7-10.0 

III.. 10. 1-16.3 

IV 16.4-21.0 

V... _ 21.1-26.2 

VI .... 26.3-33.3 

VII 33.4-40. 1 

VIII _ 40.2-48.5 

IX 48.6-57.5 

X 57.6-86.8 



218 



CONCENTRATION OF ECONOMIC POWER 



Table 34. — Correlation table of commodities distHhuted according to their ranks by 
two criteria of wholesale price flexibility 

{Frequency of change compared with amplitude of cyclical movement. Commodities classified in 10 
groups — group I least flexible, group X most flexible] 

CRITERION I 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X. 






1 
4 

4 
1 
6 
9 


2 
1 
3 
3 

g 

7 


2 

1 
5 
14 
8 


2 
3 
7 
11 


5 
2 

8 


11 
11 


19 


32 
19 
6 
4 
1 

1 


74 


^ IX 


2 
1 
2 

7 
6 
8 
19 
4 


4 
2 
2 
4 
9 
15 


16 
15 

a 

2 

1 

2 
1 


59 


7, VIII.... 


11 
9 
7 
8 
2 
5 


64 


§ VII 


10 
10 
6 
10 

4 


62 


S VI 


7 
9 
10 
7 
5 
3 


59 


W V 


8 
9 
8 
2 
9 


58 


& IV 


6 
15 

9 
11 


61 


^ III 


14 
7 
14 


93 


"" n... 


18 


40 


I - 


13 




1 




73 


Total 


62 


63 


66 


66 


66 


64 


67 


64 


63 


63 


643 



Source: Criterion I— Bureau of Labor Statistics. Criterion B— Bureau of Labor Statistics. 



DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion B.— Number of monthly changes in 39 
chances, January 1926-April 1929: 



Oroup— 

I 

II... 



Number of changes 

..._ 

1 

2-3 

4-5 



III : 

rv 

V 6-8 

VI 9-13 

VII 14-20 

Vni— 21-30 

IX 31-37 

X 38-39 



Criterion /.—Percent decrease, average of February 
1929 and February 1937 to February 1933: 

QfOQp Percent decrease 

I_.- Increase to 1.6 decrease 

II. 1.7-10.0 

III 10.1-16.3 

IV 16.4-21.0 

V 21.1-26.2 

VI _ 26.3-33.3 

VII ._ _ 33.4-40. 1 

VIIl- 40.2^8.5 

IX 48.6-57.5 

X 57.6-86.8 



CONCENTRATION OF ECONOMIC POWER 



219 



Table 35. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with timing of pre-depression peak (192&-31). Commodities classified in 
10 groups — group I least flexible, group X most flexible] 

CRITERION J 



Group 


I 


II 


III 


IV 


V 


VI 


vn 


VIII 


IX 


X 


Total 


X 










2 
2 
6 
7 
5 


11 

15 
6 
9 


11 

7 
5 


6 
12 


6 


25 
16 
14 
8 
7 
5 
3 
2 
1 


61 


IX 








1 
3 
8 
10 
11 


10 
16 

5 
2 
2 
4 

1 
2 

1 


63 


<J VIII - 






1 
2 
7 
11 
12 


9 
10 
7 
3 
5 
2 
5 
3 


60 


"Z VII 




2 
2 
3 

9 
11 


12 
8 
9 
1 
7 
4 


63 


2 VI 




5 
3 
1 
3 
10 


54 


« V 




10 
7 
5 
5 
3 


59 


tH IV 


4 

14 
13 


12 
6 
4 

1 


60 


2 III.-.. 


11 
9 
2 


60 


o II 


15 
16 


61 


I 


39 


75 






Total.. 


70 


58 


55 


66 


52 


69 


64 


62 


49 


81 


616 







Source: Criterion A— National Resources Committee. Criterion J— Bureau of Labor Statistics. 

DESCBIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Crilerion A. — Number of monthly changes in 95 
chances, January 1926-December 1933: 



Group— 
I 

n. 



Number of changes 

0-4 

5-7 



in 8-11 

rV 12-16 

V 17-22 

VI. 23-34 

vn --- 35-49 

Vm 50-77 

IX 78-92 

X 93-95 



CriUrion J.— Peak month of index, 1929-31: 

Group— ^^^^ month 

I December 1931 

II December 1930-November 1931 

III June 1930-November 1930 

IV T^nuary 1930-May 1930 

v.. .- . November 1929-December 1929 

VI September 1929-October 1929 

VII June 1929- August 1929 

VIII April 1929-May 1929 

IX March 1929 

X January 1929-February 1929 



220 



CONCENTRATION OF ECONOMICS POWER 



Table 36. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with timing of depression low (1932-34). Commodities classified in lO 
^oups — group I least flexible, group X most flexible] 

CRITERION K 



Group 


I 


n 


III 


IV 


V 


VI 


VII 


vni 


IX 


X 


Total 


X .-. 


1 


2 
4 
4 
4 
3 
3 
9 


2 
2 

1 
4 
1 
2 
6 ■ 


2 

1 
I 
7 
6 
12 


1 
2 
5 
7 
7 


2 
3 

5 
12 


2 
5 

id' 


21 
23 


15 


15 
11 
7 
3 
4 
8 
7 
3 
4 


61 


IX 


14 
9 
4 
5 
6 
1 
2 
2 


63 


< vni 




16 

4 

7 

1 
4 
1 

1 


63 


^ vn 


2 
3 

7 

3 
10 
13 ' 


9 
5 
4 

1 
1 

1 


61 


2 VI 


13 
13 
13 
2 
3 


54 


g V 


4 

7 
8 
6 


59 


^ IV 


—To 

15 
18 
3 


60 


« III 


9 
7 
13 


59 


" II 


8 
18 


62 


I 


37 


74 










Total 


76 


55 


47 


75 


47 


66 


38 


78 


72 


62 


616 







Source: Criterion A— National Resources Committee. Criterion K— Bureau of Labor Statistics. 

DESCEIPTION9 OF CEITEEIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion X.— Number of monthly changes in 96 
chances, January 1926-December 1933: 



Group— 

I 

11... 



Number of changes 

0-4 

5-7 



ni 8-11 

IV 12-16 

V. 17-22 

VI. 23-34 

vn. 35-49 

VIII 50-77 

IX 78-92 

X 93-95 



Criterio-n K.—Liow month of depression, 1932-34: 



Group 



Month 



I December 1834 

II December 1933-November 1934 

III August 1933-November 1933 

IV June 1933-July 1933 

V_ May 1933 

VI April 1933 

VII March 1933 

VIII December 1932-February 1933 

IX July 1932-November 1932 

X January 1932-JuEe 1932 



CONCENTRATION OF ECONOMIC POWER 



221 



Table 37. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with timing of post-depression peak (igse-SSV Commodities classified in 
10 groups— group I least flexible, group X most flexible] 

CRITERION L 



Group 


landn 
combined 


ni 


IV 


V 


VI 


VII 


vni 


IX 


X 


Total 


X 




1 

2 

3 

6 
3 


1 
1 
5 
7 
10 
9 


1 
5 
3 
5 
7 


5 
3 
3 

8 


5 
10 


14 
15 


22 


11 
11 
7 
7 
5 
5 
4 
4 
5 
3 


60 


IX 


3 

1 
4 
5 
9 
15 
26 


13 
24 
3 
2 
3 
1 


63 






^ VIII 


10 
7 
5 
3 
2 
1 


62 






Z VII 


18 
10 
6 
9 
6 
1 


62 


2 VI 


10 
11 
12 
7 
3 
2 


54 


05 V 


6 
9 
8 
4 
2 


58 


g IV .;: 


4 
8 
4 
5 


59 


S m 


5 
17 


58 


o n 


38 
41 


60 


I 


1 




71 






Total 


141 


37 


54 


50 


64 


73 


58 


68 


62 


607 







Source: Criterion A— National Resources Committee. Criterion L— Bureau of Labor Statistics. 

DESCRIPTIONS OF CEITEEIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion ^.—Number of monthly changes in 95 
chances, January 1926-December 1933: 



Group— 
I 



Number 
of changes 
0^ 



n 5-7 

III 8-11 

rV 12-16 

V 17-22 

VI 23-34 

VII 35-49 

Vni 50-77 

IX 78-92 

X 93-95 



Criterion Z.— Peak month of index, 1936-38: 

Group -P*"* month 

I and n. -December 1938 

III July 1938-November 1938 

rV ...April 1938-June 1938 

V December 1937-March 1938 

VI_ September 1937-November 1937 

VII June 1937-August 1937 

Vin April 1937-May 1937 

IX January 1937-March 1937 

X .January 1936-December 1936 



222 



CONCENTRATION OF ECONOMIC POWER 



Table 38. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

lAmplitude of cyclical movement compared with timing of pre-depression peak. Commodities cla.ssified 
in 10 groups— group I lease flexible, group X most flexible] 

CRITERION J 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


vni 


IX 


X 


Total 


X 








1 
3 
6 
7 
13 
9l 


2 

6 

4 

11 

7 


9 
12 
6, 

o" 


9 
11 
11 


7 
8 


10 


24 
13 
9 
14 
5 
3 
4 
9 
1 
2 


62 


IX 








12 
12 
8 
1 
2 
2 
4 

1 


65 


'" VIII. 






5 
5 
8 
9 
11 


11 
5 

11 
7 
7 
2 
2 
4 


64 


§ VII 


1 
2 

1 
5 
7 
17' 


3 

2 
10 
11 
14 


4 
12 
8 
5 
6 
3 
1 


67 


a VI..-.. 


4 
6 
8 
8 
8 
2 


65 


g V 


11 

7 
4 

7 

1 


66 


& IV 


6 

4 
2 


65 


« III 


5 
7 
8 


65 


II 


14 
4 


63 


I. 


37 


62 






Total 


70 


58 


58 


66 


60 


72 


70 


64 


52 


84 


644 







Source: Criterion J— Bureau of Labor Statistics. Criterion I— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion 7.— Percent decrease, average, February 
1929 and February 1937 to February 1933: 

Qj.Qup Percent decrease 

I Increase to 1. 6 deereace 

II 1.7-10.0 

III 10.1-16.3 

IV 16.4-21.0 

V 21-1-26.2 

VI 26.3-33.3 

VII - 33.4-40.1 

VIII 40.2-48.5 

IX 48.6-57.5 

X 57.6-86.8 



Criterion J^.— Peak month of index, 1929-31: 

Group— Month 

I December 1931 

II December 1930-November 1931 

III June 1930-November 1930 

IV January 1930-May 1930 

V -. November 1929-December 1929 

VI September 1929-October 1929 

VII June 1929-August 1929 

VIII April 1929-May 1929 

IX -. March 1929 

X January 1929-February 1929 



CONCENTRATION OF ECONOMIC POWER 



223 



Tablk 39. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

Amplitude of cyclical movement compared with timing of depression low (1932-34). Commodities classi- 
fied in 10 groups— group I least flexible, group X most flexible] 

CRITERION K 



Group 


I 


U 


in 


rv 


v 


VI 


VII 


vm 


IX 


X 


Total 


X 




4 
2 

1 
2 
4 
6 
7 
8 


2 
2 
4 
3 
5 
9 1 


2 

1 
8 
13 
16 


2 
1 
6 
4 

16 


3 
6 
8 
17 


3 
6 

15 


29 

19 


10 


12 

8 
4 
6 
1 
9 
8 
4 
2 
5 


65 


IX 




18 
16 
10 
8 
2 
4 
4 
6 


62 


"^ VIII 




11 
9 
6 
4 
3 


64 


5 vu 


1 


FT 

2 
3 
2 


67 


2 VI 


11 

11 

5 



1 


63 


g V 


6 
6 
6 

22 


l~6- 
9 

7 

1 


60 


& IV 


20 
8 
4 


67 


« III 


10 
8 
6 


65 


^ II 


14 
8 


1 


1 


63 


I 


39 


62 
















Total 


79 


65 


49 


86 


52 


68 


38 


81 


77 


69 


644 







Source: Criterion I— Bureau of Labor Statistics. Criterion K— Bureau of Labor Statistics. 

DKSCBIPTIONS Of CBITEBU Or WH0LB3ALB PRICE FLIXIBIUTT 



Criterion /.—Percent decrease, average of February' 
1929 and February 1937 to February 1933: 

Qfoup Percent decrease 

I Increase to 1.6 decrease 

II 1.7-10.0 

III. 10.1-16.3 

IV 16.4r-21.0 

V 21.1-26.2 

VI 26.3-33.3 

VII 33.4-40.1 

Vni 40.2-48.5 

IX ,... 48.6-57.5 

X 57. 6-86.8 



Criterion K.—Low month of depression, 1932-34: 
Group— Month 

I-. December 1934 

II December 1933-November 1934 

HI August 1933-November 1933 

rv. June 1933-JuIy 1933 

V May 1933 

VI AprU 1933 

Vn March 1933 

Vin December 1932-February 1933 

IX July 1932-November 1932 

X January 1932-June 1932 



224 



CONCENTRATION OF ECONOMIC POWER 



Table 40. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with change per change. Commodities classified in 10 groups— group I 
least flexible, group X most flexible] 

CRITERION M 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X 




2 
4 
17 
4 
7 
6 
5 
4 


4 
9 
6 
11 
7 
3 
5 


7 

10 
8 
8 
7 
6 


6 
10 
6 
8 
4 


5 

7 
3 

8 


6 

8 
6 


15 
3 


8 


7 
6 
3 
3 
2 
6 
7 
10 
7 
5 


60 


^ IX 


1 
7 
9 
3 
2 
7 
3 
7 


r 5- 

2 
1 
3 

13 
6 

12 
7 


63 


^ VIII 


4 
4 
7 
5 
7 
6 
3 
5 


62 


O VII 


6 
5 
7 
3 
5 
3 
9 


62 


S VI 


9 
5 
3 
4 
6 


54 


W V 


4 
6 
4 
3 
2 


57 


& IV 


8 
2 
2 
2 


57 


g III 


2 
5 
3 


52 


II 


1 
4 


44 


I 


4 


34 






Total... 


43 


54 


55 


60 


53 


50 


58 


59 


57 


56 


545 







Source: Criterion A— National Resources Committee. Criterion M— Bureau of Labor Statistics. 

ijESCEIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion yl.— Number of monthly changes in 95 

chances, January 1926-December 1933: 

Qroup Number of changet 

I 0- 4 

II 5- 7 

III.. 8-11 

rV 12-16 

V : 17-22 

VI 23-34 

VII 35^9 

VTII 60-77 

IX 78-92 

X 93-95 



Criterion M. — Average change (index points) per 

change January 1926-AprU 1929: 

Qroup Average change 

I.. 0.0- 1.6 

II 1.7- 2.2 

III 2.3- 2.6 

IV.. 2.7- 3.2 

V 3.3- 3.8 

VI 3.9- 4.6 

Vn 4.6- 5.6 

Vin 5.7- 6.7 

IX 6.8- 8.9 

X 9.0-34.7 



CONCENTRATION OF ECONOMIC POWER 



225 



Table 41.^ — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

Amplitude of cyclical movement compared with change per change. Commodities classified in 10 groups- 
group I least flexible, group X most flexible] 







CRITERION M 














Group 


I 


n 


III 


IV 


V 


VI 


VII 


vni 


IX 


X 


Total 


X 


2 


3 

5 
10 
5 
6 
7 
8 
8 


2 
10 
8 
6 
8 
7 
5 


4 
15 

7 
12 

6 

2 


7 
9 
8 
4 
4 


6 
6 
6 
8 


7 
7 
9 


16 
3 


10 


6 
5 
7 
6 
4 
4 
8 
7 
5 
4 


63 


IX 


3 
5 
10 
7 
6 
8 
3 
1 
4 


62 


"Z VIII 


1 
2 
8 
5 
8 
13 
5 


3 
5 
8 
10 
4 
1 
6 
3 


64 


S VII.-... 


6 
5 
5 
2 
2 
5 
11 


62 


2 VI 


6 
7 
4 
3 
5 
4 


61 


M V 


5 
3 
5 
8 
4 


58 


^ IV...::::..:: 


5 
4 
2 
3 


55 


3 ni.. 


4 
6 
2 


50 


II 


2 
2 


45 


I 


12 


40 






Total 


66 


56 


58 


59 


67 


64 


58 


69 


67 


66 


569 







Source: Criterion M— Bureau of Labor Statistics. Criterion I— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITEEU OF WHOLESALE PRICE FLEXIBILITY 



Criterion /.—Percent decrease, average of February 
1929 and February 1937 to February 1933: 
Group — Percent decrease 

I Increase to 1.6 decrease 

II 1.7-10.0 

in 10.1-16.3 

rV 16.4-21.0 

V 21. 1-26. 2 

VI.. 26.3-33.3 

VII 33.4-40.1 

Vni 40.2-18.5 

IX 48.6-57. 5 

X 57.6-86:8 



Criterion M.— Average change (index points) per 

change, January 1926-April 1929: 

Group — Average change 

I .0.0-1.6 

II 1.7- 2.2 

III 2.3- 2.6 

IV 2.7- 3.2 

V 3.3- 3.8 

VI .- 3.9- 4.5 

VII 4.6- 5.6 

Vin 5.7- 6.7 

IX 6.8- 8.9 

X 9.0-34.7 



226 



CONCENTRATION OP ECONOMIC POWER 



Table 42. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Peak month, 1929-31, compared with average change (index points; per change, January 1926 to April 
1929. Commodities classified in 10 groups— group I least flexible, group X most flexible] 

CRITERION M 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


vm 


IX 


X 


Total 


X 


8 
2 
4 

12 
8 
6 
1 
7 
6 


14 
7 
6 
6 
7 
6 
6 
2 


6 
6 
8 
7 
11 
3 
7 


6 
11 
9 
7 
6 
4 



6 
8 
6 

8 


11 
3 
6 

7 


12 
4 

7 


8 
5 


7 


7 
3 
4 
6 
10 
7 
3 
9 
3 
6 


84 


IX 


4 
6 
5 
4 
9 
6 
8 
4 
4 


50 


^ VIII 


6 
10 
4 
5 
5 
6 
6 
5 


64 


O VIL 


5 
6 
6 
5 
2 
3 
10 


70 


S VI 


6 
3 
5 
3 
6 
3 


68 


W V 


7 
5 

6 
1 
5 


56 


^ IV 


7 
6 
2 
3 


50 


g ni 


3 

4 
4 


51 


II 


4 


36 


I 


3 


47 






Total 


66 


59 


SB 


59 


57 


63 


69 


60 


67 


68 


676 







Source: Criterion J— Bureau of Labor Statistics. Criterion M— Bureau of Labor Statistics. 

DESCBIFTIONS OT CBITERU OT WHOLESALK PRICE FLEXIBIUTT 



Criterion J.— Teak month, 1929-31: 
Oroup— Month 

I. December 1931 

II December 1930-November 1931 

ni June 1930-November 1930 

IV January 1930-May 1930 

V November 1929-December 1929 

VL September 1929-October 1929 

VII June 1929-August 1929 

Vni April 1929-May 1929 

IX March 1929 

X January 1929-February 1929 



Criterion A/.— Average change <index points) per 
change, January 1926-Apri] 1929: 

Average 
Group — change 

I 0:0- 1.6 

II 1.7- 2.2 

UI --... 2.3- 2.6 

rv 2.7- 3.2 

V 3.3- 3.8 

VI 3.9- 4.5 

VII 4.6- 5.6 

VIII 5.7- 6.7 

rX 6.8- 8.9 

X 9.0-34.7 



CONCENTRATION OF ECONOMIC POWER 



227 



Table 43. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with aggregate change less net change. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION N 



Group 


I, II, and lU 

combined 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X -- 










1 
4 
15 


5 
12 


19 


36 

19 

9 

1 


60 


; IX .... 








1 
8 
16 


27 
10 
7 
2 
2 


63 


§ VIII 






5 
7 
11 


15 
14 
12 
4 
3 


62 


5 vii__. - 


2 
3 

11 
20 


1 
6 
10 


14 
12 
8 
6 
2 
1 
2 


62 


W VI... 


8 
9 
9 
6 
2 


64 


^ V 


15 
10 
11 
4 
1 


59 


^ IV 


12 
7 

10 
2 


60 


Q 

ni 


34 
44 
70 






60 


n 








61 


I 








76 












Total 


184 


48 


64 


69 


65 


65 


67 


64 


616 







Source: Criterion A— National Resources Committee. Criterion N— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion /!.— Number of monthly changes in 95 
chances, January 1926-December 1933: 



Group— 
I- 



Number 
of changes 
.... 0-4 



II 6- 7 

III 8-11 

IV -. 12-16 

V 17-22 

Vi 23-34 

Vli 35-49 

VIII..-. 50-77 

IX 78-92 

X : 93-95 



Criterion iV.— Aggregate change (index points) less 
net change, January 1926-April 1929: 
Group- Difference 
I, II, and III 0.0 

IV 0.1- 8 

V 9- 17 

VI 18-28 

Vri - 29- 45 

Vlli 46- 79 

IX 80-151 

X 152 and up 



228 CONCENTRATION OF ECONOMIC POWER 

Table 44. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Amplitude of cyclical movement compared with aggregate change loss net change. Commodities classified 
in 10 groups— group I least flexible, group X most flexible] 

CRITERION N 



Group 


I, II, and III 
combined 


IV 


V 


VI 


VII 


vm 


IX 


X 


Total 


X 


1 
2 
5 
15 
11 
22 
29 


3 
7 
12 
6 


2 
1 

7 
9 

in 


1 
1 
6 

8 


2 
14 
11 


6 
14 


15 


35 
12 
10 
4 

1 
1 

1 


62 




" IX - -.. 


20 
13 
4 
3 

7 
2 


64 


O VIII 


8 
10 
7 
7 
3 
6 
3 
1 


63 


5 VII 


10 
5 
7 
4 
2 
5 
3 


67 


W VI 


15 
9 
6 
4 
1 
9 


64 


& V 


7 
11 
8 
6 
6 


66 


g IV 


10 
11 
7 
8 


66 


Ill 


34 
39 
37 


65 


II 


2 




63 


I 


63 










Total. 


195 


64 


66 


60 


63 


65 


66 


64 


643 







Source; Criterion I— Bureau of Labor Statistics. Criterion N— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBaiTY 



Criterion /.—Percent decrease, average of Febru- 
ary 1929 and February 1937 to February 1933: 

Percent 
Group— decrease 

I Increase to 1.6 decrease 

II 1.7-10.0 

III.... 10.1-16.3 

IV 16.4-21.0 

V 21. 1-26.2 

VI 26.3-33.3 

VII.. 33.4^0.1 

VIII. 40.2-48.5 

IX 48.6-57.5 

X.. 57.6-86.8 



Criterion iV.— Aggregate change (index points) less 
net change, January 1926-Aprll 1929: 

Group— Difference 

I, II, and III.. 0.0 

IV 0.1- 8 

V 9- 17 

VI 18- 28 

VII 29- 45 

VIII 46- 79 

IX 80-151 

X 152 and up 



Table 45. — Distribution of commodities according to differences in rank under 
various criteria of wholesale price flexibility 

[Commodities classified in 10 groups— maximum diflerence=9] 



C orrelation between 
criteria 


Difference in rank 


Same 
rank 


1 and 
less 


2 and 
less 


3 and 
less 


4 and 
less 


5 and 
less 


6 and 
less 


7 and 
less 


Sand 
less 


9 and 
less 


C-D 


29.0 
16.9 
27.0 
21.2 
22.2 
19.6 
24.2 
21.9 
19.7 
21.9 
9.2 
9.0 
11.1 

10.0 


63.0 
42.7 
66.5 
57.0 
59.2 
60.5 
62.9 
64.5 
46.8 
56.8 
25.7 
25.9 
27.8 

28.0 


80.7 
62.5 

85.7 
80.5 
81.6 
73.2 
72.2 
77.1 
66.8 
76.1 
40.8 
45.1 
45.4 

44.0 


89.4 
73.6 
95.2 
92.3 
92.6 
85.3 
84.4 
84.2 
82.2 
86.6 
53.6 
61.4 
60.8 

58.0 


95.2 
85.2 
98.5 
97.0 
97.2 
91.7 
92.0 
90.0 
91.2 
90.5 
67.9 
72.6 
72.8 

70.0 


97.7 
90.8 
99.5 
98.8 
98.7 
96.4 
97.0 
94.1 
96.4 
93.6 
77.1 
84.0 
84.5 

80.0 


99.1 
94.8 
99.8 
99.4 
99.7 
99.0 
98.5 
97.3 
97.4 
96.6 
90.5 
93.5 
92.2 

88.0 


99.6 
96.9 

100.0 
99.6 

100.0 
99.5 
99.7 
98.8 
99.4 
98.3 
97.3 
96.8 
95.7 

94.0 


99.7 
99.2 


100.0 


J-K 


100.0 


A-F. 




A-H 


100.0 




A-I . - . 




B-I 


100.0 
100.0 
99.8 
99.7 
99.2 
99. 1 
98.9 
98.8 

98.0 




A-J.. 




A-K .... 


100.0 


I-J.... 


100.0 


I-K 


100.0 


A-M 


100.0 


I-M 


100.0 


J-M 


100.0 


Relation to be an- 
ticipated if purely 
chance distribu- 
tion 


100.0 







Source: Bureau of Labor Statistics. 



CONCENTRATION OF ECONOMIC POWER 



229 



Table 46. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change 1926-29 compared with frequency of change 1926-33. Commodities classified in 10 
groups— group I, least flexible; group X, most flexible] 

CRITERION B 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X 
















1^ 
2 


3 


56 
17 

1 
1 


60 


IX.. 












1 


2 

8 ' 


41 
6 
3 
2 


63 


^ VIII 








1 

4 

8 




46 
13 
3 


62 


; VII_ 






1 
3 

10 
10 ' 


4 

13 


10 


30 

10 

2 

1 


62 


§ VI 






19 
16 
7 
2 


54 


S V 


2 
3 

8 
17' 


1 
5 
8 


20 
10 
7 
3 


59 


W IV 


21 
11 
6 
4 


1 


2 




60 


& III 


24 
26 
14 


60 


« II 


16 










61 


I 


41 












75 


















Total 


71 


39 


88 


55 


57 


55 


63 


66 


57 


75 


616 







Source: Criterion A— National Resources Committee. Criterion B— Bureau of Labor Statistics. 



DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBIUTY 



Criterion A. — Number of monthly changes in 95 
ohancjs, January 1926-December 1933: 



Group — 

I 

II. 



Number of changes 

0-i 

5-7 



III 8-11 

rv 12-16 

V 17-22 

VI 23-34 

VII_ 35-49 

VIII. 50-77 

IX 78-92 

X 93-95 



Criterion B.— Number of monthly changes in 39 
chances, January 1926-April 1929: 



Group— 
I...- 
II... 



Number of changes 



._ 1 



III 2-3 

IV 4-5 

V 6-8 

VI 9-13 

VII 14-20 

Vni 21-30 

IX 31-37 

X 38-39 



230 



CONCENTRATION OF ECONOMIC POWER 



Table 47. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Two measures of amplitude of cyclical movement compared. Commodities classified in 10 groups- 
group I least flexible, group X most flexible] 

CRITERION F 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


vm 


IX 


X 


Total 


X. - -- 














1 
8 
16 


4 

17 


15 


42 
11 
2 
5 

1 


62 


,, IX 










1 
2 
5 
15 


2 
6 
16 


23 
11 
4 
8 
2 
1 
1 


62 


r, VIII 










24 
9 
4 

2 
1 
1 


60 


g VII^ 






1 

1 

6 

21 


11 

15 


16 
9 
6 
3 
1 


56 


H VI 






12 
13 
6 
4 
3 
2 


60 


W V 




1 

6 

26 


15 
10 
3 
4 

1 


60 


fc IV 




15 
5 
6 
3 


61 


g III 


1 

24 ' 


19 
5 
5 


61 


II.. 


16 
13 


59 


I .. 


34 


1 






59 












Total 


59 


61 


58 


65 


66 


62 


61 


62 


65 


61 


600 







Source: Criterion E — National Resources Committee. Criterion F — Bureau of Labor Statistics. 



DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBIUTY 



Criterion E. — Average of 1929 and 1937 indexes, less 
1932 index, on basis of 1929 equals 100 percent: 



Group — 



Percent 



I -20.6-0.4 

II. .5-7.5 

III 7.8-12.8 

IV 13.0-17.5 

V 17.6-23.2 

VI 23.3-27.4 

VII 27.5-32.9 

VIII.... 33.2-39.4 

IX . 39.5-47.5 

X 47.9-81.8 



Criterion F. — Percent decrease, average of 1929 and 
1937 peaks to depression low index: 



Group- 



Percevt decrease 



I Increase to 8. 5 decrease 

II 8.6-16.7 

III 16.8-23. 1 

IV 23.2-28.0 

V 28.1-33.6 

VI 33. 7-39. 7 

VII 39.8-^6.3 

VIII. .- 46.4-57.3 

IX 57.4-65.9 

X 66.0-90.0 



CONCENTRATION OF ECONOMIC POWER 



231 



Table 48. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Two measures of amplitude of cyclical movement compared. Comunodities classified in 10 groups- 
group I least flexible, group X most flexible] 

CRITERION H 



Group 


I 


II 


m 


IV 


V 


VI 


vn 


vin 


IX 


X 


Total 


X 














1 

3 

in 


1 

n 


11 


51 
11 
3 


64 


„ IX 










1 




36 
16 
2 


62 


y, VIII 










33 
13 
2 

1 


62 
61 


§ VII 








2 

7 


8 


8 


36 
14 
2 


3 vi- 






1 


35 
13 
1 


60 
62 
62 


w v 






39 
12 
1 






fc IV..... 






6 


43 
12 






« m 




2 


47 
6 










62 
60 
61 


"" II 


1 


52 

1 


1 










I 


60 
































Total 


61 


55 


60 


64 


61 


58 


66 


61 


65 


65 


610 





Source: Criterion E— National Resources Committee. Criterion H— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITEBIA OF WHOLESALE PRICE FLEXIBILITy 



Criterion E.— Average of 1929 and 1937 indexes, less 
1932 index, on basis of 1929 equals 100 percent: 

Group— Percent 

1 -20.6-0.4 

n 0.5-7.5 

m 7.8-12.8 

rV 13.0-17.5 

V 17.6-23.2 

VI 23. 3-27. 4 

vn 27.5-32.9 

Vm 33. 2-39. 4 

IX. 39.5-47.5 

X 47.9-81.8 



Criterion //.—Percent decrease from average of 
1929 and 1937 to 1932: 

Group— Percent decrease 

I 28. 5 increase to 0. 4 decrease 

11.. 0.5-7.4 

III 7.5-12.7 

IV 12.8-ia2 

V 18. 3-23. 4 

VI 23. 5-28. 5 

vn 28.6-34.8 

VIII 34.9-41.4 

IX.. „ 41.5-51.6 

X 61.7-81.1 



247149— 41— No. 1- 



-17 



232 



CONCENTRATION OF ECONOMIC POWER 



Table 49. — Correlation table of commodities distributed according to their ranks 
by two criteria of wholesale price flexibility 

(Amplitude of cyclical movement compared with change per change. Commodities classified in 10 groups- 
group I least flexible, group X most flexible] 

CRITERION M 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X — 


2 


6 
4 
9 
6 
7 
5 
5 
9 


4 
8 
10 
3 
5 
9 
6 


4 
14 

9 
11 

4 

4 


5 
10 
8 
3 
6 


6 
7 
6 
9 


7 
7 

7 


14 
6 


9 


7 
5 
6 
7 
2 
8 
6 
4 
8 
5 


64 


IX 


5 
2 
10 
11 
8 
5 
2 
2 
4 


66 


VIII. . 


2 
1 
9 
3 
12 
11 
4 


6 
5 
7 
5 
5 
5 
3 
4 


64 


hi VII-. - 


8 
4 
5 
1 
6 
2 
11 


63 


^ VI --.- 


4 
8 
5 
2 
4 
3 


59 


o v.... - 


6 
2 
6 
5 
6 


61 


S IV 


7 
1 
3 
2 


54 


g III 


4 
8 

1 


50 


g n 


1 6 
1 


45 


gi 


U 


48 






Total 


55 


58 


58 


59 


57 


54 


58 


6D 


58 


57 


574 







Source: Criterion H— Bureau of Labor Statistics. Criterion M— Bureau of Labor Statistics. 



DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion H.— Percent decrease from average of 
1929 and 1937 to 1932: 

Group— Percent decrease 

I Increases too. 4 

n 0.5- 7.4 

in - 7.5-12.7 

IV 12.8-18.2 

V 18.3-23.4 

VI 23. 5-28. 5 

VII 28.6-34.8 

VIII 34.9-41.4 

IX 41.5-51.6 

X -- 51.7-81. 1 



Criterion J\/.— Average change (index points) per 
change, January 1926 to April 1929: 

Group — Average change 

I 0.0- 1.6 

II -. 1.7- 2.2 

III 2.3- 2.6 

IV -.. 2.7- 3.2 

v.. 3.3- 3.8 

VI. 3.9- 4.5 

VII 4.6- 5.6 

VIII.. 6.7- 6.7 

IX 6.8- 8.9 

X 9.0-34.7 



CONCENTRATION OF ECONOMIC POWER 



233 



Table 50. — Correlation table of commodities distributed according to their rankt 
by two criteria of wholesale price flexibility 

[Two measures of amplitude of cyclical movement compared. Commodities classified in 10 groupe— group I 
least flexible, group X most flexible] 

CRITERION I 



Group 


I 


II 


in 


rv 


V 


VI 


vn 


vm 


IX 


X 


Total 


X 








1 

1 






3 

6 
3 


3 

9' 


6 


61 
11 


64 


IX 










2 
2 
10 


33 
24 


62 


vm - 








34 

16 

1 


63 


^ VII 








1 

2 
14 


7 
11 


27 
24 

1 


61 


5 VI 




2 
...... 

10 


4 
2 

g' 


21 

23 

2 






6fi 


a V 


2 
1 
3 

8 ' 


19 
25 
3 






61 


H IV 


21 
25 

1 








62 


£! m 


23 
25 










64 


« II 


31 
16 












66 


°i. 


47 














63 






















Total 


61 


63 


63 


66 


65 


60 


64 


63 


63 


62 


630 







Source: Criterion F— Bureau of Labor Statistics. Criterion I— Bureau of Labor Statistics. 

DESCKIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBHITT 

Criterion /.—Percent decrease, average of February 
1929 and February 1937 to February 1933: 



Group — 

I 

II.... 
III.. 
IV... 
V. 



Percent decrease 
Increase to l .6 decrease 

1.7-10.0 

10.1-16.3 

16.4-21.0 

21.1-26.2 



VI 20.3-33.3 

VII 33.4-40. 1 

VIII 40. 2-48. 5 

IX 48.6-57.5 

X 67.6-86.8 



Criterion F.— Percent decrease, average of 1929 and 
1937 peaks, to depres-sion low index: 

Group — Percent decrease 

I Increase to 8.5 deereage 

II 8.6-16.7 

III 16.8-23. 1 

IV 23.2-28.0 

V_ 28.1-33.6 

VI. 33.7-39.7 

VII _. 39.8-46.3 

VIII 46.4-57.3 

IX 67.4-65.9 

X 66.0-me 



234 



CONCENTRATION OF ECONOMIC POWER 



Table 51. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Two measures of amplitude of cyclical movement compared. Commodities classified in 10 groups — 
group I least flexible, group X most flexible] 

CRITERION I 



Group 


I 


II 


m 


IV 


V 


VI 


VU 


vm 


IX 


X 


Total 


X 














2 

1 
18 


2 

15 


15 


46 
13 

1 
2 


66 


TY - -w 














36 
9 
3 


66 


w vin 












3 

17 1 


33 
12 
1 
2 


64 


Z vu 








2 

6 

17 


5 
27 


23 
11 
10 

1 


64 


2 VI 








20 
15 
4 
4 
2 


65 


g V 




19 


2 
26 


17 
8 
6 
2 
2 






64 


H IV 




26 
11 

3 






66 


« in 




24 
11 
3 








63 


^ II 


14 


30 
10 


1 






1 


61 


I 


47 






66 
















Total 


61 


62 


85 


65 


66 


65 


67 


65 


63 


63 


642 



Source: Criterion H— Bureau of Labor Statistics. Criterion I— Bureau of Labor Statistics. 



DESCKIPTIONS OF CEITEBIA OF WHOLESALE PRICE FLEXIBILITY 



Cyiterion H.— Percent decrease from average of 
1929 and 1937 to 1932: 

Qroup — Percent decrease 

I... 28.5 increase to 0.4 decrease 

II 0.5- 7.4 

III 7.5-12.7 

IV 12.8-18.2 

V.., 18.3-23.4 

VI 23.5-28.5 

Vn 28.6-34.8 

VUI 34.9-41.4 

IX 41.5-51.6 

X..., 51. 7-81. 1 



Criterion I. — Percent decrease from average of 
February 1929 and February 1937 to February 1933: 

Qroup — Percent decrease 

I Increase to 1.6 decrease 

II 1.7-10.0 

III 10.1-16.3 

IV 16.4-21.0 

V 21. 1-26.2 

VI 26.3-33.3 

VII. 33.4-40.1 

VIII 40.2-48.5 

IX 48.6-57.5 

X 57.6-86.8 



CONCENTRATION OF ECONOMIC POWER 



235 



Table 52. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale -price flexibility 

[Frequency of change compared with amplitude of cyclical movement. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION G 



Group 


I 


II 


in 


IV 


V 


VI 


vn 


vni 


IX 


X 


Total 


X 












2 
2 

6 
10 


1 

3 

9 


6 
13 


21 


31 

26 

6 

2 


60 


^ ix - 










1 
4 
11 

8 


19 
19 
1 


63 


^ vm 








1 
6 
10 
12 


17 
12 
4 
9 
2 
1 
I 


61 


O VII 




3 
3 

8 
9 


6 
2 
7 
9 


10 
16 
10 
12 

1 


60 


S VI 




rrr 

9 
13 
8 
4 
1 


64 


W V 


3 

1 
8 
12-1 


8 
8 
11 
4 
2 


2 
1 




60 


& IV.. 


7 
13 
6 
2 


61 


g m 


10 
17 
10 


60 


II 


■l- 
24 


1 




61 


I 


36 


7S 














Total 


60 


62 


60 


67 


67 


05 


62 


64 


64 


64 


61S 







Source: Criterion A— National Resources Committee. Criterion G— Bureau of Labor Statistics. 

DESCEIPTI0N3 OF CEITE8U OF WHOLESALE PEICE FLEXIBILITY 

Criterion Q. — Percent decrease from average of 
Criterion ^.—Number of monthly changes in 95 1929 peak and 1936-March 1937 peak to depression 
chances, January 1926-December 1933: low index: 



Group— 

I 

II... 

ni.. 

IV. 



Number of changes 

0- 4 

5- 7 

8-11 

12-16 



V 17-22 

VI - 23-34 

VII 35-49 

VIII 60-77 

IX 78-92 

X 93-95 



Group — Percent decrease 

I Increase to 7.8 decrease 

II 7.9-15.3 

m 15.4-20.9 

IV 21.0-27.0 

V 27.1-32.7 

VI 32.8-38.5 

vn 38.6-45.4 

VIII 45.5-65.8 

IX 55.9-65.4 

X 65.6-89.9 



236 



CONCENTRATION OF ECONOMIC POWER 



Tablb 53. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with amplitude of cyclical movement. Oommodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION H 



Group 


I 


n 


ni 


IV 


V 


VI 


VII 


vm 


IX 


X 


Total 


X 




1 
1 

2 
4 

4 

g 

17J 


4 
6 
2 
6 
7 
4' 


1 
2 
6 
3 
12 
8| 


3 

6 
9 
6 


2 
6 
13 


10 
6 
9 


8 
6 


19 


33 

22 

6 

4 

1 


76 


IX 


2 
2 

1 
6 
6 
7 
21 
3 


16 
17 
4 
3 
3 
1 
3 


68 


« vm 


9 
16 
10 
6 
4 
6 


66 


g vn. 


8 
8 
3 
9 
9 
2 
3 


62 


J- VI. 


9 
10 
10 
6 
4 
3 


62 


fH V - 


11 
11 
9 
8 
5 


6S 


tl IV 


6 
11 

7 
13 


61 


tf in 


12 
9 
14 


03 


° n 


7 
18 


40 


I 


18 






1 


76 










Total- 


66 


63 


63 


67 


66 


63 


66 


64 


65 


66 


649 







Source: Criterion B— Bureau of Labor Statistics. Criterion H— Bureau of Labor Statistics. 



DESCRIPTIONS OF CRITERIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion B.— Number of monthly changes in 39 
chances, January 1926-April 1929: 



Group— 
I. 



n 

in - 

IV - 

V 

VI - 

vn - 

Vin 21-30 

IX 31-37 

X 38-39 



Number of 
changes 



1 

2-3 

4-5 

6-8 

9-13 

14-20 



Criterion H. — Percent decrease from average of 
1929 and 1937 to 1932: „ 

Percent 

Group — decrease 

1 28.6 increase to 0.4 decrease 

n 0.6- 7.4 

m 7.5-12.7 

IV 12.8-18.2 

V 18.3-23.4 

VI 23. 5-28. 5 

VII -... 28.6-34.8 

VUI 34. 9-41. 4 

IX 41.6-51.6 

X 51.7-81.1 



CONCENTRATION OF ECONOMIC POWER 



237 



Table 54. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

(Frequency of change compared with timing of pre-depression peak (1929-31). Commodities classified in 
10 groups— group I least flexible, group X most flexible] 

CRITERION J 



Group 


I 


II 


III 


IV 


V 


VI 


VII 


VIII 


IX 


X 


Total 


X 










1 
4 
9 
13 
5 


12 
10 
6 
6 


13 

8 
10 
6 
9 
8 
11 
4 
3 
1 


5 
9 


11 


22 
15 
7 
11 
10 
5 
3 
7 
3 
2 


64 


IX .— — 






11 


5 
4 
6 
12 
11 


14 
10 
5 
2 
1 
1 
4 

1 


66 


W VIII - 




1 
3 

5 

7 
14 
111 


13 
8 
8 
7 
6 
4 
2 
4 


64 


5 VII - 




66 


« VI. 


1 
3 
3 
6 
21 


5 
8 
7 
8 
5 
4 


64 


w V 


5 
8 
9 
3 
3 


66 


f;^ IV 


8 
4 
4 
2 


66 


« III - 




64 


^ II.. 


5 


63 


I 


37 


66 






Total 


71 


61 


59 


56 


60 


71 


72 


65 


49 


85 


649 







Soutce: Criterion H— Bureau of Labor Statistics. Criterion J— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITKEIA OF WHOLESALE PRICE FLEXIBILITY 



Criterion H.— Percent decrease from average of 
1920 and 1937 to 1932: p^^^^^^ 

Group — decreaoe 

1 28.5 increase to 0.4 decrease 

n... 0.5- 7.4 

III 7.5-12.7 

IV - 12.8-18.2 

V 18.3-23.4 

VI 23»5-28.5 

VTI 2a 6-34. 8 

Vm.... .^ 319-41.4 

IX 41.5-51.6 

X 61.7-81. 1 



Criterion J.— Peak mon^h of index, 1929-31: 

Group— Month 

I December 1931 

II December 1930-November 1931 

III.. June 1930-November 1930 

IV Januarj- 1930-May 1930 

V November 1929-Dcccmbcr 1929 

VI September 1929-Octobcr 1929 

VII June 1929-August 1929 

VIII April 192»-Mayl929 

IX.. March 1929 

X January 1929-Februarv 1929 



238 CONCENTRATION OF ECONOMIC POWER 

Table 65. — Correlation table of commodities distributed according to their rank by 
two criteria of wholesale price flexibility 

(Frequency of change compared with change per change. Commodities classified in 10 groups— gioup I 
least flexible, group X most flexible] 

CRITERION M 



Group 


I 


n 


ni 


IV 


V 


VI 


vn 


VUI 


IX 


X 


Total 


X 




1 

8 
13 
9 
9 
3 
8 
8 


7 
6 
8 
11 
6 
5 
7 




8 
8 
8 

7 
10 


6 
9 
9 
6 

6 


9 
3 
6 

6 


8 
8 
3 


15 
3 


10 


10 
4 
3 

1 
2 
3 
7 
15 
13 


76 


IX 


6 

10 
7 
7 
3 
8 
7 
8 


3 
2 

1 
4 
7 
10 
17 
3 


58 


« VIII 


3 

8 
4 
9 
4 
9 
5 


66 


g VII. 


7 
6 
11 
4 
7 
5 


63 


2 VI 


10 
3 
6 

11 


61 


« V 


6 
5 
9 
1 


60 


y IV 


5 
2 
2 


64 


tf III 


6 
2 


91 


" n 


1 


40 


I 


























* 




Total 


S6 


60 


58 


59 


57 


53 


59 


60 


67 


68 


677 



Source: Criterion B— Bureau of Labor Statistics. Criterion M— Bureau of Labor Statistics. 

DESCEIPTIONS OF CEITERIA OF WHOLESALK-PRICE FLEXIBILITT 



Criterion B.— Number of monthly changes in 39 
chances, January 1926-Aprll 1929: 



Group— 
I 



Number of changes 


1 

2-3 

4-5 



II - 

HI 

IV 

V - - 6-8 

VI 9-13 

VIC - 14-20 

Vm - - 21-30 

IX 31-37 

X 38-39 



Criterion A/.— Average change (index points) per 
change, January 1926-April 1929: 



Group— 

I 

II--.. 
III-.. 
IV... 

v.... 

VI... 
VII . 
VIII. 
IX... 
X.-.. 



Average 

0. 

1. 

2. 

2. 

3. 

3. 

4. 

5. 



change 
0- 1.6 
7- 2.6 
3-2.2 
7- 3.6 
3- 3.2 
9- 4.8 
6- 5.6 
7-6.7 
8-8.9 
0-34. 7 



CONCENTRATION OF ECONOMIC POWER 



239 



Table 56. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Frequency of change compared with affiregate change less net change. Commodities classified in 10 
groups— group I least flexible, group X most flexible] 

CRITERION N 



Group 


I, II, and UI 

combined 


IV 


V 


VI 


vn 


VIII 


IX 


X 


Total 


X 












5 
16 


27 


43 
15 
6 
1 


75 


^ IX 






2 

2 
6 
12 


2 
11 
12 


4 
14 


19 
12 
6 
3 


58 


flQ 




2 
4 
10 

10 




r; VIII 


18 
14 
10 
2 


66 


S VII 


2 
2 

8 
17 


18 
11 
11 
6 
1 


63 


3 VI 


12 
12 
9 
4 


60 


W V 


15 
11 
16 


68 


fe IV :::: 


19 






63 


g III..... 


54 
40 
75 


1 






95 


II 






40 


I 
















76 




















Total 


198 


65 


64 


62 


66 


66 


67 


66 


652 





Source: Criterion B— Bureau of Labor Statistics. Criterion N— Bureau of Labor Statistics. 

DESCRIPTIONS OF CRITERIA OF WHOLESALE-PRICE FLEXIBILITY 



Criterion B.— Number of monthly changes in 39 
chances, January 1926-April 1929: 



Group— 
I 



II 

III.... 

IV 

V 

VI 

VII 14-20 

Vin 21-30 

IX 31-37 

X 38-39 



Number of changes 



1 

2-3 

4-5 

6-8 

9-13 



Criterion AT. — Aggregate change (index points) less 
net change, January 1926-April 1929: 



Difference 

0.0 

0.1- 8 

9- 17 

18- 28 

2*- 45 

46-79 

80-151 

X 162 and up 



Group — 

I, II, and m. 

IV 

V. 

VI.... 

VII 

VIII 

IX 



240 CONCENTRATION OF ECONOMIC POWER 

Table 67. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

[Amplitude at cyclical movement compared with aggregate change less net change. Commodities classified 
in 10 groups— group I least flexible, group X most flexible] 

CRITERION N 



Group 


I, II, and III 
combined 


IV 


V 


VI 


vn 


vni 


IX 


X 


Total 


X - 


1 
3 
6 
U 
13 
19 
30 


2 
2 

4 

9 

9 


2 
2 
6 
6 

12 


1 

9 
9 


6 
10 

11 


6 
12 


16 


31 
15 
6 
6 
1 
2 


63 


a IX 


24 
9 
9 
1 
7 


68 


Z VIII - 


14 
10 
1 
3 
9 
6 
1 
3 


63 


o vn...- 


10 
9 
7 
4 
1 
2 
5 


66 


S VI 


■■l7- 
6 

7 

4 

7 


63 


« V 


13 
9 
6 

5 
5 


66 


XI IV 


9 
14 
9 
8 


68 


O III 


32 
43 
38 


3 


1 
1 


62 
65 


II 


I 


66 










Total 


196 


66 


65 


60 


65 


65 


69 


63 


649 



Source: Criterion H— Bureau of Labor Statistics. Criterion N— Bureau of Labor Statistics. 

DESCEIPTION8 OF CEITEBU OF WHOLESALE PRICE FLEXIBaiTY 



Criterion K.— Percent decrease from average of 1929 

and 1937 to 1932: 

QpQup Percent decrease 

1 28.6 increase to 0.4 decrease 

II. 0.5- 7.4 

m 7.5-12.7 

IV - 12.8-18.2 

v. 18. 3-23. 4 

VI -• 23. 5-28. 5 

VII 28. 6-34. 8 

Vin 34.9-41.4 

IX 41.6-51.6 

X 61.7-81. 1 



Criterion iV.— Aggregate change (index points) less 
net change, January 1926-April 1929: 

Qroup— Difference 

I, II, and lU 0.0 

IV 0.1- 8 

V 9- 17 

VL- 18- 28 

VII 29- 45 

VIIL 46- 79 

IX 80-151 

X 152 and up 



CONCENTRATION OF ECONOMIC POWER 



241 



Table 58. — Correlation table of commodities distributed according to their ranks by 
two criteria of wholesale price flexibility 

(Change per change compared with aggtegate change less net change. Commodities classified in 10 gronpa — 
group I least flexible, group X most flexible] 

CRITERION N 



Group 


I, n, and ra 

combined 


IV 


V 


VI 


vn 


vni 


IX 


X 


Total 


X - 


20 
13 


12 
11 
16 

9 


4 

i 
4 
6 

5 


3 
11 
6 
4 
3 


4 
6 

7 
6 


6 

6 

1 


3 

3 


2 


18 
16 
17 
12 
3 


66 


w IX 


2 
8 
7 
13 
15 
15 
6 


69 


"Z vm 


8 

6 

6 

10 

10 

11 

8 

1 


60 


§ VIL 


7 
9 
6 
6 
10 
11 
3 


68 


S VI 


3 
3 
7 
4 
11 
10 


64 


W V 


2 

8 
11 
13 

6 


67 


& IV 


4 
8 
10 
20 


69 


f^ m 


7 
9 
17 


66 


^ II 


62 


I 






66 










Total 


123 


65 


66 


61 


64 


66 


67 


66 


677 







Source: Criterion M— Bureau of Labor Statistics. Criterion N— Bureau of Labor Statistics. 

DESCEIPnONS OF CRrTEBIA OV WHOLESALB PEICE TLEXIBILITT 



Criterion Af.— Average cliange (index points) per 

change, January 1926-ApriI 1929: 

Group— Average change 

1 0.0- l.G 

n 1.7- 2.2 

III 2.3- 2.6 

rV 2.7- 3.2 

V. 3.3- 3.8 

VI 3.9- 4.5 

VII 4.6- 5.6 

VIIL _ 6.7- 6.7 

IX 6.8- 8. '9 

X - 9.0-34.7 



Criterion iV.— Aggregate change (index points) less 

net change, January 1926-April 1929: 

Group- Difference 

I, U, and in... 0.0 

IV — 0.1- 8 

V 9- 17 

VI 18- 28 

VII 29- 46 

VIII 46- 79 

IX 80-161 

X - 162 and up 



APPENDIX II 1 
CONVENTIONAL PRICE LINES 

INTRODUCTION 

The maintenance of price lines in certain markets as an aspect of 
nonprice competition has been described briefly in chapter III above. 
Reference has also been made to the significance of the so-called 
"cash" discomit common in the apparel maricet as related to price 
lines. This appendix is presented in order to describe these practices 
more fully. 

No attempt has been made, in this appendix, to present appraisals 
of the economic significance of these practices. It is designed merely 
to assemble the salient facts relating to each of them. 

The price behavior of many commodities is affected by the practice 
of "price lining." Conventional pricing practices have become more 
or less firmly established. In both the wholesale and retail markets 
the prices of these articles show a tendency to cluster at a limited 
number of specific points fixed by custom; quotations at intermediate 
levels are rare or absent. " 

The manifestations of this custom will be discussed for wearing 
apparel and consumers' durable goods, illustrative types of "price 
lines." There is evidence that the practice prevails also to some 
extent in other fields, such as certain kinds of drugs, toiletries, and 
certain packaged groceries. 

WEARING APPAREL 

The practice of price lining is perhaps most fumly established in 
the wholesale markets for wearing apparel. As changes occur in 
material or labor costs, or in styles, the quality of the garment is 
changed in order that it may be sold at one of these accepted levels. 
For example, if the material becomes more expensive, the cost of the 
finished garment can be maintained at the conventional level by the 
use of lower quality materials or less or cheaper trimmings, or by 
decreasing the amount of labor. 

Wholesale price lines are apparently somewhat more rigidly main- 
tained for inexpensive and mediuln-priced merchandise than for 
apparel of higher quality. It is reported that manufacturers produc- 
ing dresses to wholesale at $22.75 and above change their lines from 
year to year in order to maintain the same quality. 

Corsets and brassieres. — The corset and brassiere industry is an 
excellent example of an industry whose wholesale price lines have 

> Appendix II was prepared by Laura Mae Brown. Acknowledgment is due Miss VIela Darnell, S. 
Kann Sons Co., Miss Elizabeth Farrell, Julius Oarflnckel & Co., and Mr. W. B. Stringham, Qeneral 
Electric Supply Co., for their assistance In supplying certain data used in this analysis. 

242 



CONCENTRATION OF ECONOMIC POWER 243 

become fixed by custom. Under N. R. A., conformity with these 
price Hnes was made mandatory. The code for this industry, as 
approved on August 14, 1933, stipulated: 

"Wholesale prices. — To maintain established trade practices and to limit the 
multiplication of numbers, but without any attempt at price fixing, each person 
being free to determine the value to be given at each price, the following shall be 
the wholesale prices, per dozen, for sale to retailers (except chain stores selling up 
to $1 retail): 



$2.00 doz. 


$8.50 doz. 


$27.00 doz. 


2.25 


10.50 


30.00 


3.25 


12.00 


33.00 


4.00 


15.00 


36.00 


4.25 


16.50 


42.00 


4.50 


18.00 


48.00 


6.00 


21.00 


54.00 


7.00 


22.50 


60.00 


8.00 


24.00 


66.00 and up." 2 



Testimony at the hearings indicated that the industry as a whole 
had for many years observed these wholesale price lines, which cor- 
responded to similar price lines in the retail market, and that the 
latter in turn reflected the accumulated experience of retailers in 
dealing with the consumer. 

To an extent, therefore, the inclusion of these wholesale prices in 
the code was simply a recognition of a practice long established 
through the cooperation of manufacturers and retailers. Presumably 
some deviations from these lines had appeared during the buyers' 
market of 1932-33; the code provision may have been designed to 
prevent such deviations. The manufacturers maintained that, as a 
result of the stabilization of prices, the retailer could carry a much 
more complete selection of sizes at each price than would be possible 
if prices varied more. They contended that customers benefited 
from such a practice. They also argued that the setting of wholesale 
price lines was not equivalent to fixed prices since the manufacturer 
was completely unrestricted as to the quality of the garment he might 
sell at each price, and since a price line was not restricted to a garment 
meeting a standard specification. 

The same general practice is followed to a considerable extent in 
the retail markets, although price lines are less universal than in the 
wholesale markets. The extent of uniformity is indicated by the 
retail prices quoted to the Bureau of Labor Statistics, as of June 15, 
1938, by representative retailers in 32 cities. Of the 114 quotations 
reported for women's "medium quality" woven elastic girdles retaihng 
from $2.95 to $5.50, 99, or 87 percent, were at two prices — $3.50 and $5. 
One hundred ninety-two, or 85 percent, of 227 prices for foundation 
garments were at the $3.50 and $5 lines. Eighty-one percent of the 
142 prices reported for brassieres retailing between 94 cents and $1.50 
were at the $1 line; 11 percent at $1.50. 

' National Recovery Administration, Codes of Fair Competition, vol. I, p. 76, "Corset and Brassiere 
Industry," sec. 9 (i). 



244 CONCENTRATION OF ECONOMIC POWER 

The actual distributions of these prices follow: 

Table 59. — Distribution of retail prices of girdles, foundation garments, and 

brassieres 



Girdles 


Foundation garments 


Brassieres 


Price 


Number 
of quo- 
tations 


Price 


Number 
of quo- 
tations 


Price 


Number 
of quo- 
tations 


$2.95 


4 

2 

1 

32 

1 
2 
1 
1 
1 
67 
2 


$3.19 1 


1 

1 
1 
1 
77 
2 
4 
16 
1 
1 
3 
115 
1 
1 
1 
1 


$0.94 . 


1 


$2.98... 


$3.25 


$1 


115 


$3.39 


$3.29. 


$1.25 


9 


$3.50 


$3.39 


$1.29 


1 


$3.59... 


$3.50 


$1 50 


16 


$3.95 


$3.59 


Total 




$3.98 


$3.95 


142 


$4 


$3.98 






$4.69.. 


$4.69 




$5.... 


$4.95 




$5.50 


$4.98 






$5 




Total 


114 


$5.29 






$5.30 






$5.95 






$5.98 






Total 






227 











Dresses. — Wholesale price lines are also maintained in the market 
for women's dresses. Many firms manufacture dresses to sell at one 
wholesale price line only; those producing inexpensive garments tend 
to maintain the same price lines for many years. This practice has 
become so well established that manufacturers are often described by 
referring to the price lines in which they specialize; e. g., one may 
be known as a "$10.75 house" or a "$14.75 house." 

There are two branches of the dress industry. The first is the 
wash frock or "house dress" group. This branch of the industry 
originated with the manufacture of house dresses and aprons — cotton 
garments which had practically no "style." It now manufactures 
both cotton and rayon dresses, practically all of which are styled for 
street as well as for house wear. Producers of these garments usually 
own their own plants and ordinarily are not located in the large 
metropolitan centers. 

The second branch of the industry, usually known as the women's 
dress industry proper, originated with the manufacture of silk dresses. 
Most of the production of this group of manufacturers is of rayon, 
wool, linen, and the more expensive cotton materials, since fewer 
silk dresses are now sold than in former years. Many of these dresses 
are manufactured by contractors; a large percentage of the total 
volume is produced in New York City in what is known as "China- 
town." The wash frock industry is more highly mechanized than is 
the dress industry proper and the frocks manufactured by the former 
group tend toward the more tailored styles. 

The more usual price lines quoted by wash frock manufacturers at 
the present time are: $4.75, $6.75, $8.50, $12.50, $16.75, $22.50, 
$30,00, $31.50, $33.00, $42.00, $45.00 per dozen. 

All these prices have been "standard" for many years, with the 
exception of the $31.50 line which was introduced about 1931. Close- 



CONCENTRATION OF ECONOMIC POWER 



245 



outs, as well as'regular merchandise, are priced at these lines. Close- 
outs are often made from left-over materials which would ordinarily 
have been used for more expensive lines; they- are sold in lower whole- 
sale price lines dm'ing the latter part of a season in order to reduce 
material inventories and to keep labor more steadily employed. 
It is not unusual for merchandise which would have sold at $45 per 
dozen at the beginning of a season to be sold at $22.50 per dozen at 
the end of the season. This merchandise is used to enlarge the stocks 
in the retail stores for end-of-season clearance sales. Thus there are 
in efi'ect price reductions as the season progresses, but they are made 
in conventional steps downward. 

Retail price lines are also common in the wash frock market. It 
is imderstood that agreements are often made by buyers in competing 
stores to observe uniform price "endings." Such agreements usually 
affect the marking of lower-priced merchandise only. 

The importance of retail price lines in this field is indicated by the 
data compiled by the Retail Price Division of the Bureau of Labor 
Statistics. Of the 258 prices reported during Jime 1938, for dresses 
retailing between $1.50 and $3, 201, or 78 percent, were on four price 
lines: $1.95, $1.98, $2.00, and $2.98. The distribution of these 258 
prices follows: 

Table 60. — Distribution of retail prices for wash frocks 



Number of 
Price: quotations 

$1.50 2 

$1.59 1 

$1.69 11 

$1.79 1 

$1.86 1 

$1.88 2 

SI. 94 2 

$1.95 38 

$1.97 1 

$1.98 99 



Number of 
Price; quotationi 

$1.99_ 11 

$2.00 39 



$2.25. 
$2.77. 
$2.95. 
S2 98. 
$2.99. 
$3.00. 



3 

1 

12 

25 

2 

7 



Total 258 



The "accepted" wholesale price lines in the dress industry proper 
at the present time are: $1.87)^, $2.25, $2.87^, $3.75, $4.75, $6.75, 
$7.75, $8.75, $10.75, $12.75, $14.75, $16.75, $19.75, $22.75, $29.75, 
$39.75 each and over. 

Before 1931 or 1932, prices were 25 cents lower for all garments 
selling at $4.75 or over (e. g., the lines were $4.50, $6.50, etc.). They 
were increased to their present levels under an agreement instituted 
by the Half Size Guild, the Dress Creators' League of America, and 
the Party Dress Guild.^ 

The development of rayon dress materials has made possible the 
introduction of cheaper dresses during the past 10 years. About 
1930 the first $2.25 street dresses were introduced and at the present 
time a $1.87^ line is on the market. The depression made this new 
field a very popular one; practically all wholesale lines below $4.75 
have been introduced within the past 10 years. 

The retail market shows concentration at the 95-cent price ending. 
Of the 215 prices between $14.75 and $19.95 reported to the Bureau 
in June 1938 on women's "medium quality" rayon or silk street 

' N. R. A. Code Hearings on the Dress Manufacturing Industry, January 7, 1936, pp. 141 and 186. 



246 



CONCENTRATION OF ECONOMIC POWER 



dresses, 148, or 69 percent, were on the $14.95, $16.95, and $17.95 
lines. These quotations were distributed in the following manner; 

Table 61. — Distribution of retail prices for women's medium-quality dresses 

Number of 
Retail price: guotationg 

$16.98 1 

$16.99 1 

$17.50 9 

$17.95 23 

$18.00 1 

$19.75 2 

$19.95 9 



Number of 

Retail price: guotatiom 

$14.75 3 

$14.88 1 

$14.95 56 

$14.98 3 

$15.00 11 

$15.93 1 

$16.50 9 

$16.75 16 

$16.95 69 



Total 215 



Of 242 prices reported in June 1938 on lower quality rayon street 
dresses retailing from $5.88 to $12.95, 63 percent were quoted at four 
prices— $5.95, $6.95, $7.95, and $10.95. The distribution follows: 



Table 62. — Distribution of retail prices for women's cheap dresses 



Retail price: 
$5.88- _. 
$5.94... 
$5.95_.. 
$5.98_.. 
$5.99... 
$6.50- _. 
$6.60... 
$6.90-.. 
$6.95--- 
$6.98-.. 
$6.99- -. 
$7.95... 
$7.98- _. 
$8.00- -. 



Number of 
Quotations 

1 

1 

24 

14 

3 

5 

1 

14 

35 

7 

10 

57 

11 

1 



Retail price: 

$8.94.. 
$8.95.- 
$8.98-- 
$9.75.. 
$9.95- . 
$10.00- 
$10.75. 
$10.95- 
$10.98. 
$10.99. 
$11.95- 
$12.95., 



Number of 
Quotationi 

1 
4 
1 
3 
1 
1 
2 
36 
3 
1 
1 
4 



Total. 



242 

According to the above distributions, the important retail price 
lines for women's medium and lower priced silk and rayon dresses are: 
$17.95, $16.95, $14.95, $10.95, $7.95, $6.95, and $5.95. 

One feature of these last two distributions seems noteworthy. 
There is a complete avoidance of the use of any price between 1 cent 
and 49 cents over the even dollar. In other words, of the 457 quota- 
tions included in these last two tables, every one which is not quoted 
at an even dollar is at least 50 cents over the dollar. 

Presumably this reflects the retailers' appraisal of consumer psy- 
chology. It may well be true that to many consumers there is a 
smaller psychological gap between, say, $16.25 and $16.98 than 
between $16.98 and $17.15. That retail pricing should reflect this 
probably well warranted belief is natural, but the complete unanimity 
shown by these distributions is very strOcing. 

Girls' cotton dresses. — Girls' cotton dresses are also sold at "price 
lines." The following distribution of 523 retail prices reported to 
the Bureau as of June 15, 1938, for girls' cotton dresses retaihng from 
98 cents to $2 shows that 24 percent retailed at $1.98, 21 percent at 
$1, and 12 percent each at $1.19 and $1.95. Only 31 percent of the 
quotations were at other prices. 



CONCENTRATION OF ECONOMIC POWER 

Table 63. — Distribution of retail prices for girls' cotton dresses 



Retail price: 
$0.98- _. 
$1.00-.. 
$1.09--. 
$1.10--. 
$l.ll-_. 
$1.15--. 
$1.19_-. 
$1.25--- 
$1.29--. 
$1.49--- 
$1.59- _- 



Number of 
guotationi 

31 
109 



2 

2 

26 

65 

19 

2 

2 

1 



Retail price: 
$1.65.-. 
$1.69-.. 
$1.83-.. 
$1.95... 
$1.97--. 
$1.98... 
$1.99.-. 
$2.00--. 



247 



Number of 
guotalions 

1 

2 

2 

65 

2 

128 

12 

44 



Total. 



523 



Coats. 



-A third example of wearing apparel sold at rigid price lines 
IS women's and misses' coats. The most usual wholesale prices in 
this field are: $6.75, $10.75, $16.75, $22.75, $26.75, $39.75 each. 

In addition the following prices are also quoted by many houses, 
applying to both trimmed and untrimmed coats: $3.75, $4.75, $5.75, 
$8.75, $12.75, $14.75, $19.75, $29.75, $49.75 each. 

Women's hose. — The importance retailers attach to hosiery price 
Hues is indicated in the following: 

It seems taken for granted that the 79-cent retail price is too firmly entrenched 
to be fooled with and that any revisions on goods in this price class will be in the 
nature of construction changes.'' 

The prices reported to the Bureau in June 1938 demonstrate the 
importance of the 79-cent line and the $1 line. One hundred fifty-four, 
or 39 percent, of the 396 prices quoted were on the $1 hose, 30 percent 
on the 79 cent, 1 1 percent on the 69 cent, and 7 percent on the 89 cent. 
Only 13 percent of the prices quoted were at other levels. 





Table 64. 


— Distribution of retail prices for women's hose 




Price 
per pair 


3-thread, 
45-gau^e 


4-thrcad, 
42-gause 


7-thread, 
42-gaugc 


Total 


Price 
per pair 


3-thread, 
45-gauge 


4-thread, 
42-gauge 


7-thiead, 

42-gauge 


Total 


$0.69-... 
$0.75.... 


1 


17 
2 


25 


43 
2 
1 
1 
119 
1 
1 

18 
4 


$0.89-..- 
$0v94.... 
$0.95..-. 
$0.97...- 
$1.00.... 
$1.09-... 
$1.15--.. 

Total_ 


6 

1 
2 
1 

95 
1 

15 


9 


12 


27 
1 


$0.77.... 


1 






1 


3 


$0.78...- 


1 

56 






1 


$0.79.... 
$0.80..-. 


13 


50 

1 

1 

10 

1 


27 


32 


154 
1 


$0.84..-. 






1 


3 


19 


$0.85.... 
$0.88.-.. 


3 
2 


5 

1 




141 


119 


136 


396 



Girls' anklets. — Quotations for girls' mercerized anklets reported 
on June 15, 1938, to the Bureau show price lines at lower levels. 
Forty-seven percent of the group retailed for 29 cents; 26 percent 
retailed for 25 cents. 



Table 65. — Distribution of retail prices for girls' anklets 



Retail price: 
$0.25--. 
.27--. 
.28--. 
.29-.. 
.30-.. 
.31--. 



Number of 
quotations 

.... 33 

.;-- 1 

3 

..-- 60 

1 

1 



Retail price: 

$0.33-- 

.35.- 

.37-- 

.39-. 



Number of 
quotations 

.-.- 16 

5 

1 

.--. 7 



Total 128 



* Knit Goods Weekly, October 17, 1938, p. 10. 
247149— 41— No. 1 18 



248 



CONCENTRATION OF ECONOMIC POWER 



Men's work shirts. — In men's ready-to-wear, retail price lines are 
important in the pricing of men's suits, business shirts, underwear, 
socks, neckties, and felt hats. The retail prices of men's work cloth- 
ing also give evidence of price lining, although it is not as marked as 
for women's clothing. The 349 retail prices reported to the Bureau 
on men's work shirts retailing from 39 cents to $1 in June 1938 are 
generally grouped at 10-cent intervals between 39 cents and 89 cents: 



Table 66. — Distribution of retail prices for men's work shirts 



Retail price: 
$0..39.- 
.45. _ 
.47.. 
.49. _ 
.50.. 
.55.- 
.58-. 
.59.. 
.65.. 
.67__ 
.68.. 
.69.. 
.75.. 
.79.. 



Number of 
quotations 

.-__ 13 
2 

1 

-.. 22 

4 

.... 2 

1 

.... 61 

1 

.... 3 

1 

.--- 55 

.... 7 

.--- 35 



Retail price: 
$0.80-- 
.82.. 
.85-- 
.88-- 
.89.- 
.90.- 
.92-. 
.L'l.- 
.95.- 
.98.- 
1.00-. 



Number of 
quotations 

1 

1 

4 

1 

.--- 50 

1 

1 

2 

5 

.--. 39 

.... 36 



Total 349 



One retailer reported that the chain-store organization which he 
represented found that goods which were changed in price sold better 
if they were increased or reduced to an "accepted" price line rather 
than to some intermediate price. For instance, shirts which had been 
selling for 49 cents would sell better when placed in the 59-cent 
group, a price line to which their customers had become accustomed, 
than if they were priced at 54 cents. Similarly, he said it was nece^ary 
to observe customary lines even during sales. 

It has been pointed out that the retail price lines found in women's 
ready-to-wear are the result of two factors: (1) The rigidity of whole- 
sale price lines, and (2) the acceptance of "customary" price lines by 
consumers with the result that retailers consider it expedient to 
observe these conventional pricing practices. For men's work shirts, 
however, only the second factor is significant since the wholesale quota- 
tions are flexible, usually changing when costs of production change. 



VARD GOODS 

Retail price lines are also followed in the merchandising of yard 
.goods. Buyers who have established price lines on yard goods are 
anxious to purchase cloths which can be retailed at established 
prices. In order to maintain these lines in the face of changes in costs 
quality is necessarily altered, but the variations are seldom great 
enough to be evident to the average consumer. In the caoe of woolens, 
for example, the quality of the cloth may be changed in any of the 
following ways: (1) Changing the construction of the cloth; (2) using 
another grade of wool; or (3) introducing some reworked wool or 
rayon. In the case of cotton goods, the price may be stabilized by 
varying the quality of the yarn used, and, if the cloth is printed, by 
varying the number of colors and the elaborateness of the design. 



CONCENTRATION OF ECONOMIC POWER 249 

Retail prices on printed percales, 80 x 80 construction, reported to 
the Bureau as of December 1938 indicate the prevalence of price 
lining. Two price lines — 19 cents and 25 cents — accounted for 114 of 
the 134 quotations. 

Table 67. — Distribution of retail prices for printed percales 



Number of 
Retail price: quotations 

$0.14 1 

$0.15 3 

$0.17 6 

$0.19 46 

$0,2r. 1 

$0.22 6 



Number of 
Retail price: quotations 

$0.23 2 

$0.24 1 

$0.25 68 



Total 134 



CONSUMERS DURABLE GOODS 

The retail list prices of certain kinds of consumers' durable goods 
also show evidence of established price lines, although the practice is 
not as universal in this field as in the apparel markets. Many elec- 
trical appliances, for example, are regularly priced at 5 cents under the 
even $10 mark. As in the case of apparel, price lines are more com- 
mon in connection with the sale of merchandise designed for consum- 
ers in the low and middle income brackets than for goods destined for 
the less price-conscious luxury trade. 

Washing machines and vacuum cleaners. — In the sale of both washing 
machines and vacuum cleaners it seems to be the accepted practice 
for retail prices to be quoted at 5 cents under the even $10 mark. 
For example, electric vacuum cleaners are usually priced at $10 
intervals from $39.95 to $79.95. Washing machines show the same 
general pattern but the range extends materially above the $79.95 
level. 

As in the case of conventional price endings for apparel, this practice 
is largely the outgrowth of manufacturers' and distributors' appraisal 
of consumer psychology. It is generally contended by these trades 
that inter ediate price levels are less satisfactory in stimulating sales. 
Thus, if the cost of producing and distributing a certain vacuum 
cleaner warranted a price of $61, it would probably be marked at 
$59.95; similarly, if its cost indicated a retail price of $57 it would still 
sell much better at $59.95. The uniformity with which this practice 
is observed illustrates at least that these industries are convinced of 
the validity of their interpretation of the consumer's reaction. 

Radios. — The more common retail list prices for radios follow: 
$12.95, $17.95, $24.95, $29.95, $39.95, $49.95, $59.95, $69.95, $79.95, 
$89.95, and $129.95. 

Recently a small portable radio designed to retail at $9.95 has been 
introduced by many manufacturers. 

Refrigerators. — There is also some evidence of the maintenance of 
price lines for electric refrigerators. In this case, however, there is 
somewhat more variation both as between different makes and at 
different periods of time. Table 21 compares the retail list prices for 
the 1938 models of nine nationally advertised refrigerators. (See p. 
162 supra.) 



250 CONCENTRATION OF ECONOMIC POWER 

THE CASH DISCOUNT IN THE APPAREL MARKET 

It has been pointed out in chapter III of this study (see p. 74 
supra) that wholesale price lines for apparel, and particularly for 
women's apparel, should be interpreted in the light of the standard 
so-called cash discount. For most lines of women's apparel, manu- 
facturers regularly grant a discount of 8/10 EOM off the accepted 
price line.^ 

An indication of the extent to which this discount is actually ob- 
served for different kinds of goods has been obtained from data 
published by the National Retail Dry Goods Association.® According 
to the data compiled, the 8/10 EOM terms are being granted on the 
following items of women's, misses', and girls' clothing: 

(1) Neckwear and scarfs. 

(2) Millinery. 

(3) Corsets and brassieres. 

(4) Sdk and muslin underwear and slips. 

(5) Negligees and robes. 

(6) Coats and suits. 

(7) Dresses. 

(8) Blouses and sportswear. 

(9) Girls' wear. 

(10) Aprons, housedresses, and uniforms. 

(11) Furs. 

Although this allowance is usually called a cash discount it is in 
reality a combination cash and trade discount. This interpretation 
is indicated both by its size, which is unusually high for a strictly cash 
discount, and also by the fact that failure to pay by the date stipulated 
does not usually entail the loss of the entire discount. Instead, if 
payment is delayed, the terms are usually changed to 7/10/60.^ This 
is equivalent to charging interest at the rate of 6 percent per annum 
for the additional 60 days allowed. 

As in the case of the price lines themselves this discount largely 
represents the crystallization of business custom. It was, however, 
definitely formalized about 20 years ago by a conference of retailers 
and manufacturers. Later (about 1925) the relative bargaining 
power of the retailers seems to have increased, with the result that 
the discount was increased to 10/10 EOM in a substantial portion of 
the market, particularly in the lower price lines. Under N. R. A., 
however, manufacturers succeeded in restoring the terms of their old 
level of 8/10 EOM; since that time this has been the prevailing prac- 
tice. There are, however, occasional variations from these terms. It 
is understood that very large buyers are sometimes granted 10/10 
EOM terms (representing an advantage of two percent.) Some 
merchants doing business in small communities are believed to receive 

' I. 6., a discount of 8 percent if payment is made within 10 days after the end of the month during which 
the sale was completed. 

' 1937 Departmental Merchandising and Operating Results of Department and Specialty Stores, pub- 
lished by the Controllers' Congress of"^° National Retail Dry Goods Association. These figures show the 
typical performance figure in pach of toe separate departments for the items listed. Cash discounts from 
which any "loading" discounts had oftfln eliminated weio expressed in the National Retail Dry Goods 
Association report as a percentage of sal*» In order to calculate the cash discount as a percentage of cost 
(the flsure to which the S-percent discount is applied), the "typical" figures for both the cumulative mark- 
ons and mark-downs harl to be considerftd. since each percentage represents the typical performance 
rather than the actual performance of any slmrle store. 

' I. e., a discount of 7 percent if payment is made within 10 days of the expiration of a 60-day period. 



CONCENTRATION OP ECONOMIC POWER 251 

a discount of only 3 percent. In this way changes in discount impart 
a limited degree of flexibility to conventional price lines. 

The question may be raised as to whether a discount so uniformly 
granted has any real significance in the market other than that implied 
in an equivalent reduction in the nominal price lines. There is some 
evidence, however, that there is a difference in the ultimate result, 
particularly from the point of view of the consumer. It is standard 
bookkeeping practice in many department stores to apply this discount 
to the expenses of the "front" office rather than to the credit of the 
specific department involved.* If a buyer should, for any reason, fail 
to obtain the standard discount, and if office procedure is based upon 
the practice just mentioned, it is common to "load" the buyer's cost. 
For example, assume that the terms received on a $10.75 dress are only 
6/10 EOM. In such a case the dress would be charged to the depart- 
ment at $10.98 and the difference credited to the "front" office.^ 

This practice in turn influences the retail selling price. The operat- 
ing results of each department are computed upon the basis of whole- 
sale price level. Consequently, it becomes incumbent upon the buyer 
to adjust his mark-up accordingly, if the department is to show an 
adequate operating profit. 

Opinions as to the actual significance of this situation differ. It is 
contended on the one hand that it results in a higher price to the con- 
sumer for the commodities affected because of the pressure upon the 
buyer to show a profit based upon a fictitious cost. It is suggested on 
the other hand that, if this practice did not prevail, the result would be 
much the same because larger operating profits would be required 
from the individual departments in order to defray necessary adminis- 
trative expenses. Perhaps what really happens is that retail prices 
in the departments aft'ected by this practice arc somewhat higher than 
they would otherwise be, while prices in other departments are corre- 
spondingly lower. In any event the situation is significant as an illus- 
tration of the manner in which retail price levels may be affected by 
business convention. 

* Recoutlv, however, thereseenis to be some trend iu the opposite direction. 
«.|10.75 loss 6 percent equals $10.10. .$10.98 less 8 percent equals $10.10. 



APPENDIX III 
Statistical data supporting charts 



Sensitive and insensitive prices 

11926 = 100] 

(Chart I based on the following statistical data appears on p. 24) 

INDEXES OF WHOLESALE PRICES OF SULFUR, CRUDE 



Rela- 
tive 


Jan- 
uary 


Feb- 
ruary 


March 


April 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


Year 


1926... 
1927... 
1928... 
1929... 
1930... 
1931... 
1932... 
1933... 
1931... 
1935... 
1930... 
1937... 
1938... 
1939 


93 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
87 


3 

8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


93.3 

98.8 
98.8 
98 8 
9S.8 
98.8 
98.8 
98.8 
98.8 
98.8 
98.8 
98.8 
98.8 
87.9 


96 
98 

98 
98 
98 
98 
98 
98 
98 
98 
9S 
98 
98 
87 


1 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


86 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
87 


4 
8 
8 

8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


104 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
93 
98 
87 


3 

8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


104 
98 
98 
98 
98 
98 
98 
98 
93 
98 
98 
98 
98 
87 


3 

8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 

q 


104 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
87 


3 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


104 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 


3 

8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 


98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 


8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 


98 
98 
9S 
98 
98 
98 
98 
98 
98 
98 
98 
98 
90 


8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
1 


98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
87 


8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
87 


8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
8 
9 


100 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
98 
96 


0' 
» 
8 

8 
8 
8 
S- 
8 
8 

a 

8 

a 









































INDEXES OF WHOLESALE PRICES OF BRICK: LIGHT COLORED FRONT, GOOD GRADE 



1920... 


103.8 


103.8 


103.8 


101.1 


101.1 


101.1 


98.4 


98.4 


98.4 


98.4 


95.7 


95.7 


100.0 


1927... 


93.0 


93.0 


93.0 


93.0 


93.0 


93.0 


93.0 


93.0 


93.0 


93.0 


93.0 


95.7 


93. a 


1928... 


93.0 


90.3 


87.6 


87.6 


87 6 


87.6 


84.9 


87.6 


84.9 


84.9 


84.9 


84.9 


87.2 


1929... 


84.9 


84.9 


84.9 


84.9 


84.9 


84.9 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


83.6 


1930... 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


82.2 


1931... 


82.2 


79.5 


79.5 


79.5 


79.5 


79.5 


79.5 


79.5 


79.5 


76.9 


76.9 


76.0 


79. a 


1932... 


76.2 


76. 9 


76.9 


76.9 


75.8 


74.2 


72.2 


74.2 


74.2 


74.2 


74.2 


74.2 


75.1 


1933... 


74.2 


74.2 


74.2 


74.2 


74.2 


74.2 


76.2 


82.2 


82.2 


82.2 


82.2 


82.2 


77.7 


1934... 


83.9 


84.9 


87.0 


88.0 


89.0 


89.0 


89.0 


89.0 


89.0 


89.0 


89.0 


89.0 


88.0 


1935... 


89.0 


89.0 


89.0 


89.0 


89.0 


89.0 


89.0 


89.0 


84.9 


83.6 


83.6 


85.8 


87.5 


1936... 


80.2 


80.2 


82.4 


82.9 


81.6 


82.9 


82.9 


82.9 


82.9 


82.9 


84.9 


86.0 


82.8 


1937... 


89.3 


94.4 


94.4 


94.4 


94.4 


94.4 


94.4 


94.4 


94.4 


87.6 


84.9 


84.9 


91. a 


1938... 


84.9 


84.9 


84.9 


84.9 


87.1 


87.6 


87.6 


87.6 


89.0 


89.7 


90.3 


90.3 


87.4 


1939... 


90.3 


90.3 


90.3 


90.3 


90.3 


90.3 


90.3 

































INDEXBS OF WHOLESALE PRICES OF WHEAT, NO. 2, 


HARD 






1926... 


120.8 


115.3 


106.6 


107.4 


104.5 


102.7 


91.7 


83.1 


89.3 


92.5 


91.8 


91.8 


100. a 


1027... 


92.0 


90.7 


88.7 


87.4 


95.4 


99.4 


93.6 


93.5 


88.4 


89.5 


90.1 


91.1 


91.7 


1928... 


93 3 


92.3 


96.5 


103.5 


109 5 


103.4 


86.0 


73.3 


72.9 


76.5 


76.4 


76.1 


88.5 


1929... 


77.4 


80.3 


78.6 


74.6 


68.4 


69.8 


85.5 


82.2 


82.9 


82.1 


78.9 


83.0 


78. a 


1930... 


79.4 


74.4 


68.0 


68.0 


86.4 


62.6 


54.7 


55.0 


52.9 


50.7 


46.2 


47.6 


60.1 


1931... 


46.7 


46.7 


47.3 


49.0 


49.1 


44.5 


31.3 


29.7 


30.7 


33.3 


40.9 


37.3 


40.5 


1932... 


36.6 


37.1 


34.6 


36.6 


36.8 


30.3 


31.2 


32.7 


32.6 


30.6 


29.0 


28.3 


33.0 


1933... 


28.8 


29.5 


32.8 


40.3 


47.6 


53.0 


66.5 


59.3 


58.7 


64.8 


56.1 


54.2 


4a 4 


1934... 


56 5 


56.5 


54.8 


51.1 


.S5. 1 


61.6 


63 5 


71.3 


71.5 


68.2 


68.2 


70.3 


62.3 


1935... 


67.3 


67.2 


04.5 


68.7 


66.7 


59.3 


64.8 


69.3 


76.5 


79.6 


74.1 


74.4 


69.5 


1936... 


74.5 


72.5 


71.0 


67.8 


61.5 


63.5 


74.8 


81.2 


80.4 


81.6 


81.5 


89.5 


75.1 


1937... 


92.7 


91. 1 


92.9 


91.5 


88.6 


81.8 


82.1 


73.5 


73.8 


69.1 


63.1 


65.2 


80.3 


1938... 


69.0 


66.8 


61.2 


56.3 


52 


54.5 


47.0 


43.9 


43.3 


43.0 


42.8 


45.5 


61. » 


1939 .. 


47.2 


46.3 


45.8 


46.4 


50.8 


49.2 


44.6 
























- 





Source: Bureau of Labor Statistics. 
252 



CONCENTRATION 01' ECONOMIC POAVER 

Wholesale prices of selected commodities 

[1926=100] 

(Chart II based on the following statistical data appears on p. 25) 

EGGS, FIRSTS, NEW YORK 



253 



Year 


Janu- 
ary 


Febru- 
ary 


March 


April 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


Yearly 
aver- 
age 


1926... 


107.8 


86.9 


81.1 


89.2 


86.0 


84.8 


82.3 


88.3 


106.2 


113.6 


140.4 


135. 


100.0 


1927... 


117.8 


89.8 


70.5 


69.1 


65 8 


65.1 


69.6 


79.0 


96.3 


111.1 


122.6 


127.5 


89.9 


1928... 


126.4 


91.2 


80.4 


79.8 


83.5 


82.8 


85.0 


88.1 


92.8 


91.2 


103.0 


102.8 


92.6 


1929... 


102.2 


115.5 


92.0 


78.2 


87.5 


86.0 


91.1 


97.0 


102.0 


111.0 


135.7 


142.1 


103. 5 


1930... 


118.2 


98.8 


72.3 


75.5 


65.6 


68.4 


62.9 


70.2 


70.6 


74.4 


87.2 


80.7 


78.2 


1931... 


68.0 


56.6 


61.5 


5Q. 6 


53.1 


52.2 


56.6 


62.6 


67.8 


67.9 


80.0 


75.0 


63.2 


1932... 


52.4 


48.4 


39.4 


39.7 


41.2 


39.7 


42.2 


48.8 


58.0 


67.2 


86.7 


88.3 


54.3 


1933... 


64.3 


38.8 


38.3 


37.7 


39.6 


37.4 


43.0 


39.9 


49.9 


56.5 


72.3 


60.5 


48.4 


1934... 


62.4 


51.3 


49.7 


46.9 


46.1 


45.7 


46.9 


58.4 


62.1 


66.5 


77.4 


74.7 


57.2 


1935... 


83.6 


84.4 


60.2 


67.5 


70.5 


68.0 


68.6 


72.9 


76.0 


75.9 


82.4 


75.9 


73.9 


1936. -- 


68.1 


85.3 


58.9 


57.5 


60.7 


62.0 


63.8 


66.6 


69.3 


76.1 


90.7 


90.8 


70.8 


1937... 


70.2 


63.7 


65.1 


63.4 


57.9 


57.9 


59.9 


59.6 


65.6 


66.3 


73.3 


71.2 


64.5 


1938... 


63.0 


52.0 


50.4 


50. 8 


58.8 


57.9 


60.2 


62.2 


70.9 


74.9 


81.6 


78.1 


63.4 


1939... 


55.2 


49.8 


49.1 


48.4 


46.2 


45.5 


45.7 





























COTTON GOODS 



1926... 


107.5 


106.6 


104.9 


103.5 


101.0 


98.6 


98.1 


99.0 


99.4 


96.2 


93.7 


91.8 


100.0 


1927... 


90.1 


90.7 


91. i 


90.9 


92.9 


94.5 


95.6 


100.1 


106.8 


106.2 


104.3 


102.6 


97.1 


1928... 


101.3 


100.1 


99.7 


99.6 


100.7 


100.5 


101.5 


100.7 


99.2 


99.9 


100.5 


100.9 


100.4 


1929... 


100.4 


99.8 


100.6 


99.4 


98.5 


97.8 


98.2 


98.2 


98.4 


98.5 


97.4 


96.2 


98.8 


1930... 


94.7 


92.8 


90.3 


89.6 


89.0 


87.2 


83.9 


81.1 


78.6 


77.0 


77.5 


75.6 


84.7 


1931. ._ 


73.5 


73.1 


72.4 


71.4 


69.2 


67.6 


66.8 


64.0 


61.5 


59.7 


58.1 


56.4 


66.1 


1932... 


55.8 


56.4 


56.2 


55.1 


52.9 


51.0 


50.0 


52.6 


57.9 


56.2 


53.6 


51.7 


54.0 


1933... 


50.1 


49.1 


50.0 


50.7 


57.9 


67.1 


80.2 


93.5 


91.3 


88.8 


80.0 


85.5 


71.2 


1934... 


86.5 


8S.6 


89.1 


88.2 


86. 3 


86.0 


8?. 1 


86.4 


87.8 


86.6 


84.4 


84.3 


86.5 


1935... 


84.1 


83.3 


82.4 


SI. 8 


82.7 


82.5 


82.0 


82.5 


83.2 


84.6 


80.8 


86.0 


83.4 


19.36... 


80.4 


78.1 


77.1 


76.2 


75.5 


75.4 


78.7 


79.5 


80.0 


82.0 


85.5 


90.3 


80.3 


1937... 


SI. 9 


91.3 


94.0 


95.1 


92.6 


89.7 


86.8 


82.2 


76.8 


73.1 


70.5 


68.7 


84.3 


1938... 


68.2 


67.6 


67.6 


65.7 


65.0 


63.9 


65.1 


C4.4 


64.1 


64.6 


65.1 


64.6 


65.4 


1939... 


64.3 


63.7 


63.7 


63.4 


63.3 


64.1 


65.1 





























DOMESTIC RAYON 



1926... 


110.5 


110.5 


110.5 


110.5 


110.5 


110.5 


91.2 


91.2 


91.2 


91.2 


91.2 


91.2 


100.0 


1927... 


80.1 


80.1 


81.2 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82 9 


82.9 


82.9 


82.3 


1928... 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


82.9 


1929... 


82.9 


80.1 


71.8 


71.8 


71.8 


69.8 


63.6 


63.6 


63.6 


63.6 


63.6 


63.6 


68.9 


1930... 


63.6 


63.6 


63.6 


63.6 


63.6 


63.6 


59.1 


52.5 


52.5 


52.5 


52.5 


62.5 


68.5 


1931... 


47.0 


41.4 


41.4 


41.4 


41.4 


41.4 


41.4 


41.4 


41.4 


41.4 


41.4 


41.4 


41.9 


1932... 


41.4 


41.4 


41.4 


41.4 


40.3 


35.9 


31.8 


30.9 


33.2 


33.2 


33.2 


33.2 


36.5 


1933... 


33.2 


33.2 


33.2 


27.6 


30.4 


31.8 


34.5 


35.9 


35.9 


35.9 


35.9 


35.9 


33.6 


1934... 


35.9 


35.9 


35.9 


35.9 


31.9 


30.4 


30.4 


30.4 


30.4 


30.4 


30.4 


31.2 


32.4 


1935... 


33.2 


33.2 


3.3.2 


32.1 


30.4 


30.4 


30.4 


31.2 


31.5 


31.5 


31.5 


31.5 


31.7 


1936... 


31.5 


31.5 


31.5 


31.5 


31.5 


31.8 


33.2 


33.2 


33.2 


33.2 


33.2 


33.2 


32.4 


1937... 


33.2 


33.2 


33.2 


34.8 


34.8 


34.8 


34.8 


34.8 


34.8 


34.8 


34.8 


34.8 


34.4 


1938... 


33.0 


29.8 


29.8 


29.8 


28.7 


27.1 


27.1 


28.2 


28.2 


28.2 


28.2 


28.2 


28.9 


1939... 


28.2 


28.2 


28.2 


28.2 


28.2 


28.2 


28.2 





























Source: Bureau of Labor Statistics. 



254 



CONCENTRATION OF ECONOMIC POWER 



Wholesale prices of selected commodities — Continued 

[1926=100] 

(Chart III based on the following statistical data appears on p. 26) 

PHOSPHATE ROCK 



Year 


Janu- 
ary 


Feb- 
ruary 


March 


April 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


i926 


94.6 
95.5 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
90.8 
108.3 
58.9 
58.9 
58.9 
60.5 


99.5 
95.6 
95.6 
98.7 
98.7 
98.7 
98.7 
98.7 
90.8 
108.3 
58.9 
58.9 
58.9 
60.5 


103.6 

95.5 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
90.8 
108.3 
58.9 
58.9 
58.9 
60.5 


101.1 
95.5 
95.5 

98.7 
98.7 
98.7 
98.7 
98.7 
90.8 
108.3 
58.9 
58.9 
58.9 
60.5 


100.3 
95.5 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
90.8 

108.3 
58.9 
58.9 
58.9 
60.5 


100.3 
95.5 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
93.3 

108.3 
58.9 
58.9 
58.9 
60.5 


100.3 

95.5 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
103.5 
108.3 
58.9 
58.9 
58.9 
60.5 


100.3 
95.5 
97.9 
98.7 
98.7 
98.7 
98.7 
95.9 
103.5 
108.3 
58.9 
58.9 
58.9 


100.3 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
87.9 
103.5 
108.3 
58.9 
58.9 
58.9 


100.3 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
89.2 
103.5 
108.3 
58.9 
58.9 
58.9 


100.3 
95.5 
98.7 
98.7 
98.7 
98.7 
98.7 
89.2 
103.5 
108.3 
58 9 
58.9 
58.9 


100.3 


1927.-. 


95.5 


1928 


98.7 


1929 


98.7 


1930 


98.7 


1931 


98.7 


1932 


98.7 


1933 


89.2 


1934 


104.4 


1935 


61.3 


1936 


58.9 


1937 . . 


58.9 


1938 


59.2 


1939 

















ANTHRACITE 



1926. -.- 

1927 


113.7 
99.1 
94.8 
91.6 
91.2 
88.9 
94.8 

•88.7 
81.6 
82.3 
82.3 
81.6 
80.1 
80.3 


102.0 
98.9 
95.3 
91.6 
91.2 
88.9 
94.8 
88.7 
81.2 
82.3 
82.6 
81.6 
79.8 
79.9 


101.2 
96.8 
94.8 
91.4 
91.2 
88.4 
89.9 
88.3 
81.2 
81.1 
82. 5 
77.8 
79.3 
79.4 


98.1 
93.8 
89.7 
88.1 
90.2 
86.4 
85.7 
81.4 
78.1 
75.5 
80.0 
72.4 
76.0 
71.7 


97.6 
93.6 
89.0 
67.4' 
86.7 
87.5 
85.6 
78.5 
75.7 
73.0 
7fi. 6 
74.2 
73.8 
75.3 


97.3 
94.8 
90.4 
88.1 
85.8 
88.8 
85.3 
76.8 
76.9 
74.0 
77.0 
74.5 
74.5 
70.5 


97.4 
95.2 
90.5 
89.1 
86.5 
90.8 
84.5 
77.9 
78.6 
77.0 
78.5 
76.6 
76.2 
72.6 


98.1 
95.7 
90.3 
90.0 
88.0 
92.2 
86.0 
79.2 
79.9 
78.6 
79 1 
76.8 
77.9 


98.4 
97.0 
91.2 
90.6 
89.1 
94.3 
87.7 
82.0 
81.3 
80.fi 
80,6 
78.7 
79.1 


98.4 
96.9 
91.2 
91.2 
89.7 
94.2 
88.7 
81.8 
82.0 
82. S 
81.8 
78.8 
79.1 


98.8 
96.9 
91.2 
91.2 
89.6 
94.2 
88.8 
81.8 
82.1 
83.0 
82.4 
79.8 
80.1 


98.8 
96.8 


1928 .... 


91.2 


1929 

1930 


91.2 
89.6 


1931 


94.8 


1932 


88.7 


1933 


81.5 


1934.. 


82.3 


1935 


82.9 


1936 


82.3 


1937 


80.0 


1938 


80.1 


1939 

















POTATOES 
(Wliits, good to choice, bulk) 



Year 


Jan- 
uary 


Feb- 
ruary 


March 


April 


May 


Jane 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


Yearly 
aver- 
age 


1926... 


134.0 


123.2 


132.4 


151.8 


112.6 


105.7 


67.0 


74.0 


75.9 


72.2 


77.8 


75.1 


100.0 


1927... 


76.8 


77.8 


62.7 


86.3 


119.5 


122.6 


70.9 


66.0 


64.3 


58.3 


58.6 


55. 6 


76.6 


1928... 


56.6 


65.8 


86.1 


65.1 


50.3 


44.8 


30.0 


2G. 6 


30.5 


27.4 


28.2 


31.9 


44.9 


1929... 


34.5 


28.8 


26.8 


23.4 


25.3 


26.3 


69.5 


84.0 


83.4 


79.7 


75.3 


77.0 


53.3 


1930... 


82.6 


81.3 


78.6 


92.6 


89.2 


88.8 


52.6 


63.3 


69.9 


59.3 


51.0 


46.8 


70 9 


1931... 


48.5 


46.5 


47.6 


49.2 


41.9 


52.4 


45.6 


39.6 


31.5 


25.1 


20.1 


27.9 


40.1 


1932... 


27.2 


25.9 


27.8 


27.2 


27.9 


37.0 


31.3 


24.4 


23.1 


21.8 


22.1 


24.4 


26.6 


1933... 


24.5 


25.0 


25.9 


25.3 


24.5 


53.9 


91.3 


83.8 


52.1 


40.5 


42.3 


42.7 


44.2 


1934... 


55.1 


59.5 


50.8 


45.0 


33.9 


35.5 


41.5 


45.2 


30.0 


27.8 


26.0 


20.0 


40.4 


1935... 


27.4 


25.2 


22.1 


27.4 


21.9 


33.0 


45.6 


33.8 


30.2 


28.0 


36.1 


38.0 


31.0 


1936... 


38.6 


42.7 


39.5 


45.0 


60.4 


88.9 


77.8 


78.2 


72.2 


68.2 


70.9 


73.8 


63.6 


1937... 


88.8 


94.6 


87.3 


68.6 


64.3 


50.0 


50.4 


38.7 


31.7 


31.9 


35.1 


36.3 


56.2 


1938... 


33.9 


34.6 


33.4 


38.3 


45.1 


53.1 


33.8 


30.0 


29.6 


29.7 


36.0 


36.4 


36.2 


1939 


41.3 


41.4 


40.0 


39.9 


41.8 


61.9 


41.1 





























Source: Bureau of Labor Statistics. 



CONCENTRATION OP ECONOMIC POWER 



255 



iVholesale prices of selected commodities — Continued 

POTASH SALTS 
[1926-28=100] 



Month 



January- 
February. 

March 

April. 

May 

June 

July 

August 

September 
October... 
November 
December. 



1929 



101.0 
101.0 
101.0 
101.0 
92.8 
95.0 
95.8 
96.9 
97.9 
98.9 
100.0 
102.0 



1930 



102.0 
102.0 
103.2 
103.2 
94.0 
96.0 
97.0 
98.0 
99.0 
100.0 
101.0 
103.2 



1931 



103.2 
103.2 
103.2 
103.2 
91.8 
95.9 
97.0 
98.0 
99.0 
100.0 
101.0 
103.2 



1932 



103.2 
103.2 
103.2 
103.2 
90.5 
95.8 
96.8 
97.8 
98.8 
99.8 
100.9 
102.8 



1933 



102.8 
102.8 
102.8 
102.8 
90.2 
90.2 
90.2 
90.2 
90.2 
96.0 
96.0 
96,0 



1934 



101.0 
101.0 
101.0 
101.0 
80.0 
80.0 
81.1 
59.6 
59.6 
63.5 
63.5 
63.5 



1935 



63.5 
63.5 
63.6 
63.6 
61.6 
61.5 
56.4 
60.3 
60.3 
64.2 
64.2 
64.2 



1936 



64.2 
64.2 
64.2 
64.2 
64.2 
64.2 
62.3 
67.3 
67.3 
69.3 
69.3 
70.7 



1937 



70.7 
70.7 
70.7 
70.7 
70.7 
66.4 
71.9 
71.9 
71.9 
75.5 
75.5 
75.5 



1938 



76.6 
75.6 
75.5 
75.6 
75.6 
66.6 
71.9 
71.9 
71.9 
76.7 



Source: National Fertilizer Association. 



Average factory price of electric refrigerators 

[1928 = 100] 



Year — 

1928 100.0 

1929 

1930 

1931 

1932 



Source: National Electrical Manufacturers Association 



Index 


Year — 


00.0 


1933 


80.8 


1934 


79.8 


1935 


77.5 


1936 


61.0 

Associa 


1937 

tion. 



Index 
50. 1 
50.8 
46. 9 
48.6 
51.2 



Changes in average wholesale price and quantity available for consumption for 11 J 

commodities, 1929-33 



[Chart IV based on 


the following statistical data appears on p. 


39] 






Percent change 


Commodities 


Percent change 


Commodities 


Average 
price 


Amount 
available 

for con- 
sumption 


Average 
price 


Amount 
available 

for con- 
sumption 


NoDfiuiablfc goods. 

Corn 


•-37 

•-20 

•-28 

-57 

-ei 

-55 

-53 

•-32 

•-44 

-39 

-42 

•-58 

•-34 

-53 

-47 

-7 

-17 

•-13 

-51 

-56 

-57 

-15 

•-13 

-51 

-45 

-9 
-9 


•-3 

•-27 
•+1 
+28 

-2 
•+6 

-1 

-4 
-62 
•+4 

-4 

-l 

•+7 
•+1 
-16 
-13 
•-15 
•+6 
•+4 
+3 

-6 
•-6 
-13 

+2 

-31 
-37 


Nondurable goods— Con. 
Coke 


-6 

-27 
-14 
-TA 
-14 

-24 
-11 
-28 
-28 
-56 
-30 
-53 
-34 
-53 
-55 
-16 



-8 

-9 

-12 

•-33 

-21 
-6 
-2 

-43 


-60 


Oats . .. 


Fuel oil 


—30 


Wheal 


Oasoliui'* 


+3 


Steers 




-15 


Hops 


Cans, sanitary 


—2 


Poultry, live . . 


Sulfuric acid.. 

Alcohol, denatured 

Sodium ash 


-34 


Eggs 


-42 


Apples. 


—7 


Oranges 


Castor oil 


-39 


Milk. .. 


Olycerine 

Ammonia (sulfate) 

Superphosphate 

Tankage . . 


—7 


Tobacco 


+53 


Bean<;, dried 1. 

Potatoes, white 


-37 
-39 


Butter. . 


Fertilizers, mixed 

Bran and middlings 

Cottonseed meal 

Poiboard 


-46 


Cheese 


—31 


Brpad 


-3 


Flour, wheat 


-8 


Rice 

Beef, fre.oh 


Wrapping paper (ma- 
nila) 


-10 


Pork, fresh.. 


Soap, laundry 


-9 


Poultry, dressed .. 


Cigarettes 


-1 


Sugar: 


Ci<'ats. - 


-2« 


Granulated 


Semidurable goods: 

Cotton . . 




Raw 


•-7 


Vegetable oil, coconut.. 
Twine, binder 


Shoes: 

Children's 


+26 


Coal: 


Men's . 


-6 


Anthracite 


Ladies' 





Bituminous 


Hides, steer 


-14 



256 



CONCENTRATION OF ECONOMIC POWER 



Changes in average wholesale price and quantity available for consumption for 111 
commodities, 1929-83 — Continued 





Percent change 


Commodities 


Percent change 


Commodities 


Average 
price 


Amount 
available 
for con- 
sumption 


Average 
price 


Amount 
available 
for con- 
sumption 


Scmidurabie goods— Con. 

Skins, goat 

Jycather: 

Calf.. 


-32 

-24 
-37 
-41 
-36 
-2 
-7 
-11 
-28 
-34 
-23 

-47 
-47 
-23 
-51 
-67 
-55 
-32 
-18 
-26 
-36 
-22 
-20 
-18 
-26 
-26 
-71 

-18 
-2 


-19 

-18 
-11 
-4 
-58 
-42 
-11 
-40 
+2 
+ 1 
-23 

-41 

+4 
+ 1 
+64 
-23 
-75 
-14 
-28 
+1 
-37 
+10 
-50 
-37 
-49 
-41 
-27 

-52 
-99 


Durable goods— Continued. 

Plows... 

Tractors 

Castings, malleable 

Pipe, blick steel 

Structural steel 

Tinplate and terneplate. 

Passenger cars 

Trucks 



-29 
-25 
-16 
-15 
-17 
-16 
-23 
-61 
-43 
-13 
-27 
-38 
-26 

-19 
-7 
-7 
-6 

-30 
-22 
-20 
-11 
-28 
-28 
-29 

-47 
-21 
-17 
-21 


-01 
-95 
-63 


Kid 


-26 


Sole... 


-76 


Gloves 


-3 


Ovsrcoats and topcoats. 
Shirts, dress 


-64 
—45 


Suits, men's.. 


Copper, ingot. 

Leid, pig 

Tin, pig . . 


-88 


Print cloth 


-65 


Sheel ing, bleached 


-28 


Cotton yarn, carded 


Boilers, heating 


-21 


Hosiery: 


Radiation 


-76 


Rayon 


Bathtubs... 


-69 


Silk . 


Brick: 

Common. 

Fire clay 

Front 




Union suits, women's. -. 
Rayon . ... 


-82 
-59 


Silk, raw, Japan 

Silk yarn 


-87 


Cement 


-63 


Dress goods, woolen 

Overcoating 


Lumber: 

Dougla' flr 


-53 


Yarn, wool 


Oak 


-77 


Burlap 


Pine 


-62 


Thread, cotton.. 

Paint, outside white 

Varnish 


Crushed stone 

Tar, pine._ 

Carpets 


-51 
-22 
-19 


Linseed oil, raw 

Tires, balloon 


Stoves, gas 

Washing machines, 
electric 


-54 




+8 


Durable goods: 

Belting, leather.'. 

Harvester-thresher 


Mattresses 

Davenports 

Paper, book 


-50 
-67 

-28 



Source: Percentages computed by the Bureau of Labor Statistics, except those marked 
furnished by the Bureau of Agricultural Economics. 



which were 



Farm products — prices and production 

[1926 = 100] 
(Chart V based on the following statistical data appears on p. 41) 



Year 


Index of 

wholesale 

prices ' 


Index of 
produc- 
tion' 


Year 


Index of 

wholesale 

prices ' 


Index of 
produc- 
tion' 


1926 


100.0 
99.4 
lO.'-i. 9 
104.9 
88.3 
64.8 
48.2 


100 
97 

102 
99 
99 

105 
98 


1933 


51.4 
65.3 
78.8 
80.9 
80.4 
08.5 


95 


1927.. 


U'34 


92 


1928.. 


1935.. _ 


90 


1929 


1936 


93 


1930 


1937 


106 


1931 . 


.1938 


102 


1932.. 











' Source: Bureau of Labor Statistics. 

' Source: Bureau of Agricultural Economics. 



CONCENTRATION OF ECONOMIC POWER 



257 



Wholesale prices of SO basic commodities, industrial production, and reciprocals of 

price dispersion 

[1929=100] 

WHOLESALE PRICE INDEXES OF 30 BASIC COMMODITIES 

(Chart VI based on the following statistical data appears on p. 44) 



Year 


Jan- 
uary 


Feb- 
ruary 


March 


AprU 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
tober 


No- 
vem- 
ber 


De- 
cem- 
ber 


Yearly 

aver- 
age 


1926... 
1927... 
1928... 
1929... 
1930... 
1931... 
1932... 
1933... 
1934... 
1935... 
1936... 
1937... 
1938... 
1939 .. 


117.0 
103.2 
108.5 
101.9 
89.1 
61.9 
46.3 
37.2 
57.4 
71.8 
72.0 
89.9 
68.6 
63.1 


112.6 
104.1 
105.6 
103.4 
88.2 
60.0 
45.1 
36.4 
61.1 
72.0 
71.6 
89.2 
67.1 
62.9 


108.4 
103.7 
105.4 
104.1 
85.7 
61.1 
43.9 
38.4 
61.0 
70.0 
70.8 
92.6 
65.9 
63.3 


106.2 
103.3 
106.3 
101.9 
84.7 
59.1 
41.4 
41.3 
60.6 
70.4 
70.3 
90.4 
63.3 
61.7 


104.6 
102.9 
107.5 
98.4 
80.8 
55.9 
39.0 
51.0 
60.9 
70.8 
67.8 
87.0 
61.7 
62.5 


107.3 
103.2 
105.7 
98.2 
76.4 
55.2 
37.6 
55.9 
61.7 
09. 9 
68.7 
84.6 
60.9 
62.0 


108.1 
103.7 
105.9 
iOl.4 
73.4 
55.3 
38.6 
61.7 
f.2.4 
69.2 
73.2 
86.8 
64.3 
60.3 


106.9 
105.9 
103.9 
101.9 
72.7 
52.6 
42.8 
58.7 
65.9 
70.7 
76.7 
85.0 
03. 3 
59.5 


107.9 
107.3 
104.0 
102.3 
71.2 
50.3 
45.2 
58.0 
67.9 
72.7 
77.8 
&3.4 
63.2 


104.7 
107.0 
102.8 
99.6 
68.8 
49.1 
42.0 
55.3 
66.5 
74.8 
77.8 
76.7 
63.8 


102.4 
106.7 
101.9 
94.3 
66.5 
60.1 
40.3 
55.8 
67.6 
74.1 
81.4 
70.5 
63.8 


102.7 
107.7 
102.0 
91.3 
64.6 
47.1 
38.0 
54.6 
68.9 
73.1 
86.4 
68.1 
63.1 


107.6 
105.4 
105.4 
100.0 
77.0 
55.0 
41.9 
50.7 
63.9 
71.9 
74.8 
84.2 
64.3 















Source: Bureau of Labor Statistics. 

INDEXES OF INDUSTRIAL PRODUCTION, ADJUSTED 



Year 


Jan- 
uary 


Feb- 
ruary 


March 


April 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


1926 


89 
90 
90 
100 
89 
70 
61 
56 
66 
77 
82 
96 
68 
85 


88 
91 
92 
99 
90 
72 
58 
53 
68 
75 
79 
98 
66 
82 


89 
92 
91 
99 
87 
73 
56 
50 
71 
74 
78 
99 
66 
82 


90 
91 
91 
102 
87 
74 
53 
56 
72 
72 
S5 
99 
65 
77 


89 
92 
91 
103 
86 
73 
50 
66 
72 
71 
85 
99 
64 
77 


91 
90 
91 
105 
82 
70 
50 
77 
71 
72 
87 
96 
65 
82 


91 
89 
92 
104 
78 
69 
49 
84 
64 
72 
91 
96 
70 
85 


92 
89 
92 
102 
76 
66 
50 
77 
61 
73 
91 
98 
74 
86 


93 
87 
95 
102 
76 
64 
56 
71 
60 
76 
92 
93 
77 


93 
86 
97 
99 
74 
61 
56 
64 
62 
SO 
92 
87 
81 


92 
85 
98 
92 
72 
61 
55 
61 
63 
82 
9fi 
7.5 
87 


90 


J927 


86 


1928 


99 


1929.... 


87 


1930 


71 


1931 

1932 : 


62 
66 


1933 


63 


1934 

1935 


72 
87 


1936 

1937 


102 
71 


1938.... 


87 


1939 















Source: Federal Reserve Board. 

RECIPROCALS OF INDEXES OF WHOLESALE PRICE DISPERSION 



Year 


Jan- 
uary 


Feb- 
ruary 


March 


April 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


1928... 


116.1 
103.1 
100.9 
70.0 
41.4 
34.4 
42.7 
75.8 
71.6 
92.3 
63.9 
65.8 


125.8 
105.9 
99.2 
66.4 
39.3 
32.8 
45.7 
76.1 
75.1 
93.4 
60.2 
54.3 


126.9 
92.0 
93.6 
64.3 
39.7 
34.1 
46.4 
69.2 
72.2 
82.0 
59.0 
53.3 


114.8 
91.8 
93.0 
62.3 
39.4 
35.3 
44.8 
71.5 
75.4 
72.5 
56.2 
61.8 


106.6 
94.8 
92.8 
57.1 
36.7 
41.1 
45.2 
71.1 
79.2 
69.8 
54.8 
63.3 


112.6 
97.8 
90.1 
53.2 
36.0 
45.1 
49.7 
73.3 
87.2 
68.6 
54.1 
64.1 


99.9 
90.3 
89.0 
53.2 
39.7 
47.9 
51.7 
72.3 
93.7 
62.1 
54.7 
64.4 


94.5 
89.3 
91.6 
53.0 
40.9 
44.2 
67.9 
66.3 
88.2 
68.6 
64.9 
61.8 


88.0 
92.9 
83.4 
49.7 
42.2 
45.1 
64.9 
64.7 
88.5 
68.7 
56.0 


105.6 
99.2 
81.0 
48.6 
39.6 
43.1 
69.3 
67.4 
94.6 
60.1 
57.1 


113.0 
105.3 
74.5 
48.1 
39.4 
42.9 
59.7 
75.4 
98.6 
63.6 
69.2 


109.8 


1929 . 


102.7 


1930 


72.9 


1931... 


43.7 


1932 


36.6 


1933 


40.6 


1934 


60.1 


1936 


70.4 


1936... 


97.3 


1937 


64.4 


1938 


69.2 


1939 















Source: Works Progress Administration. 

The measure of dispersion is the weighted average of the deviations of the 45 commodity subgroup price 
indexes from the all-commodities index. The indexef were derived by dividing the monthly average devia- 
tions by the average deviation in 1929. • The reciprocals were obtained by dividing each monthly dispersion 
index into 100. 



258 CONCENTRATION OF ECONOMIC POWER 

Indexes of Wholesale Price Dispersion and Industrial Production 

[ioa6«=ioo] 

(Chart VII based on the following statistical data appears on p. 46) 

INDEXES OF WHOLESALE PRICE DISPERSION 



Year 


Jan- 
uary 


Feb- 
ruary 


March 


AprU 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


1928 

1929... 


86.1 
97.0 
99.1 
142.8 
241.6 
290.5 
234.4 
132.0 
139.8 
108.3 
156.6 
179.1 


79.6 
94.4 
100.8 
150.7 
254.7 
305.0 
219.0 
131.4 
133.2 
107.1 
166.1 
184.3 


78.8 
108.7 
106.8 
155.6 
252.2 
293.3 
215.3 
144.5 
138.5 
121.9 
169.6 
187.5 


87.1 
108.9 
107.6 
160.5 
253.8 
283.2 
223.3 
139.^ 
132.6 
137.9 
178.0 
193.0 


93.8 
105.6 
107.8 
175.1 
272.5 
243.2 
221.4 
140.6 
126.3 
143.2 
182.4 
187.6 


88.8 
102.2 
111.0 
188.1 
277.4 
221.7 
201.4 
136.6 
114.7 
145.7 
186.0 
184.8 


100.1 
110.7 
112.4 
187.8 
252.1 
208.8 
193.4 
138.3 
106.7 
161.0 
182.8 
183.8 


106.8 
112.0 
109.2 
1&8.6 
244.4 
226.4 
172.7 
150.9 
113.4 
170.6 
182.2 
193.2 


113.7 
107.6 
119.9 
201.4 
237.1 
221.7 
154.1 
154.5 
113.0 
170.3 
178.7 
153.5 


94.8 
100.8 
123.4 
206.3 
252.3 
231.8 
168.5 
148.3 
105.7 
166.3 
175.2 
171.1 


88.5 
95.0 
134.2 
208.0 
253.8 
233.2 
167.4 
132.7 
101.4 
157.2 
168.8 


91.1 
97.4 


1930 


137.2 


1931.. 


228 6 


1932 


281 6 


1933.. 


246.4 


1934_ 


166.3 


1935 


142.0 


1936... 


102.8 


1937 


155.4 


1938 


168. S 


1939 











Source: Works Progress Administration. 

INDEXES OF INDUSTRIAL PRODUCTION, ADJUSTED 



Year 


Jan- 
uary 


Feb- 
ruary 


March 


April 


May 


June 


July 


Au- 
gust 


Sep- 
tem- 
ber 


Octo- 
ber 


No- 
vem- 
ber 


De- 
cem- 
ber 


1926 


■ 89 
90 
90 
100 
89 
70 
61 
55 
66 
77 
82 
96 
68 
85 


88 
91 
92 
99 
90 
72 
58 
. 53 
68 
75 
79 
98 
66 
82 


89 

92 

91 

99 

87. 

73 

66 

50 

71 

74 

78 

99 

66 

82 


90 
91 
91 
102 
87 
74 
63 
56 
72 
72 
85 
99 
66 
77 


89 
92 
91 
103 
86 
73 
50 
66 
72 
71 
86 
99 
64 
77 


91 
90 
91 
105 
82 
70 
50 
77 
71 
72 
87 
96 
65 
82 


91 
89 
92 
104 
78 
69 
49 
84 
64 
72 
91 
96 
70 
85 


92 

■ 89 

92 

102 
76 
66 
50 
77 

'61 
73 
91 
98 
74 
86 


93 

87 
96 
102 
76 
64 
56 
71 
60 
76 
92 
93 
77 
93 


93 

86 
97 
99 
74 
61 
56 
64 
62 
80 
92 
87 
81 
101 


92 
85 
98 
92 
72 
61 
55 
61 
63 
82 
96 
75 
87 


90 


1927 


86 


1928 


99 


1929 

1930 

1931 

1932- 


87 
71 
62 
66 


1933 . . 


63 


1934.. 

1935 


72 
87 


1936 


102 


1937 . 


71 


1938 


87 


1939.... 











Source: Federal Reserve Board. 

Automobile tires — wholesale price and average life of automobile tires 
(Chart VIII based on the following statistical data appears on p. 66) 



Year 


Price index i 
(1926 = 100) 


Tire life » 
(years) 


Year 


Price index ' 
(1926=100) 


Tire life » 
(years) 


1913 .; 


207.2 
173.1 
155.1 
160.4 
198.0 
229 2 
209.2 
232.5 
179.0 
115.4 
109.6 
92.6 
98.6 


0.805 
.722 
.768 
.762 
.712 
.893 
.933 
1. 281 
1.486 
1.296 
1.608 
1.670 
1.6S1 


1926 


100.0 
74.9 
63.4 
64.5 
51.3 
46.0 
41.1 
42.1 
44.9 
45.7 
47.2 
66.8 
57.7 


1.770 


1914 


1927 


1.665 


1915 


1928 


1.650 


1916 


1929 


1.848 


1917. 


1930 


2.465 


1918 


1931 


2.417 


1919 .. » 


1932 .. -. 


2.689 


1920 


1933 


2.427 


1921 


1934 


2.666 


1922. 


1935 


2.725 


1923 


1936 


2.695 


1924 


1937 


» 2. 908 


1925. 


1933 











1 Source: Bureau of Labor Statistics. 

'Source: Bureau of Foreign and Domestic Commerce, Rubber News Letter. 
'Preliminary. 



CONCENTRATION OF ECONOMIC POWER 

Retail prices of men's dress shirts 
(Chart IX based on the following statistical data dppears on p. 84) 



259 



Date 


One na- 
tionally ad- 
vertised 
brand 


Other 
brands ' 


Date 


One na- 
tionally ad- 
vertised 
brand 


Other 
brands * 


December 1929 


$1.95 
1.95 
1.95 


$1.91 
1.55 
1.76 


November 1934 .. . . 


$1.95 
2.00 
2.00 


$1.73 


December 1932. 


December 1936 


1.59 


December 1933 


December 1937 


1.61 









' Unweighted average. 

Source: Bureau of Labor Statistics. 



Breakfast cereals — prices and margins 

(Chart X based on the following statistical data appears on p. 85) 

[Cents per pound] 





Rolled oats 


Corn flakes 


Year 


Farm 
value ' 


Wholesale 
price ' 


Retail 
price > 


Farm 
value ' 


Wholesale 
price > 


Retail 
price ' 


1926... 


2.2 
2.5 
2.7 
2.5 
2.1 
3.4 
1.0 
1.4 
2.3 
2.2 
1.9 
2.3 


6.6 
6.7 
6.6 
6.6 
6.6 
6.0 
5.4 
4.0 
5 3 
5.8 
5.6 
5.7 


9.1 
9.0 
9.0 
8.8 
8.6 
8.0 
7.4 
5.8 
6.8 
7.5 
7.4 
7.5 


2.8 
3.6 
4.0 
4.0 
3.6 
2.2 
1.3 
1.7 
2.8 
3.6 
3.6 
4.4 


13.4 
13.4 
13.4 
13.4 
13.4 
13.4 
13.4 
13.4 
13.0 
12.5 
12.1 
12.6 


21.0 


1927. 


19.8 


1928 _-- 

1929 _ 


18.8 
18.6 


1930 .. 


18.4 


1931 


17 6 


1932 


16.8 


1933 


16.8 


1934 -. 


16.8 


1935 

1936 


16.6 
16 2 


1937 


15.8 



> Source: Bureau of Agricultural Economics. 
2 Source: Bureau of Labor Statistics. 

Wholesale prices of selected foods (■products classified into 4 guartiles according to 

consumer buying habits) ' 

[1929 = 100] 
(Chart XI based on the following statistical data appears on p. 87) 
FIRST QUARTILE 

















Years 














Month 
































1926 


1927 


1928 


1629 


1930 


1931 


1932 


1933 


1934 


1935 


1936 


1937 


19.38 


1939 


January 


103.8 


92.8 


101.0 


98.0 


96.1 


74.4 


61.7 


49.0 


67.0 


79.2 


78.6 


80.2 


72.1 


68.4 


February 


102.7 


91.0 


102.5 


97.9 


9.5.9 


70.8 


59.8 


48.2 


68.3 


79.4 


76.9 


80.2 


71.6 


67.5 


March 


101.6 


90.0 


103.5 


98.9 


94.5 


71.6 


58.6 


49.9 


69.5 


79.6 


75.6 


81.1 


71.6 


67.5 


April 


101.0 


90.5 


104.2 


100.1 


93.7 


70.2 


57.2 


51.7 


69.9 


81.1 


76.5 


83.8 


71.4 


67.6 


May 


102.1 


92.6 


105.0 


100.8 


90.7 


69.5 


55.7 


56.1 


71.1 


81.4 


75.2 


84.4 


70.8 


68.2 


June 


99.9 


92.8 


102.0 


99.1 


89.4 


67.5 


55.1 


52.7 


71.4 


81.0 


74.4 


83.8 


70.5 


66.8 


July 


99.6 


93.0 


102.1 


102.1 


85.0 


67.0 


55.1 


56.4 


72 6 


79.8 


76.8 


84.1 


70.9 


65.8 


August 


97.8 


92.5 


100.6 


103.0 


83.8 


66.2 


55.0 


55.9 


76.1 


80.4 


81.1 


82.5 


68.8 




September.. 


96.2 


94.5 


102.9 


102.8 


81.8 


65.4 


55.2 


63.7 


79.0 


81.2 


82.0 


81.4 


69.1 




October 


94.8 


94.4 


100.9 


100.6 


78.9 


63.1 


5b. 4 


65.0 


78.4 


82.0 


79.9 


77.9 


68.2 




November... 


93.5 


97.7 


98.3 


98.7 


75.8 


64.0 


51.3 


66.8 


78.1 


80.1 


78.8 


72.3 


68.1 




December... 


92.9 


99.3 


96.6 


97.7 


74.6 


62.4 


49.3 


66.7 


78.4 


80.1 


78.9 


72.0 


68.2 




Vearly aver- 






























age 


98.8 


96.2 


101.7 


100.0 


86.6 


67.6 


55.6 


58.7 


73.3 


80.4 


77.9 


80.2 


70.1 





' For first quartile, brand names were least significant to consumer, and progressively more significant 
in each succeeding quartile. 

Data based upon sample study of consumer buying habits designed to determine relative weight given 
to brand names by consumers in purchasing different commodities. The products covered were ranked 
according to the importance of brand names in their respective markets, and then grouped into iquartiles 
on the basis of these ranks. Unweighted averages of the Bureau of Labor Statistics wholesale prices for each 
■quartile were then computed. 



260 



CONCENTRATION OP ECONOMIC POWER 



Wholesale prices of selected foods (products classified into 4 quartiles according to^ 
consumer buying habits) — Continued 

[1929=100] 
SECOND QUARTILE 

















Years 














Month 
































1926 


1927 


1928 


1929 


1930 


1931 


1932 


1933 


1934 


1935 


1936 


1937 


1938 


1939 


January 


98.6 


93.0 


104.0 


99.5 


96.0 


78.0 


62.3 


57.0 


68.1 


85.6 


77.2 


89.5 


74.4 


66.5 


February 


96.9 


94.7 


105.0 


99.1 


95.4 


76.3 


61.6 


56.3 


70.3 


88.2 


76.4 


89.5 


72.3 


65.8 


March. _ 


94.4 


94.5 


105.0 


100.1 


94.1 


76.6 


60.8 


57.4 


72.9 


88.3 


75.6 


90.5 


71.4 


65.5 


April... 


94.7 


95.3 


105.2 


99.4 


92.4 


75.6 


59.6 


59.2 


72.3 


87.8 


75.6 


91.6 


70.0 


65.2 


May 


94.5 


98.6 


106.7 


98.6 


89.0 


74.1 


59.0 


63.2 


73.6 


86.6 


73.6 


91.1 


69.3 


67.5 


June -- 


96.0 
96.0 


99.7 
101.0 


106.8 
104.7 


99.1 
101.0 


86.6 
85.2 


73.1 
72.7 


58.5 
59.0 


64.7 
68.5 


74.6 
75.0 


85.9 
84.1 


73.2 
77.1 


90.7 
88.7 


67.6 
67.5 


67.4- 


July 


66.3 


August 


95.5 


101.2 


101.1 


101.6 


87.6 


71.9 


59.5 


68.1 


77.4 


83.3 


84.7 


86.8 


66.8 




September. _ 


94.6 


98.6 


102.8 


102.5 


87.1 


70.8 


60.3 


68.9 


80.1 


83.6 


86.5 


84.3 


66.7 




October 


95.5 


100.4 


104.1 


100.6 


86.6 


68.7 


59.7 


68.3 


81.1 


83.5 


83.7 


81.4 


66.7 




November... 


93.4 


100.2 


103.1 


99.3 


83.1 


66.8 


59.1 


69.0 


82.1 


81.8 


83.5 


77.9 


65.9 




December... 


92.8 


101.0 


101.9 


98.9 


80.9 


64.0 


57.8 


67.8 


83.3 


80.2 


86.1 


76.1 


67.5 




Yearly aver- 






























age 


95.2 


98.2 


104.2 


100.0 


88.7 


72.3 


69.8 


64.1 


75.8 


84.9 


79.5 


86.5 


68.9 





THIRD QUARTILE 



January 

February 

March 

April -. 

May. 

June.. _ 

July.. 

August :. 

September. . 

October 

November... 
December. . . 
Yearly aver- 
age 



104.0 


103.5 


99.9 


98.3 


101.3 


86.9 


76.7 


68.9 


77.2 


87.0 


81.5 


85.3 


83.7 


103.6 


103.8 


99.0 


98.8 


101.5 


87.2 


76.3 


68.2 


78.2 


87.3 


81.4 


86.3 


83.8 


103.3 


103.3 


98.6 


96.9 


100.2 


85.3 


76.7 


68.1 


80.0 


87.6 


81.4 


86.7 


83.5 


103. 4 


103.2 


98.6 


97.3 


98.6 


84.5 


76.6 


68.6 


80.7 


86.9 


82.0 


86.9 


83.1 


103.1 


103.3 


99.7 


99.5 


93.5 


82.9 


76.1 


70.5 


80.3 


86.3 


81.0 


87.0 


82.4 


104.0 


102.9 


99:6 


100.5 


93.6 


81.3 


75.2 


72.1 


81.1 


86.2 


81.2 


87.8 


81.4 


104.4 


102.0 


99.4 


102.3 


90.8 


81.1 


73.6 


75.5 


82.7 


85.7 


82.8 


86.8 


80.9 


\0X 5 


101.2 


97.5 


101.5 


90.5 


80.0 


71.5 


78.2 


82.8 


83.0 


85.7 


85.9 


80.2 


103.8 


101.6 


97.7 


101.5 


91.1 


79.4 


69.6 


80.6 


85.4 


83.2 


86.3 


86.4 


79.2 


104. 5 


101.0 


99.7 


101.9 


90.4 


79.3 


69.9 


79.6 


87.1 


82.9 


8.5.3 


86.1 


78.2 


103.8 


101.1 


98.3 


100.9 


88.6 


78.1 


69.5 


77.9 


87.1 


82.8 


85.0 


85.6 


77.4 


103.8 


101.2 


98.3 


100.0 


86.8 


77.8 


69.1 


76.9 


86.7 


82.9 


85.3 


84.4 


77.5 


103.8 


102.3 


98.9 


100.0 


93.9 


82.0 


73.4 


73.7 


82.4 


85.1 


83.3 


86.3 


80.9 



77.8 
77.5 
77.4 
77.5 
77.5 
77.5 
77.0 



FOURTH QUARTILE 



January 

February 

March 

April 

May 

June 

July 

August 

September. - 

October 

November... 
December. .. 
Yearly aver- 
age 



103.2 


101.7 


104.0 


102.5 


102.2 


102.7 


101.9 


101.9 


102.7 


ini. 7 


101.9 


103.5 


101.6 


101.7 


104.3 


102.6 


101.7 


104.4 


102.8 


101.1 


103.8 


101.1 


100.6 


101.3 


101.5 


100.2 


100.8 


102.5 


101.5 


100.1 


102.5 


102.8 


100.0 


102.9 


102.8 


99.7 


102.2 


101.6 


102.3 



100.1 
101.8 
101.3 
100.4 
100.1 
100.2 
100.9 
100.7 
100.5 
99.0 
97.7 
97.7 



96.7 


87.0 


76.8 


67.0 


75.6 


85.1 


86.0 


88.0 


84.7 


96.8 


87.0 


76.2 


65.1 


76.7 


87.1 


85.7 


87.0 


84.4 


96. 7 


86.0 


75.4 


65.2 


76.9 


86.8 


84.9 


80.8 


83.3 


96.4 


84.4 


74.2 


67.0 


77.1 


87.5 


83.8 


86.9 


81.8 


95.5 


83.5 


72.3 


69.1 


78.6 


86.4 


82.3 


86.7 


79.6 


93.6 


83.2 


70.8 


70.1 


80.2 


84.9 


81.9 


87.0 


79.5 


93.0 


82.8 


70.6 


73.9 


80.2 


85.4 


83.6 


87.6 


79.2 


93.0 


82.6 


70.7 


74.6 


81.6 


86.3 


85.9 


85.8 


77.8 


31.1 


81.4 


70.0 


75.1 


83.4 


86.8 


85.5 


85.8 


77.3 


■10.9 


80.9 


69.5 


75.6 


83.7 


86.0 


84.6 


85.7 


77.2 


•8.8 


80.5 


69.4 


76.1 


83.8 


86.1 


84.7 


85.0 


76.7 


87.8 


80.1 


69.4 


75.2 


84.2 


86.8 


86.3 


84.7 


77.2 


93.3 


83.3 


72.1 


71.2 


80.0 


86.2 


84.6 


86.4 


79.9 



77.1 
76.8 
77.9 
78.1 
78.0 
78.0 
78.1 



Source: Bureau of Labor Statistics. 



CONCENTRATION OF ECONOMIC POWER 



261 



Electric refrigerators — number sold, retail value, average realization at retail, arid 

wholesale price index 

(Chart XII based on the following statistical data appears on p. 113) 



Year 


Number 
sold I 


Total retail 
value ' 


Unit 
retail 
value ' 


Wholesale 
price index 
(1932=100)' 


1927 --- 


375, 000 
535, 000 
778, 000 
79 i, 000 
906. 000 
798, 000 
1,016,000 
1, 283, 000 

1, 568, 000 
1,996,000 

2. 310. 000 
1, 240, 000 


.$131,260,000 
178, 690. 000 
227,176,000 
217,525,000 
233, 748, 000 
155,610,000 
172. 720. 000 
220, 676, 000 
253. 648, 000 
327, 344. 000 
395, 010. 000 
213, 280, 000 


$350 
334 
292 
275 
258 
195 
170 
172 
162 
164 
171 
172 




1928 - 




1929. _.. 




1930 - 




1931 __. 




1932 


100 


1933 . .... 


86 7 


1934 - 


90 9 


1935 


89 2 


1936 - 


80 6 


1937 


93 9 


1938 


96 3 







> Source: Electrical Merchandi.'ing. 
2 Source: Bureau of Labor Statistics. 



Electric washing machines- 



-number sold, retail value, average realization at retail, 
and wholesale price index 



(Chart XIII based on the following statistical data appears on p. 114) 



Year 


Number 
sold ' 


Total retail 
value 1 


Unit 
retail 
value I 


AVholesale 
prire index 
(1932=100) » 


1927 - 


775, 661 

809, 884 

956, 000 

802. 000 

812, 000 

569, 830 

966, 698 

1.121,137 

1, 228, 774 

1,528,585 

1, 405. 405 

1, 032, 956 


$110,925,000 
108,000.000 
107. 900. 000 
83. 809. 000 
69. 020. 000 
33. 619. 970 
59, 935. 276 
72. 873, 905 
79.931,748 
100.947.753 
105. 860. 857 
74, 279, 866 


$143. 01 
133.35 
112.87 
101. 50 
85. 00 
59.00 
62.00 
65.00 
65. 05 
66.04 
72.24 
71.91 


211 


1928 


172 8 


1929 


153 8 


19.30 


138 2 


1931 -.- 


121 1 


1932 .... 


100 


19.33 --. 


82 3 


1934 


80 6 


1935 


80 6 


1936 . 


86 7 


1937 


86.7 


1938. - - , 


86.7 







• Source: Electrical Merchandising. 
> Source: Bureau of Labor Statistics. 



Vacuum cleaners — number sold, retail value, average realization at retail, and 

wholesale price index 



(Chart XIV based on the following statistical data appears on p 


115) 




Year 


Number 
soldi 


Total retail 
value 1 


Unit re- 
tail value' 


Wholesale 
price index 
(1932=100)» 


1927 


1,194,614 

. 1,219.460 

1, 395, 745 

1, 170, 339 

877, 695 

557, 288 

739, 354 

968, 376 

1, 200, 940 

1,510,9.53 

1,706.337 

1, 297, 530 


$58, 536, 086 
60, 973, 000 
64, 810, 970 
55, 987, 704 
37,310,822 
19, 600, 756 
30, 271, 330 
43, 555, 465 
54, 709, 769 
67,456,541 
77, 783, 784 
63, 986, 896 


$49.00 
50 00 
46.43 
47.84 
42.51 
35. 17 
40.94 
44.98 
45.56 

44. 65 

45. 59 
49.31 


129. 1 


1928 

1929 


129.1 
125. 1 


1030 


121 2 


1931 


112.0 


1932 _ 


100.0 


1933 


95 » 


1934 


102.5 


1935 


93 


1936 


86. 1 


1937 


86 t 


1938 


86.1 







' Source: Electrical Merchandising. 
' Source: Bureau of Labor Statistics. 



262 



CONCENTRATION OF ECONOMIC POWER 



Electric ranges — number sold, retail valtie, average realization at retail, and wholesale 

price index 

(Chart XV based on the following statistical data appears on p. 1 16) 



Year 


Number 
sold ' 


Total retail 
value ' 


Unit re- 
tail value > 


Wholesale 
price index 
(1932=100)> 


1927 


102,000 
135,000 
162, 781 
180,000 
115,000 
60, 000 
50,000 
123,000 
215, 000 
318,000 
405,000 
275,000 


6, 539, 566 
22,175,000 
25,270,000 
27,000,000 
18,795,000 
9,000,000 
7,100,000 
15, 990, 000 
27, 305, 000 
41,413,140 
64,270,000 
39,875,000 


$162. 15 
164.26 
165.40 
150. 00 
163.43 
150. 00 
142. 00 
130.00 
127.00 
130.23 
134. 00 
145.00 


132.4 


1928 


134.2 


1929 - 


126.9 


1930 


97.0 


1931 --- 


97.0 


1932 -- - 


100.0 


1933 --- 


93.6 


1934 


99.4 


1935 


88.0 


1936 . --.: 


89.2 


1937 


97.2 


1938 


98.1 







1 Source: Electrical Merchandising. 
* Source: Bureau of Labor Statistics. 



Sales and saturation * 
(Chart XVI.based on the following statistical data appears on p. 119) 





Electric refrigerators 


Power washing 
machines 


Vacuum cleaners 


Electric ranges 


Year 


Number 
sold 


Percent 

of homes 

using 


Number 
sold 


Percent 

of homes 

using 


Number 
sold 


Percent 

of homes 

using 


Number 
sold 


Percent 

of homes 

using 


1927 


375, 000 

535,000 

778, 000 

791,000 

906,000 

798, 000 

1,016,000 

1,283,000 

1,568,000 

1,996,000 

2,310,000 

1,240,000 


4.3 
6.4 
9.4 
12.8 
17.1 
21.6 
24.6 
29.3 
34.2 
41.1 
49.4 
51.7 


775,661 

809,884 

956, 000 

802,000 

812.000 

569, 830 

966, 698 

1, 121, 137 

1, 228, 774 

1, 528, 585 

1,465,405 

1,032,956 


28.4 
30.2 
33.4 
35.1 
40.8 
39.4 
43.9 
46.0 
48.8 
52.5 
55.5 
57.6 


1, 194, 614 

1, 219, 460 

1,395,745 

1, 170, 339 

877, 695 

557, 288 

739, 354 ■ 

968, 376 

1, 200, 940 

1,510,953 

1, 706, 337 

1, 297, 530 


38.8 
40.7 
43.6 
44.4 
45.4 
46.6 
48.5 
48.1 
48.3 
48.9 
48.8 
49.0 


102, 000 
135,000 
152, 781 
180,000 
1 15, 000 
00,000 
50,000 
123,000 
215,000 
318,000 
405, 000 
275,000 


3.3 


1928 


3.8 


1929 


4.4 


1930 . 


4.8 


1931 


6.3 


1932 


5.5 


1933 


5.8 


1934 


6.1 


1936. 


6.8 


1936 . ... 


7.9 


1937. 


9.0 


1938 .. .. 


0.6 







1 Percent of wired homes. 
Source: Electrical Merchandising. 



) 



CONCENTRATION OF ECONOMIC POWER 



263 



Household equipment ownership by income groups, 1936-36 — Percentage of families 
reporting ownership, selected cities by regions 

(Charts XVII to XX based on tne following statistical data appear on pp. 122-129) 

ELECTRIC REFRIGERATORS 





New England 


East Central 


West 
Central 


South- 
east 


Rocky 
Moun- 
tain 


Pacific 
North- 
west 


Income class 


1 
S 


.2 
'5 

be 


T3 
0) 

-o'S 


a 

03 


"o 
a 
o 

u 


'S 

bo 


■a 


1 
'3 

a 

to 


'3 

1 
1^ 


Or 
".2 


Hi 




'3 
a 


^'3 
■a 


'3 


•a 


$250 and under $500 






12 

9 

9 

21 

27 

30 

43 

42 

56 

61 

69 

86 

82 

100 








10 
12 
20 
28 
36 
43 
56 
59 
71 
81 
81 
90 
89 
85 


8 
12 
12 
27 
36 
42 
51 
60 
63 
66 
75 


'"7" 
15 
27 
35 
48 
54 
56 
57 
67 
73 
78 
89 
82 
88 


10 
4 
11 
22 
37 
46 
56 
63 
66 
76 
72 
88 
90 
99 


"¥ 

16 
28 
43 
55 
57 
66 
61 
70 
65 
72 
78 
68 


6 
11 
25 

33 
40 
64 
64 
01 
71 
66 
87 
84 
78 
84 


ii" 

9 
6 

16 

23 

30 

34 

47 

57 

51 

66 

75 

70 

82 


12 
9 
11 
23 
31 
30 
42 
56 
58 
67 
76 
77 
88 
77 


"is" 

9 
21 
28 
32 
48 
51 
56 
64 
77 
68 
65 
85 




$500 and under $750 . 


13 

7 
15 
14 
15 
18 
18 
19 
32 
25 
24 
19 
29 
28 


2 
11 
13 
14 
26 
28 
32 
44 
50 
63 
63 
61 
75 


12 
14 
17 
20 
35 
37 
47 
56 
72 
63 


6 
9 
15 
17 
28 
27 
32 
34 
37 
40 
42 
37 
42 
30 


"e" 

23 
28 
39 
44 
48 
55 
60 
70 
60 
75 
84 
.<2 





$750 and uader $1,000 .. 





$1,000 and under $1,250 .. 


8 
15 
19 
25 
33 


$1,250 and under $1,500 - 


$1,500 and under $1,750-.- _ 

$1,750 and under $2,000.-- -- 


$2,000 and under $2,250- _ 

$2,250 and under $2,500.. 


$2,500 and under $3,000. 


49 
62 

54 

58 


$3,000 and under $3,500. 


$3,W0 and under $4,000 

$4,000 and under $5,000.. 


$5,000 and under $7,500 


71 


$7,500 and under $10,000 




$7,500 and over. .. . 


66 












95 






92 




$10,000 and over..- 


11 






50 



















































POWER WASHING MACHINES 



$250 and under $500- 








24 
34 
54 

:8 

04 
63 
65 
51 
59 
63 
64 






19 

62 
72 
77 
79 
81 
83 
82 
75 
75 
68 
78 
67 
80 


56 
63 

77 
74 
88 
84 
84 
80 
77 
86 
78 


66 
55 
70 
70 
73 
76 
68 
70 
71 
76 
81 
74 
82 
85 


46 
44 
66 
69 
73 
70 
75 
70 
73 
66 
67 
56 
66 
60 








27 
55 
45 
56 
62 
57 
68 
65 
67 
51 
48 
68 
68 
79 


31 
45 
64 
61 
61 
69 
67 
70 
70 
76 
69 
75 
79 


63 


$500 and under $750 

$750 and under $1,000 


13 
3 

7 

6 

2 

4 

5 

9 

14 

8 

13 

11 

10 

14 


6 
7 
10 
14 
19 
18 
21 
22 
37 
34 
32 
32 


18 
25 
42 
43 
46 
45 
45 
53 
43 
54 
56 
51 
59 


22 
25 
40 
46 
44 
54 
55 
48 
52 
56 
52 
53 
48 
41 


57 
59 
68 
77 
76 
81 
80 
82 
77 
83 
79 
84 
82 
86 


5 

9 
12 

9 
12 
17 
10 
16 
12 
17 

6 
22 


2 
5 

4 

10 

6 

9 

6 

10 

11 

14 

7 

7 

13 


25 
31 
45 
51 
48 
48 
51 
52 
52 
57 
43 
61 
53 
39 


53 
66 


$1,000 and under $1,250 - 


80 


$1,250 and under $1,500 


71 


$1,500 and under $1,750 


69 


$1,750 and under $2,000. 


80 


$2,000 and under $2.250 


73 


$2,250 and under $2,500 

$2,500 and under $3,000. 


77 
72 


$3,000 and under $3,500 


73 


$3,500 and under $4,000-.. 


77 


$4,000 and under $5,000 


87 


$5,000 and under $7.500 . .. 


83 


$7..500 and under $10,000 




$7,500 and over 


47 












29 






82 




$10,000 and over 


16 






63 



















































VACUUM CLEANERS 



$2.50 and under $500 

$500 and under $750 

$750 and under $1,000 ..- 
$1,000 and under $1,250-. 
$1,250 and under $1,.500.. 
$1,500 and under $1,750.- 
$1,750 and under $2,000-- 
$2,000 and under $2,250- 
$2,250 and under $2,500-. 
$2,,'i00 and under $3,000.. 
$3,000 and under $3.500.. 
$3,500 and under $4,000-. 
$4,000 and under .$5.000.. 
$5,000 and under $7,.'',00- 
$7,500 and under $10,000. 

$7,500 and over 

$10,000 and over. -- 



100 



20 

40 30 

25 46 

42 48 



37 
22 
43 
40 
52 
72 
68 
78 
69 
92 
90 
95 
96 



100 



247140 — 11— No. 1 m 



264 



CONCENTRATIOM OF ECONOMIC POWER 



Household equipment ownership by incoviO groups, 19S5-36 — Percentage of families 
reporting ownership, selected cities by regions — Continued 



RADIOS 



Income class 



New England 



$250 and under $500. _. 

$500 andninder $750. 

$750 and under $1.000 

$1,000 and under $1,250 

$1,250 and under $1,500 

$1,500 and under $1,750 

$1,750 and under $2.000 

$2,000 and under $2,250 '100 

$2,250 and under $2,500 99 

$2,500 and under $3,000 ..| 99 

$.3,000 and und?r $3,500 98 

$3,500 and under $4,000 jlOO 

$4,000 and under $5,000... j 99' 

$5,000 and under $7,500 97 

$7,500 and under $10,000 I 97 

$7,500 and over '. — 

$10,000 and over ilOO 



97 

95 

94 

98 

99 

99 
100 I 98 

99 98 
100 100 
100 100 
100 100 



Kast Central 



74 
91 
88 I 93 
87 96 



97 



West 
Central 



South- 
east 



Rocky 
Moun- 
tain 



Pacific 

North- 
west 



99 



100 
85 
90 
92 
97 



100 
100 
100 
100 



Source: Bureau of Labor Statistics: Study of Consumer Purchases, Urban Series, 1935-36. 

Note. — These data are compiled from a study of urban consumer purchases conducted during 1935-3*^ 
by the Bureau of Labor Statistics. The study relates to nonreiief families including husband and wife, 
both native-born, in 31 selected cities throughout the ruuntry. The data include only equipment owned 
at the end of the schedule year, and all hgures based upon number of families in the three-way control 
(occupation, income, family type) represent weighted data. 



I 



CONCENTRATION OF ECONOMIC POWER 



265 



Income residual after primary expenditures ' by income groups, 19S5-S6 — Nonrelief 
white families, including husband and wife, both native born ^ 



(Chart XXI based 


on the following statistical data 


appears on p. 


132-3) 










New England 


East Central 


West 
Central 


South- 
east 


Rocky 

Moun- 
tain 


Pacific 

North- 
west 


Family income class 


"o 
a 
o 

1 


.2 

1-1 


ii 


a 

CO 


"3 
£ 


ta 




.2 
'a 

a 

03 


'5 
1^ 




.2 
'3 

Hi 


S"3 


'3 




ca 
1-5 


T3 


$250 and under $500 . 






-69 
-6 
6 
13 
16 
21 
22 
29 
29 
34 
33 
42 
46 
45 


-28 
-11 
10 
14 
22 
20 
27 
29 
30 
33 
41 


-16 
2 
10 
15 
19 
23 
26 
25 
29 
35 
35 
38 
45 
46 
61 


"i 

10 
16 
21 
25 
28 
30 
32 
37 
37 
42 
44 
45 
52 
68 


-28 
-2 
9 
16 
20 
25 
29 
31 
35 
37 
39 
43 
46 
57 


-23 
3 

14 
16 
25 
26 
30 
30 
34 
37 
49 


■(3)- 

12 
14 
19 
23 
26 
30 
34 
35 
36 
41 
42 
43 
55 


-32 
2 
12 
19 
22 
27 
30 
34 
36 
37 
41 
47 
46 
58 


"'"8 
9 
15 
21 
23 
24 
29 
30 
33 
35 
36 
41 
45 
59 


-15 
5 
16 
18 
21 
22 
26 
28 
33 
32 
38 
41 
42 
52 


"-4 
12 
19 
23 
25 
28 
29 
34 
36 
37 
40 
43 
46 
53 


-39 
-6 
5 
15 
19 
28 
24 
32 
33 
31 
37 
41 
42 
57 


"-2 
11 
21 
24 
30 
31 
33 
35 
35 
41 
43 
46 
51 
61 


-''0 


$500 and unaer $750 ._. . 


-43 
-8 
7 
10 
15 
17 
18 
22 
24 
26 
29 
28 
32 
36 
51 


-5 
9 
13 
17 
19 
24 
23 
29 
30 
31 
40 
38 
42 
46 


3 


$750 and under $1,000 


?0 


$1,000 and under $1,250 


?1 


$1,250 and under $1,500 


?8 


$l,.500and under $1,750 

$1,750 and under $2,000 

$2,000 and under $2,250 

$2,250 and under $2,500 

$2,500 and under $3,000 


29 
30 
32 
36 

39 


$3,000 and under $3.500 


3<i 


$3,500 and under $4,000 


4? 


$4,000 and under $5,000 

$5,i.j0and under $7,500 

$7,500 and under $10,000 


49 
51 


$10,000 and over 













































' Figures show percent of income remaining after expenditures for food, home maintenance, clothing and 
personal care are made. 
' Family types covered are as follows: 

Family type I — 2 persons (husband and wife only). 

Family type II— 3 persons (husband, wife, 1 child under 16, and no others). 
Family type III — 4 persons (husband, wife, 2 children under 16, and no others). 
Family type IV— 3 or 4 persons (husband, wife, 1 person 16 or over, and 1 or no other person regard- 
less nf age) . 

Family type V— 5 or 6 persons (husband, wife, 1 child under 16, 1 person 16 or over, and 1 or 2 other 
persons regardless of age). 
Family type VI— 5 or 6 persons (husband, wife, 3 or 4 children under 16 and no others). 
Family type VII— 7 or 8 persons (husband, wife, 1 child under 16, 4 or 5 other persons regardless of age). 
Family types VI and VII appear in east central region only. 
« Less than 1 percent. 

Source: Bureau of Labor Statistics; Study of Consumer Purchases, Urban Series, 1935-36. 



PART II 
GEOGRAPHIC PRICE STRUCTURES 

BY 

SAUL NELSON 

ASSISTED BY 

WILLIAM C. FRENCH, JR. 



PART II 
PREFACE 

In part I of this volume, it was pointed out that the behavior and 
structure of prices is influenced in varying degrees by the policy 
decisions of businessmen, acting individually or in concert. Such 
policy decisions, within the scope of their effectiveness, must take 
into account not only a nominal price quotation but also a host of 
collateral terms and conditions of sale. One of the most important 
of these concerns the expense and responsibility of shipping the mer- 
chandise from the place of business of the seller to that of the buyer. 
A quotation which implies that the purchaser must arrange and pay 
for transportation is clearly different from one which includes de- 
livery to destination. 

It is axiomatic that there are two points of view in every transac- 
tion. The seller is concerned with his net return which excludes 
freight; the buyer with his total outlay after freight has been paid. 
In choosing between the offers of two rival manufacturers producing 
identical commodities, if transportation costs are of any significance 
in the unit cost of a product, the buyer will naturally compare de- 
livered costs and not net price at the plant; the latter is not his 
immediate problem. If the merchandise is not identical, it is never- 
theless the difference in delivered costs which he must weigh against 
any inequalities of product. 

This situation is inevitably reflected in commodity price structures. 
Sellers, acting within the field in which they can formulate and main- 
tain policy, have adopted a wide variety of practices with regard to 
the burden of shipping costs. Differences in practice reflect partly 
dilferencos in market coiiditions, partly administrative decisions as to 
expediency, and partly the abiliij'^ to enforce such decisions in a 
given economic and legal environment. Some sellers maintain a 
uniform price at their plants to all buyers regardless of their location, 
others quote uniform delivered prices in all markets or within de- 
fined geographic zones, still others vary their prices systematicnlly or 
unsystematieally in order to meet c' undersell their nvids in all 
markets in which they wish to do busmess. 

Some of these practices, notably basing point S3"stems and zone 
systems, result in greatly limiting or eliminating price competition 
in the markets for the commodities affected, although competition 
may take other forms. 

These types of geographic price structure, particularly the basing 
point system, have consequently been the subject of much contro- 
vers}^ in discussions of the problems of monopoly and eoiupetition in 
ii, lustrial markets. The Federal Trade Commission has conducted 
intensive studies of geographic price structures in many industries. 
In recent hearings before the Temporary National Economic Com- 

269 



270 CONCENTRATION OF ECONOMIC POWER 

mittee the practices of the steel industry with regard to freight were 
considered in great detail.^ 

There has not, however, been any general survey of the extent to 
which diflPerent types of geographic price structure are actually 
encountered in the American economy, nor of the considerations 
which favor the development of one or another type of practice. 
Such information seems needed for an adequate appraisal of the 
relationship between such practices as basing point systems, zone 
systems, and other means of freight equalization and the pattern of 
competition within an industry. Among the problems with which 
the Temporary National Economic Committee is immediately con- 
fronted is the adequacy of existing antitrust legislation to cope with 
geographic practices which may seem to impair the efficacy of price 
competition. 

Part II of this volume is designed to yield the factual basis needed 
for such an appraisal, and as a guide to policy. It does not present 
conclusions nor recommendations, which are the province of the 
committee. It describes the geographic pricing structures of a wide 
variety of commodities; industrial, agricultural, and extractive. The- 
list is by no means complete, but it is reasonably representative. 
The two chapters consider in order: 

I. Types of Geographic Price Structure: A discussion of the 
importance of the element of freight as a market factor and a de- 
scription of the more common types of geographic price structure. 

II. Geographic Practices in American Markets: A product by 
product analysis of the types of geographic price structure currently 
observed followed by -a summary indicating the extent of the more 
common types of geographic practice. 

Part II was prepared by Saul Nelson with the assistance of William 
C. French, Jr. The data relating to geographic price structures of 
building materials were assembled by Walter G. Keim. Jesse M. 
Cutts of the Wholesale Price Division provided much of the basic 
information. Valuable assistance was accorded by trade association 
officials and business executives regarding the price structures of their 
respective industries. Mr. Edwin B. George of Dun & Brads treet, 
rendered material help in the planning of this study. 

' See Temporary National Economic Committee Hearings, Parts 26 and 27. 



CHAPTER I 
TYPES OF GEOGRAPHIC PRICE STRUCTURE 

INTRODUCTION 

The importance of transportation costs. — The expense of physical 
transportation constitutes an important element in the total cost of 
preparing goods for the market. According to a recent estimate ^ the 
total cost of producing and distributing commodities for the national 
market during 1929 was $65,600,000,000. Thirteen percent or 
$8,800,000,000 of this total represented the cost of transportation. 

According to the same estimate, only $27,100,000,000 of the 
$65,600,000,000 total represented the cost of physical production 
while $38,500,000,000 constituted the cost of distribution. Conse- 
quently the cost of transporting commodities was almost one-third as 
great as the cost of physically producing them, and constituted 23 
percent of the aggregate bill for distribution. 

The $8,800,000,000 bill for transportation included a variety of items: 
Rail freight, water freight, railway express, electric freight, motor 
trucking, pipe-line transportation, and parcel post. For most of these 
means of transportation, shipping rates are either fixed by law or are 
otherwise out of the control of the shipper or receiver of the goods 
transported. Partly as a result of this situation, freight rates are 
notoriously rigid; their variations are narrow and bear no apparent 
relationship to the movement of commodity prices. Consequently, 
the bill for transportation becomes oroportionately much more im- 
portant durmg periods when commodity prices are low or falling; it 
decreases in relative importance when commodity prices are high or 
rising. 

The data quoted for 1929, therefore, probably represent an under- 
estimate of the significance of freight during periods of low prices and 
limited use of resources, such as the last decade. 

Unfortunately, there are no data readily available which would indi- 
cate the size of the total freight bill during the period since 1929. 
Some information is available relating to one of the most important 
single components of that bill — rail freight. According to the Inter- 
state Commerce Commission,^ rail freight revenue on class I roads for 
1930 was $4,200,000,000, or 6.7 percent of the total value of commod- 
ities transported. For 1933, the effect of the generally low price leveL 
was reflected in an increase of this ratio to 10.7 percent. As prices 
rose again the ratio declined to 8.5 percent for 1936, the last date for 
which these data were compiled.^ 

' Does Distribution Cost Too Much, Twentieth Century Fund, p. 118. 

' Interstate Commerce Commission, Bureau of Statistics, Freight Revenue and Value of Commodities 
Transported on Class I Steam Railways in the United States, calendar year 1936. 

' These data are presented merely to show trend and are not at all comparable to those in the Twentieth 
Century Fund publication previously cited. A major difference is that the Interstate Commerce Com- 
mission figures include numerous duplications entering into the est; nate of total value: for example, iron 
ore will first be included as such and will again enter into the value of shipments for semifinished and finished 
steel products. This results in an underestimate of the over-all significance of freight and thus differs from 
the Twentieth Century Fund data which are based upon the value of products in final form. 

271 



272 CONCENTRATION OP ECONOMIC POWER 

Factors affecting freight costs. — The importance of transportation 
costs varies very widely for different kinds of products. Many factors 
enter into the picture. One of the most important is the reLation 
between the price of the product and its weight; other things being 
equal, freight will be relatively more significant for cheap, bulky items 
than for those which cost more per pound. For example, rail freight 
revenue represents 56 percent of the value of bituminous coal at des- 
tination and 46 percent of the value of salt, whereas it constitutes less 
than 10 percent for sulfur and only 5 percent for copper ore. 

For the same reason freight will be a less important factor for man- 
ufactured goods than for their constituent raw materials; thus the 
percentage of freight revenue to value at destination for cereal food 
preparations is 3.4 percent as against 5.9 percent for wheat flour, S 
percent for wheat, 9.3 percent for corn, and 12.4 percent for oats. 

Another significant factor is the location of supply in relation to 
the market. Where production is concentrated within a circum- 
scribed area, while consumption is distributed throughout the United 
States, the average haul is likely to be long and the relative import- 
ance of freight considerable. Wliere centers of production are scat- 
tered or are located near most important centers of consumption, 
hauls are likely to be shorter and freight relatively less important. 
More generally, if production must be located near sources of raw 
material, freight for the finished product will be more important than 
when plants can be established at or near the markets. 

Reference may also be made to perishability and the consequent 
need for special or expeditious handling which is probably responsible 
for the fact that freight constitutes 60 percent of value at destination 
of such products as grapes.* Another element may be public policy, 
as in the case of the extremely low postal rates for newspapers and 
periodicals. 

Economic significance. — Obviously, these costs of transportation 
must somehow be included in the price of the delivered product. 
There are many ways in which this can be done. Ench buyer may 
be required to bear the full expense of shipping his particular pur- 
chase directly, or the seller may choose to defray this expense in the 
first instance and then to distribute it in varioiis ways among all his 
custon^ers. In the sale of most commodities, practices witb regard 
to the manner in which freight charges are borne and distributed 
among the different buyers and sellers in the market have developed 
ce: tain conventionalized patterns. These practices are commonly 
referred to as the "geographic price structure" for the product in 
question. The form they take in any particular case reflects the im- 
pact of many forces, such as the inherent characteristics of the mar- 
ket, the requirements of law as interpreted by courts and adminis- 
trative agencies, and the policy decisions of businessmen acting in 
this environment. Geographic price structures in turn have far- 
reaching economic effects; they influence the character of competi- 
tion within an industry, the location of its plants, and the prospects 
of profit or survival of individual concerns. 

However, the appraisal of the economic implications of the dif- 
ferent types of geographic price structure encountered in American 
industry is beyond the scope of the present study. The issi.es raised 

* In 1933, when prices were lower, the ratio for grapes was almost 65 percent. Interstate Commerce 
Commission, op. cit. 



CONCENTRATION OF ECONOMIC POWER 273 

in such an appraisal are many and complex. Practices in particular 
industries, such as the basing point systems in the steel and cement 
industries/ have been the subject of considerable and intensive 
analysis; yet conclusions regarding its merits and implications re- 
main in considerable dispute. It is intended here merely to present 
factual data regarding the types of geographical price structure which 
characterize different sectors of American industry and thus to fur- 
nish a basis for broader analysis of the problem, as well as to permit 
a better understanding of the meaning of price and price quotations 
in different industries and markets. 

Types of structure summarized. — The cost of shipment enters directly 
or indirectly into virtually every transfer of commodities between 
buyer aud seller. There is, however, a very wide variation between 
different industries and even within industries as to the manner in 
which this element is related to the price quotation and charged to 
differently located buyers. Although there is usually a degree of 
uniformity in geographic pricing practice between companies which 
are competing in the sale of identical or similar products, this is not 
necessarily the case. Moreover, the same company may vary its 
methods of price quotation for different parts of the country or to 
meet special situations encountered in particular transactions or 
groups of transactions. Changes in structure are also likely to occur 
from time to time under the impact of altering market conditions or 
the requirements imposed by Government through law or admmis- 
trative action. Consequently, any analysis of geographic price 
structures must start with a recognition that they are not rigid or 
immutable, although specific patterns may persist for long periods of 
time in individual industries. Before proceeding to consider different 
types of geographic structure i,n detail, it is useful to summarize 
briefly patterns of variation which may actuall}^ occur. Among the 
more common are — 

(1) The amount paid by- each buyer varies in precise accordance 
with the cost of transporting the product from point of shipment to 
point of destination. 

(2) Unsystematic schemes of freight equalization in which a seller 
will reduce his price on particular transactions in order to meet or 
belter the offer of a competing seller who is more advantageously 
located. 

(3) Systematip schemes of freight equalization in which this type of 
adjustment follows some set pattern which is generally observed by 
all or most competing sellers. 

(4) Single or multiple basing-point schemes in which the amount of 
freight charged to individual buyers varies in accordance with, shipping 
costs from one or more basing points recognized by the mdustry. 
These basing points usually represent important producing centers, 
but in a true basing-point system there will always be some plants 
which are not located at any basing point. 

(5) Zone pricing in which the delivered prices paid by buyers are 
uniform throughout certain conventionally accepted geographic areas 
but vary between areas. 

• Probaoiy the most intensive work on this subject has been done by the Federal Trade CommissioDi 
See for example Price Bases Inquiry, The Basing Point Formula and Cement Prices, Federal Trade Com- 
mission March 1932. 



274 CONCENTRATION OF ECONOMIC POWER 

(6) Uniform delivered prices in which the same dehvered price is 
paid by all buyers in the United States wherever located. 

(7) Unsystematic price variation in which the prices in particular 
markets show no direct relation to shipping costs. They may be set 
arbitrarily to meet peculiar competitive conditions, or they may vary 
constantly with day-to-day changes in supply or demand in those 
markets. 

(8) Various combinations of the above. 

The differences enumerated all relate to the way in which the 
amounts paid by buyers and the net returns of sellers vary on sales 
to different localities. In addition, the form of quotation may have a 
bearing upon the implications of the sales contract, particularly as 
regards the distribution of risk of shipment between buyer and seller. 
Thus there is a distinction in principle between prices which are 
quoted at the point of shipment — f. o. b.** pricing — and prices which 
are quoted at the point of delivery — delivered pricing.^ In the former 
case, transfer of title to goods may take place at the point of ship- 
ment, such as the seller's plant or warehouse, and the cost and respon- 
sibility of shipment is borne by the buyer. In the latter case, transfer 
of title may not occur until the merchandise is delivered to the point 
at which the seller is located, with the risk of shipment borne directly 
by the seller. However, the point at which title passes and burden of 
risk in any specific instance cannot be determined merely by referring 
to the form of the quotation, since other factors such as the terms of 
the bill of lading, the sales contract and the intent of the parties are 
also involved. 

Insofar as this distinction relates merely to the form of quotation, 
it does not carry with it any necessary implication as to the variation 
of prices between differently located buyers. It is true that basing- 
point systems, by their very nature, require that prices be quoted on 
a delivered basis. However, f. o. b. prices may be so adjusted for 
differences in freight, that the actual delivered cost of the product is 
the same to all buyers throughout the United States or within a given 
zone; conversely, dt /ered prices may include the full cost of freight 
in every instance and vary in precise accordance with differences in 
shipping costs. While the latter situation is unusual, the former is 
quite common. Many concerns quote prices f. o. b. plant with full 
freight allowed, which is equivalent to a uniform delivered price. 
When freight is thus "allowed," the buj'^er ordinarily pays the trans- 
portation agency in the first instance and then deducts the amount 
of this payment from the invoice. In some cases, freight is not onl}^ 
allowed but also prepaid, under which circumstances the seller paj^s 
the cost of shipment at the source, thus relieving the buyer of the 
necessity for advancing freight charges.^ 

6 These initials are an abbreviation for "free oil board" and Indicate that the quotation includes the 
expense of placing the merchandise on railroad cars or other means of transportation indicated at the point 
named, with the buyer bearing the expense and responsibility of shipment from that point E g f o b 
cars, Chicago, means that the price includes placing the merchandise on ralkoad cars at Chicago 

'In this and the subsequent discussion the terms "price" and "market" are used both in relation to the 
point of origin and the point of destination; the specific meaning in each case is indicated by the context 
It should be noted, however, that "price" and "market" to the consumer may mean one thing- they may 
mean quite another to the businessman; they may have still another meaning to government agencies 
charged with the duty of determining whether industrial pricing policies suppress free and fair competition 
It IS not the purpose of this monograph to take any position w;„h respect to these various viewpoints about 
price" and "market" or their legal and economic implications. 

« The distinction between "freight allowed" and "freight prepaid," since it is reflected in the gross amount 
of the invoice, may also aflect the amount of cash and other discounts which may be figured on the gross 
amount as a base. 

Page 274. Mono. 1. 
247149—40 



CONCENTRATION OP ECONOMIC POWER 275 

However, too much emphasis should not be imputed to the mere 
form of quotation, even as it relates to the point at which title passes. 
Thus it may be questioned whether the free and unreserved transfer 
of title at the point of shipment is compatible with any system involv- 
ing freight allowances. Certainly it is not ordinarily within the intent 
of the seller that the buyer should be free to divert the shipment before 
it reaches its announced destination. If this were not true, it would 
be possible for a buyer located at some distance from the point of ship- 
ment to take advantage of his freight allowance by reselling the mer- 
chandise at a profit to another buyer who is located closer to the source 
of supply and who would not, therefore, be entitled to as large an 
allowance. Presumably, therefore, the reservation that the shipment 
must proceed to its announced destination is implied in any system 
involving freight allo'vances. To that extent any such system diffei's 
from straight f. o. b. mill pricing in which the buyer can do as he will 
with the merchandise once he receives delivery at the mill door. 

In addition, reference may be made to the type of quotation known 
as "c. i. f." which is often used in connection with goods shipped by 
water. The initials represent an abbreviation for "cost, insurance, 
freight," and mean that the quoted price includes the cost of freight 
and insurance to the port specified, and delivery in good condition to 
railroad cars or trucks at that port, with the buyer bearing the expense 
and responsibility of further transportation.^ The initials "f. a. s.", 
meaning "free alongside," are also used in connection with water trans- 
portation and differ from "c. i. f." in that the buyer accepts delivery 
at the wharf and must arrange for loading the merchandise on cars or 
trucks for the land shipment. 

COMMON FORMS OF STRUCTURE — DEVELOPMENT AND CHARACTERISTICS 

The form of geographic price structure which prevails in the market 
for any commodity reflects the operation of a host of factors. Among 
the more important of these is the intensity and focus of competition 
including the relative emphasis upon price or nonprice rivalry, the 
degree of geographic concentration of the industry, the location of 
sources of supply in relation to markets, the relative importance of 
transportation costs as an element in the price of the commodity, the 
channels of distribution utilized, the extent of economic concentration 
among sellers and among buyers, the interest of sellers in maintaining 
control over resale prices and conditions, etc. The way in which 
conditions of this kind are actually reflected in the geographic price 
structure, and the consistency with which such a structure is observed, 
will also be affected very considerably by the degree of freedom which 
individual sellers or groups of sellers have in formulating and main- 
taining price policies. The possible impact of these forces upon some 
of the more common types of geographic price structure will illustrate 
the issues involved. 

F. 0. b. plant prices. — Probably the simplest type of structure is the 
f. o. b. system of pricing with no freight allowed. Under this system 
all delivery charges are borne by the buyer who accepts delivery at 
the point of shipment; the price charged by the seller to buyers wiU not 
be adjusted in any way to reflect the varying transportation charges 

» Less common variants of this type of quotation arc "c. i. f. e.", which indicate that the quotation ia- 
eludes provision for converting foreign exchange; and "c. & f." which mean that the buyer must arrauge 
for insurance during the marine transit. 



276 CONCENTRATION OF ECONOMIC POWER 

which the latter are called upon to pay because of their different loca- 
tions. The same practical result, except as relates to risk of ship- 
ment, can be achieved by a delivered price system in which the 
delivered price includes actual full freight in every case, but this is not 
a usual practice. This type of structure yields the seller a net return 
on all sales which is independent of his destination and which will 
be uniform insofar as all other terms of sale (e. g., quantity discounts) 
are identical. It is most likely to be encountered in those cases in 
which there is no severe pressure upon the seller to reduce his prices 
in certain markets to meet the competition of some rival who happens 
to be more advantageously located with respect to that market, 
'^his condition will be fulfilled, for example, when all sellers of a given 
commodity are located in a narrowly circumscribed geographic area 
so that the cost of shipping the product from any plant to any market 
is practically the same as that of shipping it from any other plant to 
the same market. Turpentine, which is produced largely in Florida 
and Georgia is an example, as is the women's dress industry ^° which 
is almost entirely concentrated in the New York area, and the automo- 
bile industry in Michigan before the establishment of assembling 
plants at other points. These conditions could also be fulfilled by a 
seller who enjoys an outright monopoly, or who has succeeded in 
creating unique consumer acceptance for his product, so that there is 
no effective pressure from substitute products at anj^ point. A similar 
situation may occur where freight is so small a part of the price of the 
finished product that it does not constitute an important competitive 
factor, particularly wdiere emphasis is upon nonprice elements such as 
style; thus most apparel is sold on the basis of a uniform f. o. b. price. 
The existence of material differences in the quality or design of com- 
peting products may even permit uniform f. o. b. plant prices to be 
used in connection with items for which freight is a material element; 
thus milling and grinding machines may be sold on this basis. 

These considerations relate, of course, only to the territory actual!}^ 
served by the seller in question. The existence of numerous sources 
of supply throughout the United States — or outside it — neo(^ not 
affect the structure so long as the product irom each source is dis- 
tributed in a geographically circamscribed area which does not 
seriously ov^erlap the area served by other sources. For example, 
the existence of important phosphate rock mines in Tennessee does 
not appreciably affect the pricing practices of the producers of phos- 
phate pebble in Florida, so long as they sell in distinct markets. 

Freight equalization. — When there is more than one geographic 
source of supply and one seller seeks to expand his territory into an 
area contiguous to the other, modification of this simple structure is 
likely to occur. From the point of view of the buyer, it must be 
emphasized, the significant element is the total price which ue is called 
upon to pay at destination, and not the seller's net realization. This 
does not deny that buyers have a very substantial interest in the 
geographic pricing practices of sellers as they affect the character or 
intensity of competition and the level or behavior of prices; the advan- 
tages derived from freight concessions or allowances are often apparent 
rather than real. To the individual buyer on any single purchase, 
however, the total cost at destination is the item of immediate concern. 

'0 This refers to the woinen's dress industry proper, and not to the house dress or wash frock industry 
which is much more decentralized. 



CONCENTRATION OF ECONOMIC POWER 277 

In the sale of a standard commodity, therefore, sellers who distrib- 
ute through a wide geographic area are likeh^ to meet constant pres- 
sure to adjust tliei' prices on individual transactions to meet the 
offer of competing sellers who happen to be nearer freightwise. To 
illustrate: assume two rival producers located in New York and 
Chicago, respectivel}", who are selling identical commodities. Suppose 
that Philadelphia and St. Louis are two important markets, that both 
sellers are using a simple f. o. b. system of pricing, and that the plant 
prices of both are initially identical. Obviously, the New York pro- 
ducer will not be able to sell in St. Louis, nor the Chicago producer in 
Philadelphia. Originally this m.ay have presented no problem, be- 
cause the New York manufacturer found ample markets in eastern 
territory, while the Chicago producer was able to dispose of all his 
merchandise in the \lidwest. With the passing of time, however, 
and the expansion of plant facilities, one proflucer may readily find 
himself with surplus capacity or surplus product on his hands which 
cannot at the moment be absorbed by the territory which he has been 
accustomed to serve. If under such circumstances the New York 
firm learns that a buyer in St. Louis is in the market for a substantial 
order, it is likely to attempt to invade the St. Louis territory and to 
meet or better the offer of the Chicago producer at that point. 

Of course, one way in which the New York producer can reduce his 
price to the St. Louis buyer sufficiently to meet Chicago competition 
would be simply to cut his plant price to all comers by an amount 
sufficient to compensate for the difference in freight. In general, 
however, such a course would involve so large a loss on sales in nearby 
areas that the benefit from making occasional sales in remoter areas 
would be completely lost. Consequently a much more expedient and 
likely decision would be to cut prices only on the St. Louis transaction 
by an amount approximately equal to the difference in freight. If 
prices are quoted on a delivered basis, this can be done directly; if 
an f. o. b. system is used, the quotation can be reduced by the discount 
necessary to make the sale. 

Some such process of "freight absorption" is likel}^ to occur when- 
ever geographically separated sellers of reasonably similar products are 
•competing in the same markets and is probably the alternative to a 
strict limitation of the sales territory of each seller to the area which 
he can serve most economically. The tendency to sell in remote 
areas is augmented by fluctuations in local demand, which are con- 
stantly and inevitably occurring, and as soon as sales tei-ritories over- 
lap some form of freight absorption or "equalization" is likely to occur.'* 

It should be emphasized that the foregoing illustration is strictly 
hypothetical. It was presented merely to suggest the way in which 
pressure to adjust delivered prices in competitive territories may arise 
initially. The actual process of adjustm.ent is rarely so simple or 
^'natural." In practice, freight equalization assumes much more con- 
ventional forms than the sort of sim.ple adjustment to m.eet the needs 
of the individual transaction which has just been described. In 
many industries there are systematic schemes of freight equalization 
which are more or less closely observed by all sellers and which are 
far too elaborate in detail to represent purely spontaneous develop- 

" Something akin to equalization may occur within the organization of a large company, as well as between 
competitors. Thus a large agricultural implement producer has a main factory in Chicago with numerous 
more specialized plants in other cities. On sales from these latter plants freight is charged from plant or 
from Chicago, whichever is lower. 



278 CONCENTRATION OF ECONOMIC POWER 

ments. Moreover these schemes are often found in conjunction with 
arrangements for maintaining well-defined relationships between the 
prices at different plants, thereby permitting a substantial degree of 
control over the entire price structure. Such practices, if rigidly ob- 
served, effectively limit the possibility of price competition. 

On the other hand, it should not be inferred that the existence of 
such a systematic scheme of freight equalization is per se an indication 
of the absence of effective price competition.*^ All that can be said 
is that the more complex and conventional types of geographic price 
structure often spring not from natural adjustments to the market 
but from a conscious effort on the part of concerns in an industry to 
limit or eliminate price competition and that they may even be indis- 
pensable tools to this end. Thus although the more obviously artifi- 
cial types of geographic price structure are frequently encountered 
under circumstances which give rise to suspicion of collusive restraint 
of trade, yet it is not necessarily true that their existence is either the 
direct cause or manifestation of such collusion. It is theoretically 
possible, for example, that aggressive price cutting should take place 
within the framework of such a system as well as without it. 

Geographic price structures of this kind take many forms. In the 
case of many heavy chemicals such as sulfuric acid, for example, plant 
price quotations are apparently uniform for all plants of all companies 
throughout the United States.** Freight is equalized on the basis of 
shipping costs from the plant nearest the point of delivery.** Since 
the location of all plants in these industries is known, all producers 
will tend to quote the same delivered price in any market. 

Another common type of equalization involves a division of the 
country into zones. Plant prices in each zone are uniform and freight 
is equalized as before, to the plant nearest the point of delivery. 
Asphalt shingles and floor tiles furnish examples of this very common 
type of structure. A further degree of simplification may be introduced 
by the adoption of a standard relationship between plant prices in 
different zones; the price in one zone automatically determines plant 
prices in all other zones by the application of a simple scheme of dis- 
counts or additions. Here again a high degree of price uniformity 
between rival producers is readily attainable because the structure is 
so conventionalized. 

In some cases sellers find it expedient to set certain limits to the 
amount of freight which they are willing to absorb in connection with 
equalization schemes of this sort. The limit may be based upon the 
location of the. point of delivery, the alternative shipping point for 
which equalization is computed, the size of the order, or the actual 
cost involved. For example, unlimited equalization for floor tiles is 
confined to a few items such as the standard one-inch hexagonal tile; 
for other products it is restricted in accordance with various criteria. 
Equalization may be allowed only on sales of a specified quantity; 
thus in the case of soda ash and caustic soda the practice is to equalize 
freight only on carload shipments presumably because the higher 

" These comments apply equally to the basing point and zone structures described subsequently. 

'• There is some evidence that this practice is more strictly observed on "spot" sales than on contracts 
covering a period of time; the latter type of transaction seems to be subject to some variation, especially when 
the buyer can exert substantial bargaining pressure. 

i< In this and all subsequent discussion the phrase "nearest the point of delivery" should be understood 
In terms of freicht cost and not of physical mileage. In other words, "nearest" is used as shorthand for 
"having lowest shipping costs to." 



CONCENTRATION OF ECONOMIC POWER 279 

J. c. 1. rates would require disproportionate absorption. Reservations 
of this kind as to the maximum amount of freight which the seller is 
willing to absorb have the effect of limiting the potential sales territory 
correspondingly and presumably reflect a decision that sales to more 
distant points or of smaller quantities involve an unjustifiable sacri- 
fice of plant net. In principle, a concern may be willing to absorb 
freight up to the point at which the resulting net realization is adequate 
to cover little more than direct out-of-pocket costs; in practice con- 
ventional arrangements within an industry often result in setting 
much narrower limits to freight absorption. 

The schemes of freight equalization so far considered all involve the 
acceptance of reduced plant realizations by the seller on sales to dis- 
tant points. On sales to immediately surrounding territory, however, 
prices remain on a uniform plant-net basis and the price to the pur- 
chaser at the plant door wUl be lower than to buyers twenty or a 
hundred miles away. In other words, the location of each mill governs 
the price structure in the contiguous area and the erection of a new 
plant in new territory wiU be reflected automatically by a change in 
delivered prices in that territory. 

Basing-point systems. — It is in this last respect that schemes of 
systematic freight equalization differ fundamentally from basing-point 
systems. The simplest form of this structure is the single basing- 
point system. Delivered prices at any point in the United States are 
related to a "base" price at some single important producing center and 
are arrived at by adding to this base price the freight rate (usually for 
all-rail shipment) from that point to the point of delivery. This was 
the type of structure, for example, which prevailed in the steel industry 
between 1900 and 1926 except for certain temporary lapses and was 
known as "Pittsburgh Plus." As the name implies, the delivered price 
at any locality was the base price at Pittsburgh, plus freight from 
Pittsburgh. Thus for a mill located, say, at Chicago, the delivered 
price on sales at the mill door would include full freight from Pitts- 
burgh; the price to purchasers farther from the point of shipment but 
nearer freightwise to Pittsburgh would be substantially less. The 
seller would charge fictitious freight on the former transaction and per- 
haps absorb some freight on the latter. 

In contrast to the systems of freight equalization previously 
described, which may have developed naturally as mills enlarged their 
territories, there is evidence that one of the important considerations 
leading to the adoption of the basing-poinfc system, at least in the 
case of the steel industry, was to restrict price competition as far as 
possible. According to evidence presented to the Temporary National 
Economic Committee, based upon an earlier investigation by the 
Federal Trade Commission, the Pittsburgh-Plus system originated 
under the following circumstances: 

No systematic Pittsburgh-Plus system had been adopted by the steel producers 
at the time of Pittsburgh's greatest predominance in the steel industry or until 
after 1900. From 1873 or earlier to 1903 steel producers attempted generally 
with some success to fix prices for steel products through pools, price-fixing trade 
meetings, and later on through what are known as the "Gary Dinners." From 
1903 to 1909 the Pittsburgh-Plus system of quoting and selling steel products was 
used in connection with and as a basis for the price-fixing activities of the steel 
producers. From 1909 to the present time, with minor interruptions, the Pitts- 
burghrPlus system has been used by the steel producers independently of such 



247 L4 9 — 41— No. 1 20 



280 CONCENTRATION OF ECONOMIC POWER 

pools, price-fixing trade meetings, and Gary Dinners for the purpose and with the 
effect of reaching uniform delivered prices. 

In 1921, with the advent of price competition on plates, shapes, and bars, the 
Pittsburgh-Plus system was discontinued by the Chicago district mills in their 
sales of those products, but not in their sales of sheets and tin plate and wire and 
wire products, in which articles in that district and everywhere else Pittsburgh- 
Plus prices still prevail. 

The wire nail producers, including the Respondent, American Steel & Wire Co., 
agreed on zone prices in May 1898. In 1904 the large wire producers agreed to 
maintain uniform prices by means of the Pittsburgh-Plus system. 

Prior to the year 1900 sheet steel was not sold on the Pittsburgh-Plus system, 
and even after the absorption of a large number of sheet mills by the American 
Sheet Steel Co., which was later taken over by Respondent, American Sheet & Tin 
Plate Co., that company sold its sheets in the Chicago district f. o. b. its mills in 
that district. In the fall of 1900, however, that company inaugurated the Pitts- 
burgh-Plus system in selling its sheets, and the Respondent, American Sheet & 
Tin Plate Co., has followed the system ever since, practically without exception. 

Prior to 1900 to 1903 tin mills sold their products generally f. o. b. mill, but after 
absorption of many tin mills by the American Tin Plate Co., which was shortly 
after taken over by Respondent, American Sheet & Tin Plate Co., that company 
inaugurated the Pittsburgh-Plus system in selling its tin plate from its various 
mills. ' 

In 1903, it announced as to its Indiana mills that tin plate would no longer be 
fiold f. o. b. the Indiana mills but would be sold thereafter on the Pittsburgh-Plus 
system because of the higher cost of production at the Indiana mills. The 
respondent, American Sheet & Tin Plate Co., has continued the Pittsburgh-Plus 
system ever since on tin plate. '^ 

Further excerpts from the Federal Trade Commission inquiry, as 
reported at these hearings, include the testimony of Col. Henry Bope, 
who was vice president of the Carnegie Corporation after it was taken 
over by the United States Steel Corporation. This testimony throws 
further light upon some of the considerations involved in the adoption 
of Pittsburgh Plus. 

Q. Going back to the original organization, what connection did the Pitts- 
burgh-base system have with that? 

A. (Colonel Bope) The price was made, based upon Pittsburgh, because the 
Carnegie Bros. & Co. were the largest manufacturers, and it was felt they should 
have the say as to what the price should be, and how it should be established at 
the main point, so as to give stability of prices, which had been fluctuating all 
over the lot. 

Q. By that do you mean to get uniform prices? 

A. To get uniform prices. 

Q. Before that time what was the practice? 

A. The practice was eenerally to quote f. o. b. mills. Every mill was a law 
unto itself. 

Q. And the difference in prices between the mills, did that amount to the 
freight rate, or was it entirely independent? 

A. Each mill made whatever price seemed necessary to take the business. 

Q. What was the necessity for a basing point? Could they maintain prices 
without a basing point? 

A. No. They tried it once in 1909 and got into such chaos in a short time that 
the mills were glad to get back to the old base. Every system has to have some 
stabilizing point, and Pittsburgh, from its natural location, its natural advantages, 
and everything of that sort, seemed to be the natural basing point. '^ 

The maintenance of the Pittsburgh-Plus system greatly simplified 
the preservation of price uniformity within the industry. It was 
manifestly easier to make sure that all competitors charged the same 
price at every market if they all quoted on an f. o. b. Pittsburgh basis 
than would be true if each quoted f. o. b. the nearest mill. Since 
Jnost concerns preferred to avoid price competition, this was con- 
sidered a very important advantage. 

" See Temporary National Economic Committee Hearings, Part 27, afternoon session, January 29, 1940. 
i«Ibld. 



CONCENTRATION OP ECONOMIC POWER 281 

As an industry becomes more decentralized, however, the main- 
tenance of a simple basing-point system of this kind becomes increas- 
ingly difficult. It is likely to incur growing resentment from buyers 
who are located near a mill distant from the basing point, and who do 
not see why they should be called upon to pay fictitious freight from 
the basing point upon shipments which actually travel only a short 
•distance. Moreover, there is doubt as to the legality of single basing 
point systems under the Sherman and Clayton Acts and under the 
Robinson-Patman Act. Consequently there has been a shift in 
many industries to the so-called multiple basing-point system in 
which the basing-point principle is retained but the number of basing 
points is increased materially to reflect the establishment of important 
new producing centers. Thus the steel industry shifted from the 
single to the multiple basing-point system in 1926, at least partly 
because of pressure by the Federal Trade Commission. ^^ The price 
actually paid by the buyer for delivery at any point then becomes 
the lowest sum of the price at any basing point and freight from, that 
basing point. 

Since an important aim of the basing-point system, whether single 
or multiple, is the maintenance of price uniformity, it is essential to 
its successful operation that all sellers calculate their freight charges 
in the same way. For this purpose "freight books" are frequently 
issued by leading companies or by trade associations; these books 
indicate the freight charges which are to be used in calculating the 
cost of sliipment from any basing point to any important market. 
The rates shown in these books do not necessarily conform in every 
detail with actual freight charges but usually follow them rather 
closely. They usually seek to discourage cheaper means of trans- 
portation such as water shipment and motor truck, since to do this 
would permit the buyer to effect a price reduction by selecting a 
more economical mode of transit- and thereby to interfere with the 
maintenance of uniformity. In the steel industry, for example, al- 
though a buyer is permitted to accept plant delivery in his own truck 
he is generally required to pay a premium amounting to 35 percent 
of the cost of all rail delivery for this privilege. ^^ The entire structure 
is frankly arbitrary, and is predicated at least in part on the assump- 
tion that price competition is not desirable. It was admitted by 
President Fairless, of the United States Steel Corporation that the 
effect of the basing-point system, if it were always faithfully observed, 
would be to eliminate price competition in the industry entirely. 
According to Mr. Fairless: 

It seems to me that for all practical purposes and for the conservation of time, 
which I believe is important to all of us, we will concede, if that is the point that 
you are trying to make, that if base prices as announced were followed in every 
transaction, and that the nearest basing point to the consumer governed, and 
that the rail freight was added from that point, and the delivered price arrived 
at in that manner, there wouldn't be any competition in the steel industry. It 
would be a one-price industry, pure and simple.** 

However, in common with most other systems of pricing, discounts 
and concessions from the nominal price level are granted sellers under 
certain circumstances. Such concessions are most common during a 
buyers' market when the pressure to obtain business is most acute. 

" A cease and desist order was issued by the Federal Trade Commission against the Linited States Steel 
Corporation on July 21, 1924, Docket No. 760. 
>* See Temporary National Economic Committee Hearings, Part 27, afternoon session, January 26, 1940. 
"Ibid. 



2g2 CONCENTRATION OF ECONOMIC POWER 

Although the ba sing-point system has been described in terms of the 
steel industry, it should not be inferred that this is the only important 
area in which it is encountered. Cast-iron soil pipe, for example, has 
been sold on the basis of a single basing point in Birmingham, Ala. 
The pulp, sugar, cement, and lead industries all use multiple basing- 
point systems. In some cases basing-point systems are observed with 
respect to part of the market only; for instance, benzol is priced 
f. o. b. Minnequa, Colo., only on sales in the region "Omaha and 
West" and gasoline is sold f. o. b. Tulsa only in parts of the Midwest. 
In each case the system may be adjusted to the peculiar needs of the 
industry involved and some of its more important variations will be 
described in the following chapter. 

"Fostage stamp" and zone systems. — For all the geographic struc- 
tures so far considered, delivered prices at any point are arrived at by 
taking some combination of plant price and shipping costs, though as 
was pointed out, the addition for shipping charges is often arbitrary 
rather than actual. Delivered prices vary from locality to locality 
depending upon its distance freightwise from whatever point is the 
actual or nominal base of shipment. 

There is a second major tj^'pe of structure which does not display 
any such point-to-point variation but in which delivered -prices are 
uniform either throughout the entire United States or within certain 
defined geographic zones. This may be accomplished either by quot- 
ing delivered prices directly, or by quoting f. o. b. prices and allowing 
full freight. 

Uniform delivered prices thioughout the United States are most 
commonly encountered when shipping costs are relatively minor in 
relation to the value of the commodity. They are frequent in the 
case of nationally advertised consumer goods, particularly where some 
effort is made by the manufacturer to control resale prices as for 
nationally advertised drugs and cosmetics. When the manufacturer 
advertises a list price for his product or fixes minimum resale prices in 
accordance with State price maintenance laws, there is an obvious ad- 
vantage in geographic price uniformity, since otherwise distributors in 
one section of the coimtry would be forced to accept smaller mark-ups 
than those in other sections. Even in the absence of resale price 
maintenance, delivered price uniformity may be favored as a means 
of reducing the incentive to distributors to encroach on each other's 
territory .^° Uniform delivered prices are also quoted for some indus- 
trial products when freight is a minor element; this practice is fol- 
lowed, for example, in the case of aluminum.^' 

>» Thus, according to a recent article in the Quarterly Journal of Economics; 

"The policy of quoting prices freight allowed is frequently said by manufacturers to be used in order to 
place their distributors in adjoining territories on 'an equal competitive basis'; and further, at times to give 
the wholesale trade the same mark-up in a policy of maintaining national, uniform, resale prices. With a 
quoting of prices f. o. b. factory, freight allowed to jobbers' warehouses, any given jobber would be at a 
disadvantage in entering another's territory even though he had general salesmen in that field. Thus a 
manufacturer of air-rifle shot in assigning a reason for the use of the freight allowed policy said: 'To make 
landed cost to distributors everywhere the same and thus localize each jobber's business and keep far-away 
jobbers from entering others' territory.' Other typical answers of various manufacturers were 'to put all 
distributors on the same cost basis regardless of location, so that they can compete on an equal basis of cost'; 
'to give jobbers the same cost'; and 'so that distributors of our products in adjoining territories will be on an 
equal competitive basis.' 

"The desire of manufacturers to give the wholesale trade the same mark-up in a program of national, 
uniform resale prices is illustrated by the following str.tement recently sent by a glass manufacturer to its 
Jobbers. ' • • • Glass Works will carry the freight burden, enabling jobbers to operate with a fixed 
gross profit uninfluenced by varying freight rates, undisturbed by their fluctuations. Suggested retail 
prices will be the same for east and west. Allowed freight eliminates the need for a differential.' " (The 
Quarterly Journal of Economics, vol. LIV, February 1940, "The 'Freight Allowed' Method of Price Quota- 
tion" by Vernon A. Mund, pp. 238, 239.) 

M According to the Interstate Commerce Commission rail freight during 1936 represented 3.24 percent of 
the value of aluminum at destination. 



CONCENTRATION OF ECONOMIC POWER 283 

A distinction may be made between commodities which are de- 
hvered at the same nrice (or on which full freight is allowed) to any 
destination in the United States and those for which this privilege 
extends only to established distributing or jobbing centers, with pur- 
chasers not located at such centers being required to pay the expense 
of further transportation. The former practice is more commonly 
associated with light goods, such as pharmaceutical products and the 
latter with heavier merchandise, such as building materials, but prac- 
tice is by no means consistent. Since in general most important con- 
suming areas are recognized as distributing points, delivered price 
uniformity at such points is often equivalent to uniformity for the 
bulk of the market. 

In some cases uniform delivered prices may be combined with plant 
pricing in such a way that they act as a ceiling to the market, rather 
than as a universal price. Thus carbon black in less-than-c irload lots 
can be purchased either f. o. b. plant, or, at the buyer's option, it will 
be delivered anywhere in the United States for a fixed premium. 

Instead of nation-wide uniformity, delivered prices may be kept 
constant throughout certain defined geographic zones. The extent 
of these zones varies considerably; one may take in all the area east 
or west of the Mississippi or east or west of the Rockies, or it may be 
restricted to the limits of a single State or part of a State. An impor- 
tant factor is again the relative cost of shipment; where this is high, 
the zones are likely to be narrower than when it is low. As in the case 
of basing point systems, zone systems often reflect the historical 
development of the industry. Thus where scattered sources of supply 
are competing within certain geographically limited markets, there 
may be a tendency for price uniformity within such markets to 
exist. Such dividing lines as the Mississippi River or the Rocky 
Mountains may be explained both by the gradual extension of markets 
into areas previously untapped and by the nature of the railroad 
freight rate structure itself. 

There are numerous examples of zone systems in majiy different 
kinds of industries. Many chemicals such as carbon black, carbon 
tetrachloride, and anhydrous ammouia are priced on a zone basis. 
A highly developed system of 19 zones and many subzones and even 
subdivisions of subzones is used in the market for fertilizer. Zone 
systems are observed in the sale of paper with the number of zones 
varyiug widely for different products. Thus, there are 10 zones for 
newsprint and 4 for fine papers. As in the case of uniform delivered 
prices, zone prices sometimes apply to any destination within the 
zone and sometimes only to distributing or jobbing centers. 

In most cases, the boundaries of zones have become generally 
recognized throughout the industry and are observed by all com- 
peting sellers, except insofar as prices may be cut on particular 
transactions in order to obtain a desired order. However, this is 
not always the case. For example, most refrigerator manufacturers 
maintain a zone system for the retail markets of their products, but 
zone boundaries are not the same for all producers. Moreover, kince 
the beginning of 1940 one manufacturer has recently announced 
uniform prices for the entire region east of the Rockies. 

Sometimes zone systems apply at one market level, but not at 
others. Thus, certain electric refrigerators are sold to wholesale 
distributors on an f. o. b. plant basis, and distributors resell to retail 



284 CONCENTRATION OF ECONOMIC POWER 

dealers on a zone basis. The same practice seems to be true in the 
case of fine paper. 

Zone limits may be used to set a maximum price for the area 
rather than a fixed price applicable to all customers. For example, 
buyers of fertilizers who happen to be located near certain ports are 
able to buy on what amounts to an f. o. b. port basis; prices increase 
with the distance from the port until the maximum for the zone is 
reached; beyond this point there is no further advance. Frequently 
zone prices apply on purchases of a specified minimum quantity only, 
usually a carload. This is true, for example, of fertilizer, carbon black, 
and numerous other products. Sometimes the situation is reversed, 
with the zone structure applying to small shipments only, while some 
other basis is used for larger orders. For instance, caustic soda and 
soda ash in carload lots are sold freight equalized, but for 1. c. 1, lots 
prices are on a zone basis. 

The relationship between prices in different zones may or may not 
be fixed by custom. In the case of newsprint, for example, the price 
in any zone can be derived by applying a premium or deduction to 
the quoted price in an accepted ''base" zone. A similar practice is 
followed in the case of many other commodities. On the other hand, 
zone differentials may vary considerably from time to time with the 
price in each area determined by conditions in that area. 

One further variant of the zone type of structure which is commonly 
encountered is the "free delivery zone." In the case of many kinds 
of apparel, for example, such as women's dresses, there is no charge 
for delivery within the metropolitan area in which the garment is 
manufactured. The prices in all other areas are on an f. o. b. plant 
basis. In some instances the free delivery zone may be dictated by 
competitive considerations rather than by the location of the produc- 
ing plant. Thus some manufacturers of men's shirts make no charge 
for delivery in the New York City area, even though their plants may 
be at some distance from that city. As is evident from these examples, 
the existence of a free delivery zone or zones does not necessarily imply 
the observance of a zone structure in other areas. 

Buyer dominated structures — equalization at the -point oj origin. — 
So far, geographic price structures have been described in relation to 
the marketing policies of sellers. It has been suggested that sporadic 
freight absorption may reflect a concern's desire to extend sales into 
an area in which a rival enjoys a freight advantage, while some of the 
more conventionalized forms of structure may represent efforts to 
limit or eliminate the influence of price competition as a market factor. 
In the latter situation, particularly, this has involved the implicit 
assumption that decisions as to price policy were largely in the hands 
of sellers and that buyers either could do little to alter such decisions 
or else acquiesce in them as mutually beneficial. While this assump- 
tion is obviously an oversimplification, it probably does not materially 
misrepresent the usual situation in most industrial markets. The 
breakdowns of structure which occur during a depressed buyers' 
market merely emphasize the rule. 

There are, however, numerous sectors of the market in which buyers, 
and not sellers, normally hold the balance of power. In such cases it 
may be to the interest of these buyers to avoid competing among 
themselves in their purchases of raw materials. Just as price competi- 



CONCENTRATION OF ECONOMIC POWER 285 

tion among sellers may force prices down, so price competition among 
buyers may bid prices up. There is some evidence that geographic 
price structures may occasionally be adapted to prevent the latter as 
well as the former type of price competition. Under such circum- 
stances prices will be quoted and published by buyers rather than by 
sellers, and they will be equalized at the point of shipment rather than 
at the point of delivery. Clear instances of this kind are uncommon, 
but they do occur. Two such cases — nonferrous scrap metal and, at 
least until recently, cottonseed — will be described in the next chapter. 
Crude petroleum is another possible example. 

Unsystematic price variation. — Finally, there are types of geographic 
price variation which do not fit into any of these more or less clear-cut 
patterns. For example, prices in different markets may be largely 
out of the control of the seller, as in the case of fresh fruits or vegetables 
sold at auction or on consignment. Special competitive situations 
may exist in particular markets which make it necessary to deviate 
from the general practice on sales in those areas. Thus where imports 
are competing with domestic sources of supply, prices at important 
ports of entry may bear no direct relation to the general domestic 
price structure. For example, because of the competition of imports 
the price of cement in New York is not related to the general basing- 
point structure of that industry ; in the language of the industry, New 
York is an "arbitrary" point. 

In practice, the types of structure which have been considered are 
subject to almost infinite variation and combination to meet the 
peculiar needs of specific markets. Some of these will be illustrated 
in the followdng chapter, which describes the patterns of price variation 
actually found in various sectors of the American economy. 



CHAPTER II 
GEOGRAPHIC PRACTICES IN AMERICAN MARKETS 

METHODS OF ANALYSIS 

The preceding chapter included a description of most of the more 
common types of price structure encountered in American markets. 
In the following pages, practices actually observed in connection with 
the sale of a wide range of commodities are described. The com- 
modities discussed were selected partly on the basis of availability of 
data and partly m an effort to include a representative group illustrat- 
ing a wide diversity of market situations. 

The analysis is extensive and not intensive. It has not been 
possible to consider the geographic price structure for any commodity 
in full detail, since to do so would far transcend the limitations of 
time, personnel, and space which have been allotted to this study. 
The primary purpose of this study, as stated in the preface, was to 
afford some indication of the extent to which particular kinds of 
geographic price structure are observed in different sectors of industry 
and in the economy generally, and it is in the light of this purpose 
that the following discussion should be interpreted. 

The data upon which the analysis is based have been compiled 
from a wide variety of sources. The most important of these was di- 
rect contact with members of industry and trade association officials. 
In addition, much information was obtained from experts in other 
agencies of the Government, from published studies of the Federal 
Trade Commxission, the Department of Agriculture, and other Federal 
departments, from trade publications, and from records of the Whole- 
sale Price Division of the Bureau of Labor Statistics. Information 
with regard to steel and petroleum products is primarily based upon 
testimony presented at hearings before the Temporary National 
Economic Corftmittee. Data relating to building materials largely 
reflect the results of a detailed field study which has been conducted 
by the Temporary National Economic Committee Studies Section of 
the Bureau of Labor Statistics. In addition, various reports of the 
National Recovery Administration proved useful as source material 
in casting added light upon current practices, but they were not relied 
upon per se as evidence of existing geographic price structures. Some 
information was also obtained from a recent study by Vernon A. 
Mund, published in the Harvard Quarterly Journal of Economics} 

This chapter considers commodities and broad commodity groups 
in the following order: 

Agricultural commodities. 

Food and kindred products. 

Textiles and textile products. 

' Op. cit. 
286 



CONCENTRATION OF ECONOMIC POWER 287 

Leather and its .major products. 

Tobacco products. 

Steel and steel products. 

Lumber and its products. 

Turpentine. 

Building materials other than steel and lumber. 

Furniture. 

Chemicals. 

Drugs, cosmetics, and toiletries. 

Fertilizer. 

Paper and pulp industries. 

Passenger automobiles. 

Agricultural implements and machinery. 

Machinery and related products, other than automotive and 
agricultural. 

Electrical household equipment. 

Nonferrous metals. 

Petroleum and its products. 

Bituminous coal. 

These analyses of conditions in specific markets are followed by a 
summary of the major distinct types of geographic price structure, 
indicating the products and sectors of industry for which each was 
encountered. 

AGRICULTURAL COMMODITIES 

The geographic price structures of agricultural commodities are 
rarely as well defined as those for the products of industry. The 
reasons for this are obvious. The number of sellers in any market is 
usually so great that no one of them can exert any appreciable in- 
fluence upon the prices which hei receives for hi^ crops. Since the 
price itself is largely beyond his control, there is little opportunity 
for the development of any. rigid conventional practices regarding 
collateral terms of sale, such as the payment of freight charges. At 
the same time there are many different kinds of buyers in the market, 
purchasing under different conditions and for different ultimate uses 
and destinations. 

Nevertheless there are certain broad price relationships and cer- 
tain customs with regard to the payment of freight costs which have 
displayed a degree of persistence and ^hich apply to substantial 
sectors of the market. In contrast with the geographic price struc- 
tures which prevail for manufactured commodities, however, these 
relationships usually represent inevitable adjustments to character- 
istics inherent in the market, rather than business policy decisions, 
although the influence of the latter may be revealed in some minor 
details. 

In general, the pattern of geographic variation of the prices re- 
ceived by producers of agricultural commodities is governed in the 
first instance by the location of major terminal markets. In some 
cases, as for fresh fruits and vegetables, such markets exist at most 
important centers of consumption, which also serve as points of dis- 
tribution for the surrounding territory. For staple commodities, and 
particularly those traded in organized exchanges or in futures markets, 



288 CONCENTRATION OF ECONOMIC POWER 

these terminal markets are more narrowly concentrated and represent 
primarily points at which the product is collected for distribution 
throughout the United States. 

In surplus producing areas, that is in those sections which raise 
more of the product than can be used locally, the price received by 
growers tends to be determined by the price prevailing at the terminal 
market, less the cost of transportation to that market. In deficit 
areas which raise less than they consume, the reverse relationship 
will be encountered and growers may receive a price limited by the 
terminal market price, plus the cost of transportation. For export 
commodities, such as wheat, the controlling element will be not only 
the domestic requirements of any area but also export demand. 

In both surplus and deficit areas the price relationships just des- 
cribed are limiting relationships which may not actually conform 
with the existing pattern of variation at any time. Thus in a surplus 
area the prices are not likely to fall below the terminal market price 
less freight , and in deficit areas they will not rise above terminal 
market price plus freight, because in either event it would become 
profitable to ship to or from the terminal market. However, there 
may be many conditions which would cause variation within these 
limits, such as the avaUabUity of advantageous freight rates for 
direct shipment from a surplus to a deficit area without passing 
through recognized terminal markets. For some commodities, such 
as wheat, there may also be "mUling-in-transit" freight rates which 
combine the cost of shipping the wheat to the flour mill and the flour 
to its ultimate destination into a single charge, thereby permitting a 
further narrowing of the differential between the terminal market 
price of wheat and the amount received by the grower.^ A somewhat 
similar situation applies through "storage-in-transit" rates for such 
products as potatoes which make it possible to store the product en 
route from farm to market without any equivalent increase in the 
cost of shipping. 

Another important influence upon the geographic price structure 
of agricultural commodities is the manner in which they are marketed. 
They can either be sold by the farmer or local dealer on an f. o. b. 
basis at the point of shipment, or they can be sent directly to the 
terminal market on a consignment basis. The latter practice is com- 
mon in the case of fresh fruits and vegetables and for the former the 
price to be paid at the market is determined at organized auctions. 
Under such circumstances the grower or local dealer does not know 
what his net return will be until after the auction has been held. In 
extreme cases, it is even possible that the price received at destination 
will not be sufficient to cover the full cost of shipment. Even on 
sales "which are nominally on an f; o. b. basis, guarantees against 
price declines during transit may be required, which result in a con- 
dition not materially different from that for consignment transactions. 

The manner in which these general considerations affect the market 
for 10 important agricultural commodities — wheat, com, oats, cotton, 
potatoes, hogs, wool, butter fat, eggs, and chickens — is revealed in an 
analysis prepared by the Department of Agriculture.^ The way in 
which prices grade down in surplus producing areas and up in deficit 

> Seep. 289 below. 

« U. S. Department of Agriculture, Regional Variations in Prices Received by Farmers, 1925-34, for Ten 
Selected Commodities, May 1939. 



CONCENTRATION OF ECONOMIC POWER 289 

areas is clearly illustrated in a series of 10 contour maps included in 
this publication, which shows the actual average prices received by 
farmers for these products in different regions for the period 1925-34. 

The detailed characteristics of the markets for a few important 
products are described below. 

Wheat. — The geographic price structure of wheat is largely affected 
by the existence of six major terminal markets; Kansas City and 
Omaha for hard winter wheat, St. Louis for soft red winter wheat, 
Minneapolis and Duluth for spring wheat and durum, and Seattle for 
western white winter wheat. Spot prices in each of these markets 
are constantly changing, partly under the influence of fluctuations in 
futures markets. GeneraUy speaking, prices at grain elevators lo- 
cated elsewhere than at terminal markets move in direct response to 
terminal market prices. In major wheat producing areas, in which 
the crop is more than adequate to take care of any local requirements, 
local prices will tend to be less than terminal market prices by an 
amount equal to the cost of shipment and handling to the most 
advantageously located terminal market.^ In a sense this may be 
compared with a basing point system in reverse, with the prices at 
any point being the difference between the base price and the cost of 
shipment rather than their sum. 

This situation exists, however, only in those areas where the supply 
of wheat for sale exceeds the demand from local mills. In regions 
where the mill demand exceeds the local supply, the reverse con- 
dition may occur and price be determined by adding freight to the 
terminal market quotation, rather than subtracting it. This is 
generally true, for example, on the eastern seaboard. 

Some regions may be border-line in character, with the crop ex- 
ceeding demand during good ye^rs and being inadequate to meet it 
during poor years, and prices will reflect these changes. In Colorado, 
for example, the price tends to fluctuate between the Kansas City 
piice plus freight, when the- crop is poor and the Kansas City price 
minus freight, when the crop is good. 

One important modification of the structure described relates to 
the availability of "miUing-in-transit" freight rates. A substantial 
amount of wheat is sold under an arrangement whereby the freight 
rate on wheat shipped to a flour mill and then reshipped as flour to 
its ultimate destination is based upon the through rate from the 
point of origin of the wheat to the point of destination of the flour, 
rather than upon the individual hauls of the wheat and of the flour. 
This "milling-in-transit" rate varies with the freight zone or area in 
which the wheat originates and the zone in which the flour terminates. 
Within these zones or areas the freight rate is identical; in other 
words it is a "blanket rate." For example, for wheat raised in the 
Chicago area, there may be three possible blanket rates depending 
upon the origin and destination; a trans-Mississippi rate, a rate for 
the State of Illinois, and a rate for the territory east of Illinois. 

The price which the miller can pay for wheat at any elevator, there- 
fore, depends upon the location of his flour market and may be sub- 
stantially higher than the spot price at the terminal market, less 

* Thus, according to a study by the Federal Trade Commission, "Grain prices paid in the country to 
farmers under normal competitive conditions among country elevators are based primarily on the 'cash' 
or 'to arrive' prices at terminal markets for the same kind and grade, less freight, terminal handling charges 
and the country dealer's gross margin." (Federal Trade Commission, Agricultural Income Inquiry, 1937, 
Pt. I, p. 328.) 



290 CONCENTRATION OF ECONOMIC POWER 

straight haul freight. It would be most accurate to say that these 
two situations set the limits within which prices in any surplus pro- 
ducing area wiU vary. Prices will not at any time fall appreciably 
below the terminal market less freight, because if they did, it would 
become profitable to ship to the terminal market. On the other 
hand, millers may often be in a position to bid above this limiting 
quotation when they see the possibility of advantageous "in-transit" 
freight arrangements. 

According to the Department of Agriculture, the lowest average 
price received by farmers for wheat during the decade 1925-34 was 
in the surplus producing area in eastern Wyoming. The price in this 
area was about 80 cents, or between 15 and 20 cents below the prices 
at the major midwestern terminal markets. Another low area was 
Idaho, in which the price of about 85 cents was some 15 cents below 
the Seattle level. Highest recorded average prices— $1 .30 per bushel — 
were in the extreme southeastern States, Georgia and Alabama, which 
produced little wheat and are furthest freightwise from the terminal 
markets.** 

Milk. — The price of fluid mUk is subject to minimum price deter- 
mination by the Department of Agriculture. The United States is 
divided into approximately 25 marketing areas, and in each of these 
areas minimum prices are established by classes of milk. In general^ 
these prices apply to delivery at the market so that the net return to 
the farmer will vary with his distance from the market to which he 
ships and with the arrangements which he can make for transporta- 
tion. The difference between the price at the market and the net 
return to the farmer may be substantial; thus for four urban market 
areas the delivered cost to dealer during October 1935 averaged $0,053 
per quart, while the net return to farmer was $0,045.® 

Cattle. — The marketing of cattle is centered in Chicago and Kansas 
City and prices at these two important centers are closely related to 
each other because of the ability of packers to shift their purchases 
from one market to the other. Net return to producers in major 
producing areas, therefore, usually represents the difference between 
prices at these terminal markets and cost of shipping cattle to them. 

Potatoes. — There is a wide variety of different practices observed in 
the sale of potatoes with regard to the burden of transportation costs. 
Practices vary for early and late potatoes, with the producing area, 
the method of financing the crop, the channel of distribution, the grade 
of the product, and many other factors. In some cases, sales are on a 
straight f. o. b. basis, m others there is a guarantee against price decline 
during transit, and in still others, particularly with regard to potatoes 
of lower grade, sales are on a consignment basis. These differences in 
practice are described in detail by the Federal Trade Commission in 
its agricultural income inquiry. A few relevant quotations from this 
report follow and illustrate the diversity of possible situations. 

METHODS OF SALE BY GROWERS 

The practices which exist in connection with the disposition by the grower of 
potatoes vary considerably in the several commercial producing areas under con- 
sideration. Fundamentally, these differences stem from the single question of 
whether or not the grower had to depend upon outside sources for a part or all 

« Op. cit., p. 2. 

• Federal Trade Commission, Agricultural Income Inquiry, 1937, Part I, p. 121. 



CONCENTRATION OF ECONOMIC POWER 



291 



of the capital necessary for financing the production of his crop. Where. the 
grower receives an advance it is almost invariably accompanied by some control 
over the disposition of the crop. * * * 

Where the grower is able to finance his crop without resort to outside agencies, 
he is, of course, free to dispose of it in whatever manner he chooses. The ordi- 
nary channels utilized are direct sales by the grower to truckers, to local dealers, 
sales in carlots to terminal market receivers or chain stores, and shipments on 
<!onsignment to commission merchants. 

In Florida: The Florida crop is marketed largely on an f. o. b. basis, except in 
the case of potatoes grading lower than U. S. No. 1, or shipments made after other 
commercial producing areas have begun to compete strongly with Florida potatoes 
in the terminal markets. In the exceptions just mentioned, shipments are usually 
on a consignment basis and are sold as circumstances permit. * * * 

In South Carolina: * * * jjj ^j^g Charleston area it is estimated that about 
70 percent of all sales are made on an f. o. b. basis. These f. o. b. sales carry the 
true characteristics of such a sale, because there is rarely any change made in the 
f. o. b. price after the shipment has started its movement. This practice is some- 
what different from that existing in Florida where, in the case of so-called f. o. b. 
sales, the seller ordinarily guarantees the purchaser against a decline in price dur- 
ing the time the shipment is in transit. * * * 

In North Carolina-Norfolk, Va.: The method of disposition by growers in this 
area differs radically from the customarj^ procedure in P'lorida and South Carolina. 
In the latter areas the local dealers through whom the crop is marketed rarely 
purchase potatoes outright, but handle them for the account of the growers, 
whereas in the area now under consideration a substantial part of the crop is 
purchased from growers by local dealers. * * * 

* * * That part of the crop not sold outright to local dealers and shippers, 
consisting in large part of potatoes not equal to U. S. No. 1 in grade, is generally 
handled by the local shipper on consignment for the grower's account. * * * 
The proceeds of sale, less this ch.qrge and freight and terminal handling charges, 
are remitted to the grower or applied on the grower's account where funds had 
been advanced to him. * * * 

In western New York: In western New York growers finance their own opera- 
tions with the exception of some loans secured through production credit associa- 
tions, which place no restriction upon disposition of the crop. * * * 

The prices paid to growers in this area by buyer-loaders and local dealers are 
based upon carlot prices in the terminal markets ordinarily supplied from this 
area. The terminal market delivered price is reduced by the freight charge, 8 
cents per hundred pounds for the cost of the sack, 4 cents per sack to cover foreign 
brokerage, and from 15 to 20 cents per sack to cover other expenses and afford a 
profit to the dealer. 

In Wisconsin and Michigan: * * * The price paid to growers in Wisconsin 
is based upon the Chicago delivered price less deduction's to cover freight, foreign 
brokerage, cost of containers, and the gross margin of the dealer or market receiver. 
* * * In Michigan the Chicago quotations are not the major factor influencing 
the price received by the grower, since quotations to growers in Michigan are 
generally computed on an f. o. b. Cadillac basis. The Cadillac price is directly 
■dependent upon quotations in the terminal market for which a particular ship- 
ment is destined. 

DISPOSITION BY LOCAL DEALERS 

In every commercial producing area in which inquiry was made the majority 
of all shipments destined for terminal markets is handled by local dealer-shippers 
or other types of local marketing organizations. * * * The methods of sale 
by local dealers are quite varied. The customary methods are: (1) Sales f. o. b. 
shipping point; (2) Delivered sales; (3) Sales through brokers; and (4) Consign- 
ment sales. 

Sales f. o. b. shipping point are transactions in which a local shipper sells potatoes 
loaded in cars at shipping point. Delivered sales are those in which the shipper 
seUs potatoes delivered at a point designated by the purchaser. In sales through 
brokers either f. o. b. or delivered it is customary for the broker to obtain the 
shipper's approval of the price before closing the sale. In these sales payment is 
a matter between the shipper and the purchaser and with respect to which no 
responsibility attaches to the broker. A consignment sale is one in which potatoes 
are shipped to a terminal market commission agent for sale at the best price obtain- 
able without prior approval of the price by the shipper and navment is guaranteed 
by the commission agent. 



292 CONCENTRATION OF ECONOMIC POWER 

There are almost infinite variations of these methods of selling resulting from 
individual agreements between buyers and sellers. For instance, the Atlantic 
Commission Co. not infrequently handles potatoes on the basis of "price arrival." 
This term designates a shipment intended for the Great Atlantic & Pacific Tea Co., 
and as to which the Atlantic Commission Co. agrees that it will accept the pota- 
toes at the average market price in the destination market on the day of arrival 
provided the shipment is in suitable condition. Unless otherwise specified, the 
price is submitted to the shipper for confirmation before the sale is completed. 
The Atlantic Commission Co. also uses "arrival sales." These are shipments 
on which the best offers obtainable on a carlot basis are submitted to the shipper 
for confirmation. The potatoes may be sold to the general trade or bought by 
the Atlantic Commission Co. On such shipments there is no liability on the 
part of the Atlantic Commission Co. to accept the potatoes, as is the case in "price 
arrival" sales. 

In f. o. b. sales the shipper is paid a price agreed upon at the time sale is made, 
regardless of price fluctuations between the time of sale and the time of arrival 
at destination. In the case of f. o. b. shipments from Florida and some other 
southern areas it is not unusual for the shipper to guarantee the price on arrival 
at destination; that is, if any decline occurs in the shipping-point price before a 
shipment reaches its destination the price on such shipment will be reduced 
accordingly. 

Shipments from southern areas are customarily sold on an f. o. b. basis, unless 
the withdrawal of large buyers from the f. o. b. market forces a resort to consign- 
ment sales or urgent competition from other early-crop areas makes it appear 
advisable for buyers to concentrate their purchases in terminal markets. The 
principal exception to this custom of selling f. o. b. results from advances made 
by market receivers to local dealers. These advances are made by commission 
merchants in terminal markets primarily to assure themselves of a supply of early 
potatoes in order to meet the requirements of their trade. This practice results 
in shipments going to a specific market regardless of the. fact that prices may be 
more favorable in some other terminal. * * * 

Dealers in Maine sell principally upon a delivered basis. This places the respon- 
sibility for the condition of the shipment at destination upon the shipper. The 
risk of loss from damage in transit is an important factor in shipments from 
Northern points during winter months. 

* * * In Wisconsin and Michigan production areas some terminal market 
receivers maintain what might be called chain-buying agencies. * * * Here, 
as in Maine, the delivered sale is the most usual type of transaction between 
shipping-point dealers and terminal buyers. The proportion of potatoes from 
these areas which will grade U. S. No. 1 or better is smaller than in the early 
producing areas or in Maine. This res"ults in few sales being made upon grade, 
and in resort to sales on a price basis subject to inspection and approval upon 
arrival. ' 

Fresh fruits and vegetables. — Marketing practices for fresh fruits 
and vegetables are also described at length by the Federal Trade 
Commission in its ^^ricw^^wre Income Inquiry, 1937.^ In some cases 
growers dispose of their crops as they stand, in others they may gather 
them and deliver them to local dealers, in still others they retain title 
to them and ship them on consignment to terminal markets. In 
general, the net return on shipments to any particular market will 
vary with day-to-day changes in conditions at that market. In the 
case of fruits, prices at terminal markets are largely determined by the 
fruit auction system. In consequence the pattern of geographic price 
variation for fresh fruits and vegetables is in no sense systematic. 

Cottonseed. — Cottonseed is usually classed as an agricultural product 
although its production does involve a simple stage of processing. 
The geographic price structure for cottonseed is nmch more regular 
and apparently subject to a substantially greater degree of control 
than is true for the farm products described above. 

' Federal Trade Commission, Agricultural Income Inquiry, 1937, pt. I, pp. 573-581. 
8 Op. cit. 



CONCENTRATION OP ECONOMIC POWER 293 

Prior to 1934, the geographic price structure for cottonseed was very 
clearly defined. The producing territory — the Cotton Belt — was 
divided into a number of zones whose boundaries corresponded with 
the jurisdictions of the millers' trade associations. Within each of 
these zones the mills published the prices which they were willing to 
pay for cottonseed f. o. b. shipping point. If a mill in one zone pur- 
chased cottonseed from a gin located in another zone, it would pay 
the published f. o. b. price in that zone whether this price was higher 
or lower than that prevailing in its home zone. 

The fact that shipping point prices, rather than delivered prices, 
are uniform in each zone presumably reflects the competitive structure 
of the industry. The buyers of cottonseed — the cottonseed oil mills — 
are in general larger and more concentrated than are the sellers and 
are therefore in a position to exert a substantial influence over the 
prices which they pay for their raw material. The maintenance of 
price uniformity at the shipping point means that each mill is bidding 
the same price for supplies at every point and that there is no incentive 
for the seller to deal with one mill rather than with another. This 
may lessen the likelihood of prices being bid up by competition among 
buyers. 

In a sense, this form of price equalization at the buying point is the 
obverse of the more commion form of equalization at the selling point, 
but it springs from the same general motivation. Where rival sellers 
are well organized, the geographic price structure often reflects the 
desire to avoid price competition in selling, while where buyers are in 
a position to exercise substantial control over the market, they may 
wish to avoid price competition among themselves in their purchases 
of raw materials. 

On May 31, 1934, a Federal Trade Commission complaint^ was 
issued, as a result of which mills stopped publishing bid prices. At 
the present time the Department of Agriculture publishes a range of 
carlot prices on 10-ton lots or more in those States where sales are 
based on a standard grading system. There is no information avail- 
able as to current practices in the industry. However, according to a 
recent study, there is some evidence that the exchange of price infor- 
mation between mills continues. '° 

FOOD AND KINDRED PRODUCTS 

In terms of value of products, the group of industries classed by the 
Census Bureau as Food and Kindred Products is much the largest 
group in the American economy. Total value of product during 1935 
was ahnost $10,000,000,000." 

The geographic price structures of food products reflect a very wide 
diversity in market characteristics such as perishabihty, degree of pro- 
cessing, extent of standardization, importance of trade-marks and brand 
names, relative importance of freight as an item in cost, etc. Accord- 
ingly they exhibit almost every recognized pattern of variation in- 
cluding basing-point systems, zone systems, f. o. b. plant pricing, 
freight equalization, and uniform delivered prices, as well as com- 
pletely unsystematic price variation between markets. In general, 

» Federal Trade Commission Docket No. 2190. 

'« Walton Hamilton and Associates, Prices and Price Policies, p. 281. 

" Bureau of Census, Biennial Census of Manufactures, 1935, p. 42. 



294 CONCENTRATION OP ECONOMIC, POWER 

there is some relationship between the degree of processing and the 
character of the geographic price structure; slightly processed com- 
modities, such as meats, tend to vary in as irregular a fashion as 
agricultural products, while foods which have undergone a greater 
degree of fabrication and particularly those which are branded or 
trade-marked commonly display the more conventional types of 
structure usually associated with the products of industry. There 
are often differences in the geographic price structure for a single 
product, depending upon whether it is sold under a national brand, 
under a distributor's brand, or in bulk; advertised brands are more 
commonly sold on a delivered or freight allowed basis than are private 
brands or bulk products. 

Because of the diversity of products included in the food industry, 
it would be impractical to discuss in detail the geographic price struc- 
ture prevailing for even a reasonably representative selection of items. 
Instead a very limited list of commodities has been accorded separate 
treatment, followed by a tabular summary of the prevailing geographic 
price structures for a considerably wider group. 

Meats. — The price of meat products in different cities of the United 
States seems to bear no apparent relationship to their cost of shipment 
from major producing centers or from central markets. This is clearly 
illustrated in the case of beef by the report of the Federal Trade 
Commission in its Agricultm'al Income Inquiry. ^^ This report lists 
the average wholesale prices for "good beef carcass" in 51 cities, during 
the year November 1934 to October 1935.'^ The weighted average 
price per 100 pounds for all 51 cities was $16.28. Prices in the two 
large packing centers — Chicago and Kansas City — were $17.22 and 
$18.02 respectively, or materially above this average for the United 
States. In contrast, the value in Baltimore, which is remote from 
the major producing area, was only $14.41, while in Washington it 
was $15.91 and in New York, $16.43. Prices ranged from a low of 
$11.89 in Portland, Oreg., to a high of $19.12 in New Haven, Conn., 
but there was no evidence of any variation which might be considered 
to reflect the location of supply in relation to markets. 

The range of veal prices is even greater than that for beef. Accord- 
ing to the Federal Trade Commission report,'^ average wholesale prices 
per 100 pounds for the period November 1934 to October 1935, varied 
from $8.88 in Little Rock, Ark., to $17.93 in Washington, D. C. The 
weighted average for all 51 cities was $14.75 and prices in terminal 
markets at Kansas City and Chicago were $12.36 and $14.75 per 100 
pounds respectively. Again the variation did not reveal any con- 
sistent pattern in which the influence of transportation charges to 
and from terminal markets could be clearly traced. 

Vegetable oils. — There are three zones observed in the sale of cotton- 
seed oil: the southeastern area, which includes aU southeastern States 
as far west as Alabama and eastern Tennessee inclusive, the Mississippi 
Valley area including Louisiana, Arkansas, and western Tennessee, and 
the southwestern area including Texas and Oklahoma. In each of 
these areas prices are quoted f. o. b. mill, with the prices for all mills in 
any given zone the same at any time. The price is usually lowest lq 
the southwest, % cent higher in the Mississippi Valley, and again 

" Federal Trade Commission, Agricultural Income Inauiry, pt. I .Principa IFarm Products, 1937. 
" Ibid, pp. 158-159. 
" Ibid, pp. 169, 170. 



CONCENTRATION OF ECONOMIC POWER 295 

higher by about another }i cent in the Southeast. Cottonseed oil is 
traded on organized exchanges which largely influence the prevailing 
price. It is understood that the boundaries of the zones are related 
to the railroad freight-rate structure and that purchasers of cottonseed 
oil are usually unable to cross from one zone to another in their buying 
because this would involve their losing the advantage of the most fa- 
vorable "fabrication-in-transit" rates. 

The prices of soybean and other minor vegetable oils are said to be 
usually uniform in crushers' mills over the entire country. 

Vegetable shortening. — Nationally advertised vegetable shortening is 
sold on a delivered basis at uniform prices anywhere in the United 
States. However, in the case of at least one well-known brand, 
there are special prices in effect in some of the Southern States, in 
the Mountain States, and in the western section of the Dakotas, 
Nebraska, and Kansas. The lower prices in effect in these zones are 
for the purpose of introducing the sale of this product in those areas 
and suggest another of the considerations which may afi'ect geographic 
price structures. 

Unadvertised or private brajids as well as bulk shortening are sold 
f. o. b. shipping point with no freight allowed. 

Bread. — The market for bread is largely local in that the product 
is rarely shipped any considerable distance from the bakery. Prices 
to distributors are on a delivered basis and are uniform for the same 
kind of customer within any given locality. However, the same 
bakery may sell at quite different prices in adjacent areas and it is 
not uncommon for the price to be lower in a town at some distance 
from the plant than at nearer points. For example, according to the 
Department of Agriculture, the Washington, D. C, plant of a large 
baking company sells bread in Washington at a wholesale price of 16 
ounces for 8 cents, equivalent to 8 cents per poimd, while the same 
plant sells to Fredericksburg, Va., at a price of 22 ounces for 8 cents, 
equivalent to 5.8 cents per pound. The same company operating 
from another plant sells its bread at 8 cents per pound in Norfolk, 
Va., and at 6.4 cents per pound across the river in Newport News.^^ 
This sort of price variation is clearly not related in any way to trans- 
portation costs. In fact there is some evidence that the effect of 
this kind of geographic pricing practice on the part of this large com- 
pany may be to create difficulties for smaller competitors located in 
the areas in which prices are arbitrarily reduced. ^^ 

Sugar. — The prices of refined sugar at any point in the United 
States are related to the prices of cane sugar at seaport refineries on 
the Atlantic, Gulf, and Pacific coasts. These ports in effect consti- 
tute multiple basing points and the base prices at each such point are 
usually identical. This structure reflects the fact that practically all 
cane sugar refining, which accounts for approximately 80 percent of 
all refined sugar produced in the United States, is conducted at these 
seaboard refineries. The uniformity of prices at all basing points 
may be explained by the fact that the bulk of raw sugar consumed 
in the United States is imported, and the costs of shipping this raw 

'5 Temporary National Economic Committee Press Release, T. N. E. C. 30, January 29, 1940. 

" These practices have been the subject of complaints issued by the Federal Trade Commission on the 
ground that they "tend to create a monopoly." See F. T. C. Docket No. 3669, dated December 17, 1938, 
relating to the practice in the District of Columbia and Vireinia areas; and F. T. C. Docket No. 3740, dated 
March 20, 1939, relating to the same subject in Iowa, Minnesota, South Dakota, and Nebraska. The 
former case is still pending; a Cease and Desist Order was issued for the latter case on December 28, 19.39. 

247149—41 — No. 1 21 



296 CONCENTRATION OF ECONOMIC POWER 

sugar from its points of production to any of these seaports will not 
vary significantly. The delivered price of cane sugar at any destina- 
tion is arrived at, theoretically, on this basis of "seaboard plus"; in 
other words it is computed by adding the cost of combined rail- 
water-truck shipment to the base price. Some years ago it was the 
custom to compute freight on an all-rail basis only, but the increas- 
ing use of water and truck transportation forced a modification of 
the practice. 

Beet sugar, which is produced primarily at inland points in the 
West, is directly competitive with cane sugar and consequently shows 
the same general pattern of geographic variation. However, there 
appears to be a slight difference in popular acceptance which results 
in a r'elatively minor price dift'erential between cane and beet sugars. 
Under ordinary circumstances tne price of beet sugar in any market 
is 20 points — i. e., $0.20 per 100 pounds — below that of cane sugar 
in the same market. The result of this practice is that the highest 
price for beet sugar occurs around Pittsburgh beyond which point it 
becomes unprofitable to ship it and which represents its longest haul, 
while its lowest price is in the region adjacent to its producing 
centers. 

In basing point cities, the delivered price usually includes a small 
charge for trucking which is in some respects similar to the switching 
charges observed at steel basing points. For example, in New York 
City during April 1939 there was a charge of three points for truck 
deliveries involving stops at more than one store. 

An indication of the approximate relative importance of freight, on 
shipments of various length, is afforded by the following schedule of 
freight extras prevailing during April 1939, at a time when the base 
price approximated $.044 per pound. 

Freight extras pi r 
100 pounds 

Bridpeport, Conn ^ $0. 14 

Pittsburgh, Pa 0. 28 

Cleveland. Ohio 0. 36 

Springfield, 111 0. 42/2 

Minneapolis, Minn 0. 54 

As in the case of many other commodities, adherence to the struc- 
ture just described is by no means perfect. The nominal quotations 
are often shaded to meet competitive conditions. In addition the 
differential between beet sugar and cane sugar may vary from time 
to time, although it usually remains within the range between 10 
and 20 points. Guarantees against price decline are common, and 
concessions of this sort affect not only current transactions but also 
past orders within the terms of the guarantee. Since price conces- 
sions of this kind do not affect all markets uniformly, they amount to 
modifications of the nominal geographic price structure. 

Salt. — Salt is marketed in accordance with a complex freight equali- 
zation system which operates on a zone basis. The delivered price 
at any point in a zone is, in general, determined by adding freight 
costs to the f. o. b. price of the most advantageously located plant in 
that zone. Sellers located outside the zone play no part in price- 
making beyond the limits of their accepted territory. 

Salt is produced commercially in only 12 States. Of these two, New 
Mexico and Nevada, produce very little salt and a third, Oklahoma, 



CONCENTRATION OF ECONOMIC POWER 297 

has not until recently been sufficiently important to warrant being 
considered a separate producing- field. The eight producing fields 
recognized by the industry are New York, Ohio, and West Virginia, 
Michigan, Louisiana, Texas, Kansas and Oldahoma, Utah, and 
California. "Natural marketing areas" have been established roughly 
corresponding to these producing regions and producers generally 
refrain from selling in a marketing area, other than their own, at a 
price lower than that of producers in the field. Within each area a 
system of freight equalization prevails and "freight books" are used 
to insure uniformity of delivered prices. Producers outside the area 
may compete at the same prices but they often set a limit to the amount 
of freight which they are willing to absorb in order to do so. 

The functioning of the system is well described in a report prepared 
by the Division of Review of the National Recovery Administration. 
According to the best information available, the same general structure 
still prevails. 

Following the organization of the Salt Producers' Association in 1914, that 
organization prepared and published what were known as State freight rate books 
for every State in the Union. These freight rate books contained the name of 
every known delivery point, or point of destination, in each State, together with, 
the railroad freight rate to such delivery point from the nearest producing plant, 
The various producers, in calculating the delivered price of salt to such point of 
destination, would add to the base price the figure set forth in the State freight 
rate book. Thus, every producing plant became a basing point for all delivery 
points nearer to it than to any other plant. 

The following quotation is an excerpt from a letter, written by a member of the 
industry to a Nebraska wholesale grocer in 1915, explaining the method of using 
price lists and freight rate books (which system is still in effect): 

"We have sent to you Nebraska and Iowa books and scales. You will note that 
there are two scales — one scale No. 7, which applies on Michigan salt, the other 
scale No. Z-7, which applies on Kansas salt. The rate books show freight rates 
both from Michigan and Kansas. The method of using the books is very simple. 
Take the town of Weeping Willow, Nebr., for example. Reference to the rate 
book will show that the cheapest rate to Weeping Willow is from Kansas, and is 
36 cents. To arrive at the price to Weeping Willow, use the Z-7 book and look 
under column 36, which will show that the price of Number 1 Jack Rabbit is $1.21. 
This is the price to be charged a retail dealer. From this price you are allowed a 
5-cent per barrel commission, as shown on the last page of the schedule. We 
insist that the wholesale grocer keep the discount for themselves and shall not in 
any way rebate to the customer or sell him at prices less than those shown in our 
schedule. 

"To arrive at the price on Michigan Salt to Weeping Willow, we refer to the 
Michigan rate, which is 57 cents. Recently, however, it has become the practice 
of Michigan manufacturers to absorb the difference befiween Michigan and Kansas 
rates to the extent of 15 cents per barrel. Therefore, the Michigan price to Weep- 
ing Willow would be at the rate of 57 cents less the maximum absorption of 15 
cents, which makes 42 cents, and the price of salt from Michigan to Weeping 
Willow is found in Column 42 of the Michigan Schedule. Thus, the price on 
Michigan salt is $1.27 per barrel." 

The amount of freight absorption varied considerably, depending on the need 
for an expanded market on the part of manufacturers in any given area, and even 
varied on different grades of salt. Thus, in 1932, we find one southern manu- 
facturer issuing a price schedule containing instructions to salesmen to limit 
freight absorption on rock salt in Southern States to a point which would net the 
producer at least $4 per ton at the plant, but permitting complete freight absorp- 
tion to all points of destination on high-grade industrial salt. In sales in Ken- 
tucky, for example, the salesman is instructed to figure freight rates on the 
Michigan or Ohio freight rate, whichever is lower, instead of figuring the freight 
rate on the actual cost from I.ouisiana, except that on rock salt the absorption of 
freight was limited to a figure which would net the producer $4 per ton.*^ 

"National Recovery Administration, Division of Review — Manufacturers Control of Distribution: A 
Study of Trade Practice Provisions in Selected National Recovery Administration Codes, by Irwin S. 
Moise and George B. Haddock; Work Materials No. 62, March J 930. pp. 82, 83. 



298 CONCENTRATION OF ECONOMIC POWER 

The maintenance of this elaborate system may be explained partly 
by the relative standardization of the product ^^ and partly by the 
great importance of freight as an element in the delivered price of 
salt. According to the Interstate Commerce Commission/® rail 
freight revenue on carload shipments of salt amounted to 46 percent 
of the delivered value of the product at destination during 1936. 
During 1933, when prices were lower, Interstate Commerce Com- 
mission data show that freight reached the high ratio of 64 percent 
of delivered value; in other words, almost two-thirds of the average 
delivered wholesale price of salt represented the cost of transporta- 
tion.2» 

The two largest producers, who are apparently the price leaders of 
the industry, have plants in many different producing areas and 
between them they are direct market factors in 44 of the 48 States.^' 
Consequently there is little incentive for these two concerns to dump 
their surplus product across zone boundaries. At the same time they 
are in a position to utilize their prestige for the purpose of maintain- 
ing the established system, and according to the National Recovery 
Administration report quoted: 

There is some evidence to the effect that this uniformity in published prices 
resulted from a definite fear on the part of smaller producers of disastrous re- 
prisals if they disturbed the prices established by the larger, more powerful 
producers.22 

Nevertheless the system is not always rigidly observed and there is 
considerable evidence of price cutting during periods of stress. It is 
possible that the tendency on the part of smaller producers to cut 
prices occasionally is related to their difficulty in competing on the 
basis of uniform prices with larger companies who have obtained 
public acceptance for their advertised brands.^^ Sometimes sporadic 
price cutting culminates in severe price wars during which the entire 
geographic structure may become little more than nominal. Such a 
price war occurred, for example, during the latter part of the National 
Recoveiy Administration period in 1935: 

Following May 27, 1935, deviations from published prices became more and 
more troublesome. By August, the secret prices evidently became sufficiently 
serious to warrant retaliation by the price leaders in the industry. Since that 
time, there has developed one of the worst price wars experienced in recent years 
by this industry. Published prices remain practically the same as they were 
during the code period, but discounts and rebates ranging from 20 to 30 percent 
are being granted to various types of buyers.^* 

Coffee. — Unadvertised b^'ands of coffee are generally sold f. o. b. 
shipping point with no freight allowance. Nationally advertised 
brands, on the other hand, are often sold on a uniform delivered price 
basis. Thus one company charges a uniform price for store door 
delivery anywhere in the United States, another prepays freight to 
the buyer's city only, and a third prepays freight to the buyer's city 
but quotes different prices east and west of the Rocky Mountains. 

Rice. — Rice in bulk, as well as unadvertised or private brands, is 
sold on a simple f. o. b. shipping-point basis with no freight allowed. 

" Trade names and brands have some effect upon this marnet, but not enough to support an appreciable 
price differential. 
>• Op. eit. 

M Interstate Commerce Commission, Freight Revenue and Value of Commodities Transported, 1933. 
" Manufacturers Control of Distribution, p. 81. 
a Ibid., p. 83. 
M Ibid., p. 145. 
« Ibid., p. 147. 



CONCENTRATION OF ECONOMIC POWER 299 

In the. case of nationally advertised brands, practices vary. One 
brand is sold at a uniform delivered price at all eastern seaports and 
a uniform differential above this at all other points. Another brand 
is sold full freight allowed, except in a group of midwestern and 
mountain States in which the delivered price is higher. 

Other food products. — Prevailing geographic price structures for 
othor food products are summarized below. Where the practice 
applies only under certain conditions, e. g., to manufacturers brands, 
unadvertised brands, or in bulk, the limitation is noted. When 
there is no such note the practice applies generally regardless of 
brand or packaging. 

The following products are usually sold f. o. b. shipping point with 
no freight allowed: 

Grape juice: Nationally advertised brands and bulli only. 

Corn meal: Unadvertised brands and bulk only. 

Crackers: Unadvertised brands only. 

Wheat flour. 

Chocolate coating: Unadvertised brands and bulk. 

Cocoa: Bulk only. 

Creamery butter: Bulk purchases in certain cases only. 

Condensed milk: Bulk purchases in certain cases only. 

Processed cheese: Unadvertised brands only. 

Bulk cheese. 

Canned peaches. 

Canned pineapple. 

Dried apricots. 

Prunes. 

Raisins. 

Canned soup: Unadvertised brands only. 

Canned corn: Unadvertised and some advertised brands. 

Canned peas: Unadvertised and some advertised brands. 

Canned tomatoes. 

Vegetable shortening: Unadvertised brands and bulk only. 

Lard. 

Molasses: Bulk purchases in certain cases only. 

Black pepper: F. o. b. warehouse, New York City or port of arrival. 

Canned salmon: Advertised and unadvertised brands. 

Tea: Bulk. 

Vinegar: Bulk. 

The following products are sold either at uniform delivered prices 
anywhere in the United States or f. o. b. shipping point, full freight 
allowed. The latter practice is indicated by the initials "f. a." 

Ginger ale and club soda: Advertised brands, f. a. (except in Washington and 
Oregon where freight allowance is limited to 50 cents per 100 pounds). 

Ginger ale and club soda: Unadvertised or private brands. 

Grape juice: Advertised brands (f. a. to warehouse city). 

Corn flakes: Advertised brands (some quoted f. a., others delivered). 

Wheat cereal: Advertised brands, f. a. 

Crackers: Advertised brands, f. a. 

Macaroni: F. a (on unadvertised brands freight allowance may be for carlots 
only). 

Pretzels: Nationally advertised and bulk, f. a. 

Packaged candy: Nationally advertised, f. a. 

Cocoa: Nationally advertised, f. a. 

Creamery butter: Bulk delivered in some cases. 

Condensed milk. 

Powdered milk: Nationally advertised. 

Toilet soap, bar laundry soap, and soap flakes: Private brands or bulk, f. a., 
nationally advertised brands delivered. 

Canned soup: Advertised brands, f. a. 

Baked Beans: One advertised brand, f. a. Unadvertised brands, f. a. in carlots. 



300 CONCENTRATION OP ECONOMIC POWER 

Canned corn and canned peas: Some advertised brands. 
Canned tomato juice: Advertised brands, f. a. 

Jelly: Some advertised brands, f. a. Unadvertised brands, f. a. in carJots. 
Molasses: Some advertised brands, f. a., and bulk sometimes f. a. 
Oleomargarine. 

Peanut butter: Some advertised brands, f. a., and unadvertised brands, f. a. 
in carlots. 

Tea: Advertised brands. 

Vinegar: Some advertised brands f. a., and unadvertised brands, f. a. in carlots. 

The following products are sold on a zone basis with two delivery 
zones, east and west of the Rocky Mountains. 

Corn flakes: Unadvertised brands. 

Farina: Unadvertised brands. 

Oatmeal: Unadvertised brands. 

Cooked wheat cereal: Unadvertised brands. 

Powdered milk: Bulk. 

The following products are* sold on a zone delivered basis with 
three or four zones recognized. 

Farina, oatmeal and cornmeal: Advertised brands. 

Evaporated milk. 

Processed cheese: Nationally advertised. 

The following nationally advertised products are sold by at least 
one manufacturer on a delivered -price basis, using six or seven zones: 
Canned baked beans, jelly, molasses, peanut butter, vinegar. 

Bulk corn sirup and bulk cornstarch are sold in accordance with a 
basing point system on carload factory shipments. 

Packaged sirup in carlots is sold on a basing point system in some 
areas and on a zone delivered price basis in others. 

Packaged starch in carlots is sold on a delivered basis with prices 
varying in 12 or more zones. 

TEXTILES AND TEXTILE PRODUCTS 

Transportation constitutes only a minor item in the price of most 
textiles and textile products. During 1936, according to the Inter- 
state Commerce Commission, freight was only 2.5 percent of the value 
of baled cotton at its destination; for cotton cloth and cotton fabrics 
the ratio of freight to value was 1.8 percent.^' It is logical to assume 
that the relative importance of freight is even less for finished apparel 
and for more expensive fibers such as silk, wool, and rayon. 

The minor rple played by freight is probably at least in part re- 
sponsible for the absence of any complex forms of freight equalization 
or zone pricing in the markets for these products. A few products 
are sold on a uniform delivered basis but the general practice seems to 
be to quote straight f. o. b. mill or f. o. b. mill with occasional minor 
modifications. 

Yarns. — Cotton yarns are sold on a sim])le f. o. b. mill system. 
Knitters constitute the principal market for this product because 
cotton weaving is almost entirely in the-hands of integrated mills. 

Rayon yarn is sold on a freight-allowed basis. Quotations are 
f. o. b. producer's plant with minimum freight allowed to destination. 
The term "minimum freight" simply means that the amount of freight 
allowance is determined by the lowest shipping rate available, regard 
less of the route actually used. 

»• Interstate Commerce Commission, op. clt. 



CONCENTRATION OF ECONOMIC POWER 301 

The geographic structure for woolen yarns varies with the type of 
yarn. Weavmg yarns are sold f. o. b. mill. Knitting yams, however, 
are sold on a delivered basis in the Philadelphia, New York, Cleveland, 
and New England areas; for other points they are sold f. o. b. shipping 
point of the finished (dyed) yarn. Apparently knitting yams are 
usually dyed and finished by companies other than the spinners and 
the practice is to quote the price f. o. b. the finishing plant. 

Gray goods. — Gray goods — both cotton and rayon — are understood 
to be sold on a stniiglit f. o. b. mill basis with no important modifi- 
cations. 

Finished cloth. — In general, cotton and wool finished cloth, as well 
as gray goods, is quoted on a straight f. o. b. mill basis. There are, 
however, certain variations. Clothiers' linings and corset cloths are 
usually sold on a delivered basis to New York manufacturers, who 
apparently constitute a major segment of the market for these prod- 
ucts and are consequently able to exert an important influence upon 
their terms of purchase. ^^ However, the price to manufacturers 
outside New York is f. o. b. mill. Clothiers' linings and corset cloths 
sold to retailers are quoted either f. o. b. mill or, if shipped from 
New York stocks, f. o. b. New York warehouse. 

Finished raj'on cloth is sold on a delivered basis to metropolitan 
areas where warehouses are located; in other areas it is sold f. o. b. 
mill or warehouse, whichever is lower. 

Finished apparel. — The great bulk of finished apparel is sold on the 
basis of a simple f. o, b. system. This practice is followed even though 
there is a tendency for retail prices to the consumer to be uniform 
throughout the United States either because of the existence of con- 
ventional price lines or, in the case of some nationally advertised 
products, because of price maintenance efforts by manufacturers. 

Under these circumstances it becomes necessary for the retailer — 
who usually purchases directly from the manufacturer — to absorb the 
cost of freight in his gross margin. Although this might be thought 
to impose a burden upon retailers who are unfavorably located with 
reference to their sources of supply, the actual cost of shipment is very 
low for most apparel and consequently the problemi is not serious. 
During recent years, freight costs have been further reduced by the 
increasing use of truck delivery. In general, therefore, the f. o. b. 
system seems to be observed simply because the element of freight is 
too minor to become the subject of competitive bargaining, especially 
in view of the emphasis placed by the market upon nonprice factors 
such as style. 

The prevailing f. o. b. system is subject to some modifications, a few 
of which are generally recognized. Thus it is common practice to 
allow free delivery anywhere within the city or metropolitan area in 
which the apparel is manufactured. Since the cost of such delivery 
is unlikely to be great, this is a minor concession. 

In the case of a number of products. New York City retailers are 
apparently granted a favored position and allowed free delivery by 
manufacturers located anywhere in the United States. This is often 
true, for example, of women's dresses and men's suits and shirts. 
The practice probably reflects the historical development of the in- 
dustries. It is only recently that wornen's dresses and men's siijts 

" The same practice was at one time followed in connection with the sale of shiitings to New York maba- 
facfurers, but it has since been abandoned. 



302 CONCENTRATION OF ECONOMIC POWER 

have come to be produced in any quantity outside of New York ; the 
production of men's shirts was for a long time concentrated exclusively 
in the Troy, N. Y., and New York City areas. As a result, metro- 
politan retailers undoubtedly became accustomed to free delivery. 
As mills were established in other areas, it may have been natural for 
these retailers to insist upon their customary prerogatives as a con- 
dition of purchase. Even at the present time the bulk of men's 
suits and women's dresses (except wash frocks) is produced in New 
York City. At the same time the great importance of this market 
and the bargaining power of the large department stores in the area " 
are probably factors in maintaining the custom. 

Companies which have showrooms in more than one city may allow 
free delivery in any of these cities and base freight charges to other 
points on the rates from the nearest such free dehvery point. 

In addition to these generally observed practices, a few companies 
absorb freight more or less regularly. For example, a few wash frock 
manufacturers in California pay one-half of the freight charges on 
shipments to the East in order to compete with eastern houses, but 
this seems to be an exception rather than the rule. One manufacturer 
of flannelette garments in Michigan equalizes his freight on a New York 
basis. A large work clothing manufacturer allows freight on ship- 
ments exceeding a specified number of garments. An important 
knit goods producer, who advertises on a national scale, sells on a 
delivered basis. 

In addition to practices of this kind, which form a part of the estab- 
lished policy of most members of an industry or of individual firms, 
a very limited amount of freight absorption may be encountered on 
specific transactions when the producer feels it necessary to make a 
minor concession in order to consummate a sale. In general, however, 
concessions of this kind are made in the form of an outright reduction 
in the price quotation. 

It should be emphasized that these deviations from simple f. o. b. 
pricing which have been described are all exceptions from a widely 
observed general rule. 

Binder twine. — The geographic price structure for hard fibers and 
their products does not usually conform with the pattern for the textile 
products which have been described above. For example, binder 
twine is sold on the basis of a system of freight equalization. Three 
of the largest producers in this industry are definitely known to observe 
this practice and presumably smaller producers follow their lead in 
this respect. 

However, an appreciable proportion of binder twine is produced in 
prison shops and. it is doubtful that these observe the same selling 
practices. In the case of the Minnesota and Wisconsin State prisons, 
prices are apparently f. o. b. point of production. However, these 
exceptions may not conflict seriously with the general use of the freight 
equalization system in the industry because the sale of prison-made 
twine is confined largely to the States in which it is produced, partly 
on account of restrictions imposed by other States upon imports of 
prison-made goods. 

•' Many chain stores maintain central offices in New York at which they accept delivery for distribution 
to; their branches; this increases the pressure to favor the New York market. 



CONCENTRATION OF ECONOMIC POWER 303 

The freight equalization points in use at the present time, as reported 
by two of the largest manufacturers, represent, in part, important 
producing centers and, in part, ports of entry for foreign twine. These 
latter points are: Baltimore, Beaumont (Tex.), Boston, Buffalo, 
Chicago, Corpus Christi (Tex.), Galveston, Houston, Lake Charles 
(La.), Los Angeles, New Orleans, New York, Norfolk, Philadelphia, 
Portland (Oreg.), Seattle, and San Francisco. Until 1937 equalization 
was largely on the basis of domestic producing centers but the practice 
was then extended to include the ports mentioned. The significance 
of import competition is increased by the fact that there is no duty 
upon binder twine. 

The system of freight equalization which has been described is not 
always observed closely. There is evidence of considerable price 
variation on specific orders as, for example, on large-scale purchases 
made by groups of dealers who pool their orders. 

Manila Rope. — According to a recent study, manila rope is sold by 
at least one manufacturer with full freight allowed to distributors; 
a practice equivalent to uniform delivered prices. ^* 

LEATHER AND ITS MAJOR PRODUCTS 

Leather and leather footwear are usually sold f. o. b. tannery and 
factory respectively. There is apparently little tendency to deviate 
from uniform plant prices in either case. 

Leather. — The f . o. b. tannery method of selling is adhered to closely. 
Such departures as do occur are usually confined to periods of very 
slack business. Freight absorption or equalization to meet the compe- 
tition of more favorably located producers is uncommon. 

The minor importance of transportation charges in the cost of the 
finished product is presumably the principal reason for adherence to 
simple f. o. b. plant tannery pricing. Freight revenue on carload ship^ 
ments of leather represented only 1.3 percent of value of product at 
destination during 1936, according to the Interstate Commerce Com- 
mission.^^ In addition, there are apparently individual variations in 
the quality and grade of leather which lessen the importance of price 
comparisons and make it possible for differently located tanneries to 
compete in the same market despite minor variations in their shipping 
costs. 

Leather boots and shoes. — F. o. b. factory pricing is adhered to on 
sales of boots and shoes even more closely than in the case of leather. 
The considerations which make this possible are the same in principle 
but are even more pronounced than in the leather market. There are 
no data regarding the ratio of freight revenue to delivered value on 
raU shipments of boots and shoes, but it seems probable that this ratio 
is lower than for leather because of the higher unit value of the finished 
product. The extensive use of trucks for shipment probably reduces 
freight costs considerably. In addition, differences in grade and qual- 
ity of product are greater than for leather and consumer acceptance 
of rival lines is largely affected by the use of trade-marks and brands 
which lessen the importance of price considerations and make it 

« Mund, V. A., op. cit., p. 237. 

" Interstate Commerce Commission, op, cit. 



304 CONCENTRATION OF ECONOMIC POWER 

generally possible to ignore transportation costs as a competitive 
factor. Tie-ups of long standing between manufacturers and dis- 
tributors may be another factor making for simple f. o. b. plant pricing. 
Leather transmission belting. — Leather transmission belting, in lots 
of 100 pounds or more, is sold with full freight allowed to destination, 
at least by some manufacturers.^" 

TOBACCO PRODUCTS 

Cigarettes and tobacco. — Cigarettes, and smoking and chewing 
tobacco are sold at uniform delivered prices anywhere in the United 
States. This practice is presumably dictated by the desire to maintain 
a certain degree of uniformity of retail prices to consumers, although 
cigarette manufacturers do not as a rule resort to such steps as price 
maintenance. Since distributive margins for cigarettes are not very 
liberal it would be difficult for distributors to absorb freight differences. 

PrevaiUng practices are described in detail by the Federal Trade 
Commission in its Agricultural Income Inquiry: 

The prices and terms quoted on cigarettes, smoking and chewing tobacco 
include freight delivery to the customer's railroad destination. * * * In a 
few cities certain manufacturers make store-door deliveries to their customers, 
but such instances are rare. In cities where railroads have instituted store-door 
deliveries the customer receives the benefit of this arrangement. 

Manufacturers accept occasional collect telegraphic orders from their customers, 
make deliveries by express and bear the cost of the telegram and express charges. 
They endeavor to prevent an abuse of this method of ordering and try to hold 
their customers to the use of telegraph and express orders in cases actually amount- 
ing to emergencies. Some manufacturers' price lists set out in detail the arrange- 
ments or adjustments which will be made with a customer on express shipments. 

Tobacco products generally and cigarettes in particular have a very rapid 
turnover in retail establishments. Manufacturers consider it important to keep 
an adequate supply of their brands in the hands of jobbers and retailers and 
almost as important to avoid overstocking them and thus allowing stale mer- 
chandise to reach the consumer. It is said that the use of a recently developed 
moisture-proof wrapping has materially lengthened the period of freshness, but 
it is still necessary for tobacco products to move rapidly through the channels of 
distribution. 

These considerations, as well as delivery costs, make it important for manu- 
facturers, particularly those whose products are distributed nationally, to use 
service depots near their centers of distribution. The larger manufacturers 
utilize the services of public warehouses, consigning merchandise to such ware- 
houses from time to time to supply the needs of the trade in those areas. The 
goods are stored by the warehouse company and delivered by it on order of the 
manufacturer. Although more than one manufacturer may use the services of 
the same public warehouse, it does not appear that there are any joint arrange- 
ments among manufacturers concerning the use of such warehouses. Several 
manufacturers operate their own distributing warehouses on the Pacific coast, 
but this is a departure from the usual method. 

Deliveries of goods sold to chain-store companies are usually made directly 
fronfi the factory to the warehouse of the chain. Customers of this type usually 
receive the same terms as jobbers and they are expected to service their individual 
stores. In some instances manufacturers make drop shipments to individual 
stores of a chain. These have sometimes represented as much as 50 percent of 
the total sales of cigarettes to a particular chain but such instances are unusual. 

Nearly all manufacturers make drop shipments of certain minimum quantities 
or combinations of brands directly to retailers for the accounts of jobbers. Often 
such shipments include free goods or special allowances to retailers and in some 
instances jobbers are given additional allowances. Some manufacturers will 
make drop shipments of quantities as low as 1,000 cigarettes, or 5 cartons. In 
this way it is possible for consumers to order through customers of the manu- 

'« Mund, V. A., op. cit., p. 233. 



CONCENTRATION OF ECONOMIC POWER 305 

facturer in quantities small enough for their personal use or for division with 
others. Such shipments are made by the manufacturer on the order of his 
customer, and when they are in interstate commerce state stamp taxes are. avoided. 
This type of merchandising does not appear to be engaged in to any substantial 
extent at the present time.^' 

Cigars. — Cigars are also usually sold on a uniform delivered price 
basis. According to the Federal Trade Commission: 

Only one instance was found where a cigar manufacturer made sales f. o. b. 
factory and in this instance a trade discount of 12}'^ percent, plus the customary 
cash discount, was given. No additional discounts or allowances are given to 
direct customers of manufacturers on account of quantity purchased. Additional 
allowances are made to indirect cuctomers, including customers of branch houses, 
in drop-shipment deals, and occasionally an extra allowance is made to the 
distributor for securing drop-shipment orders.^^ 

Snuff. — In contrast to the other tobacco products described, snuff 
is sold on a zone basis. There are five recognized zones in the United 
States, two of which include the single States of Kentucky and 
Virginia. However, price variation between zones is not the same 
for all producers. In all cases reported by the Federal Trade Com- 
mission,^^ the price in the Northeast is between 4 and 6 percent lower 
than in the region west of the Mississippi and north of Oklahoma. 
Two of the three producers charge the same price in the South as in 
the East, while the other quotes the higher western price in the South. 
Further minor differences are introduced by variations in discounts 
and other terms of sale. 

STEEL AND STEEL PRODUCTS 

The geographic pricing practices used by the steel industry were 
described in detail at hearings recently held by the Temporary Na- 
tional Economic Committee.^* Consequently, only the salient fea- 
tures of the system will be recapitulated here. 

The steel industry represents probably the best known illustration 
of a multiple basing point system. For each major group of products, 
such as structural shapes, tank plates, bars, hot rolled sheets, cold 
rolled sheets, galvanized sheets, etc., "base prices" are quoted at a 
number of basing points. Basing points are not the same for all 
classes of product but vary, depending partly upon the actual loca- 
tion of producing mills. For a specialized product such as tin plate, 
the number of recognized basing points will be less than for those 
whose production is more widely distributed, such as structural shapes 
or hot rolled sheets. 

These "base prices" apply to orders of a specified character and 
quantity. The actual price "f. o. b. basing point" for any particular 
order can be computed from this base price by the application of a 
detailed schedule of extras and deductions. 

The delivered price on any order at any point will then be, at least 
nominally, the lowest sum of any basing point price, corrected by the 
application of the relevant extras or deductions, and of freight from 
that basing point to the point of delivery. Freight rates used are 

" Federal Trade Commission — Agricultural Income Inquiry, 1937, pt. I, pp. 519, 520. 

» Ibid., p. 522. 

" Ibid., pp. 478-479. 

" See Hearings, Part 27. January' 27-29, 1940 



306 CONCENTRATION OF ECONOMIC POWER 

compiled in a freight book which is pubUshed by the American Iron 
and Steel Institute and are usually based upon all-rail rate.^^ 

For most important products, there is a tendency for base prices at 
various basing points used to be uniform, but there is some variation. 
For soft steel bars, for example, prices as of February 8, 1940, were 
the same at Pittsburgh, Chicago and Gary, Cleveland, Buffalo, and 
Birmingham. The base price at Duluth was slightly higher, while 
prices were also quoted f. o. b. cars at Gulf ports and Pacific ports at 
levels above those for all basing points. Similarly, for cold rolled 
sheets, the base price at Granite City was higher than at Middletown, 
Cleveland, Buffalo, Chicago, Youngstown, and Pittsburgh, all of the 
latter being uniform.^^ In general, the price quoted f. o. b. Gulf 
ports or Pacific ports approximate the base price at the nearest eastern 
producing center plus combined rail-water freight. 

The Iron Age, which is the recognized source of price quotations for 
the industry, also quotes delivered prices for New York and Phila- 
delphia. It is understood, however, that these delivered prices are 
nothing more than base prices plus all-rail freight 

For a few items, such as soft steel bars and hot and cold rolled 
sheets, there is also a delivered price quotation at Detroit. This last 
quotation is usually "arbitrary" in the sense that it is below the figure 
which would be arrived at by adding freight to the price at the nearest 
basing point. 

Freight charges in almost all cases are based upon all-rail freight. 
It is, however, usually permissible for the buyer to accept delivery 
from the plant in trucks, but in such a case he must pay 35 percent of 
the published all-rail freight to destination in addition to the base 
price. According to testimony presented at the hearings before the 
Temporary National Economic Committee, this premium is added in 
order to discourage truck shipments because of the extra costs to 
producers said to be involved in making truck delivery .^^ In general 
there is no provision for making use of water shipments in order to 
reduce freight costs. According to representatives of the industry, 
the purpose of this practice is to avoid giving an advantage to cus- 

35 Thus, according to the testimony of Mr. Fairless, chairman of the board of the United States Steel Cor- 
portation, before the Temporary National Economic Committee: 

"Mr. Fairless. The American Iron and Steel Institute has a traCBc committpe composed of traflBc man- 
agers of 10 different steel companies. This committee supervises the institutes Freitrht Rate Book. There 
are four sections to the Institutes Rale Book, and the responsibility of keeping these sections up to date is 
assigned to different members of the committee. 

"When corrections are necessary— and by necessary I mean when rate changes take place— these com- 
mittee members have the changes made on supplementary sections or pages, sending these sections or pages 
to the institute for distribution to holders of the rate book. The rate book is availablo to anyone internstcd 
in the steel business, but peculiarly, it is not used by all the steel companies and is used by some manufac- 
turing concerns not classed as steel companies. There is a nominal charge made for this service and the 
individual holders of the book pay these charges to the institute." See Temporary National Economic 
Committee IJnarinss, Part 27, morning session, January 27, ]04(). 

3« Iron Age. February 8. 1940. 

3' On this point Mr. Adams, President of the United States Steel Corporation, testified to this effect 
before the Temporary National Economic Committee.- 

"Mr. Adams. On truck deliveries where we contract with a common carrier, the truck company, to 
deliver our products to destination, we charge the all-rail rato of freipht. We do that because in our analysis 
of rail rates versus truck rates we find that there is practically no difference. There may be a difference 
of a few cents here or there, but generally speaiing they are approximately the same. If we sell our material 
on a delivered-price basis, as we always do, and a buyer wants to send his truck to our mill to pick up that 
material, we quote the delivered price predicated upon a transportation cost which is equsl to the rail rate 
and we deduct from that 66 percent of that rate. Our object in doing that is something that we do not 
attempt to conceal. 

"We are attempting to discourage ine use of trucks in the transportation of our products for many reasons. 
In the first place, our production facilities are not laid out to haul all of our products by tryck, smaU truck 
loads. We couldn't possibly ship 12 to 15 millions of finished products throughout this country each year 
and use trucks; there is not enough space in our plants to handle trucks on that basis, so it is an attempt on 
our part to discourage the use of trucks in the handling of steel products. Also there is the question of the 
material being damaged in transit and other items of that character." (See Hearings, Part 27, after- 
noon session, January 26, 1940.) 



CONCENTRATION OF ECONOMIC POWER 3Q7 

tomers located on waterways as against those who could not con- 
veniently use water shipment. According to executives of the United 
States Steel Corporation only 1.6 percent of the total steel tonnage 
actually moves by water at the all-rail freight rate.^^ It is possible, 
however, that the volume of water shipment would be larger if cus- 
tomers were- permitted to take advantage of the resulting, economies. 

On shipments to customers located at a basing point, a switching 
charge is added which is uniform on all transfers within the basing 
point regardless of the actual location of the seller or the buyer. 

Although the tendency of this system, insofar as it is observed, is 
to equalize the quotations of all sellers m each market, there will be 
differences in certain cases because of the availability of fabrication- 
in-transit rates. Through the use of these rates there is a single 
freight charge covering shipment from the steel mill to the fabricator 
and from the fabricator to the destination, and this single rate is less 
than the smn of the two straight-haul rates involved. As a result, a 
fabricator may obtain an advantage by ordering his steel from a mill 
located at some distance from his plant, rather than from one nearby, 
because the low through rate permits him to save a substantial portion 
of the cost of shipping the fabricated product to the job. Some of 
the consequences of the availability of this privilege were suggested 
by Dr. De Chazeau, associate professor of economics at the University 
of Virginia, testifying before the Committee: 

Incoming waybills (i. e., waybills on the shipment from mill to fabricating 
plant) may be accumulated by the fabricating plant and used on outgoing ship- 
ments of equal tonnage which permit the greatest saving to the fabricator. So 
long as foreign mills arc willing to quote him, therefore, it is profitable for the 
fabricator to purchase his stec! from the foreign rather than from the home mill. 
For example, through the application of incoming way-bills on shipments to 
paiticular areas, the fatricator may save up to five or six dollars a ton. Obviously 
the saving depends entirely on the destination, on the freight rate structure, and 
on the source of supply; but the advantage (for purposes of f-i-t) in buying from 
a contieruous mill is very small. 

The price to the faliricator at his plant is the same from both mills. But if 
he is at Neville Inland, say (within the switching limits of Pittsburgh), and he 
buys from a Pittsburgh plant, thtTe is no advantage in f-i-t. The maximum 
difference lietween the through rate from the Pittsburgh mill to destination of 
the fabricated material and the sum of the two local rates is not more than a few 
cents. However, if he can get his steel from Chicago in shipments to certain 
destinations the difference will be substantial and effects a reduction in the cost 
of steel to him at ultimate destination. The saving varies up to about five or 
six dollars a ton. I don't assume that is the average; the average is likely to be 
considerably less. Thus, if the home mill is to retain its business, it must cut the 
price to compensate the fabricator for foregoing his f-i-t privilege.^" 

It was stressed at the hearings before the Temporary National Eco- 
nomic Committee that the price structure for steel is not always 
rigidly adhered to and that concessions are granted from time to time 
as market conditions warrant. During the summer of 1939, for ex- 
ample, according to this testimony, discounts amounted to from $6 to 
$8 per ton. The effect of these concessions as a factor modifying the 
normal geographic structure depends upon whether they are uniformly 
extended to all buyers, wherever located, or whether the actual cost 
of shipment is a factor in determining the willingness of the seller to 
reduce his prices on particular orders. 

"Ibid. 

'• See Hearine.s. Part 27, morning session, January 26, lfl40. 



308 CONCENTRATION OF ECONOMIC POWER 

Other iron and steel products. — Lake Superior iron ore is usually 
quoted "delivered lake ports." Imported ores are usually priced 
c. i. f. seaboard. 

Some light steel products, such as bolts, nuts, and rivets, are sold 
on a freight-equalized basis. The price is f . o. b. seller's works, freight 
equalized with Cleveland, Pittsburgh, Chicago, or Birmingham. This 
system differs from a true basing-point sj'^stem in that the price at 
the seller's works will never be higher than that at points remote from 
the seller's works. 

Ferro-alloys. — The practice with regard to ferro-alloys varies. Fer- 
romanganese is quoted f. o. b. Atlantic and Gulf ports (New York, 
Philadelphia, Baltimore, Mobile, and New Orleans). Bessemer ferro- 
silicon and silvery iron are sold on a basing-point system, f. o. b. 
Jackson (Ohio) or Buffalo (N. Y.). Electric ferrosilicon, ferrochrome, 
silico manganese, and many other alloys are priced on a uniform de- 
livered basis. 

Hardware, tools, and other light fabricated steel. — Such products as 
-cap and set screws, screw products, stove bolts, tire chains, machine 
knives, furniture tacks, and steel pulleys are generally sold f . o. b. 
plant with full freight allowed to destination. Usually some limita- 
tion regarding the size of shipment and sometimes the amount of the 
allowance is specified; for example, for cap and set screws and stove 
bolts the allowance is not to exceed 65 cents per 100 pounds on orders 
of 200 pounds or more. For some items, such as sash pulleys and 
saws, freight is allowed within given zones. For pliers, wrenches, 
screw drivers, and many other small tools, freight is allowed to dis- 
tributors or to distributing points.^'' 

LUMBER AND ITS PRODUCTS 

Although conventional forms of geographic pricing practices have 
been developed in the market for most lumber products, the verj^ 
large number of competing mills, the multiplicity of grades and sizes, 
and competition between different varieties precludes their rigid ob- 
servance. Consequently the types of geographic price structure de- 
scribed below should not be interpreted as constituting more than the 
usual or prevailing practice. 

Lumber — Douglas jir .—The general practice is to quote prices either 
f. o. b. mill or f. o. b. destination and to equalize delivered prices in 
an unsystematic manner in order to meet competition. However, 
individual mills may choose not to sell in territories in which exces- 
sive freight absorption is required. For example, one west-coast 
manufacturer does not compete within the territory between the Mis- 
sissippi River and the Rocky Mountains because of the existence of 
more favorably located mills on the eastern slope of the Rockies. He 
will, however, ship to the east coast by boat because of the low water 
freight rates prevailing. In general, mills located on the West Coast 
are more favorably situated with regard to the east-coast market than 
are mUls farther inland. 

Lumber — Ponderosa pine. — The geographic price structure for Pon- 
derosa pine is generally the same as that for Douglas fir except that 

*'> These statements are based partly upon information, contained in the Iron Age, and partly upon data 
compiled by Mund (op. cit. pp 233-237). While these practices are reported by some manufacturers, 
there is no evidence to indicate whether their observance is universal. 



CONCENTRATION OF ECONOMIC POWER 3Q9 

the source of this lumber extends farther east and south than does 
that for Douglas fir. 

Lumber — Southern pine. — Southern pine is quoted on what approxi- 
mates a multiple basing-point system, with bases at Norfolk (Va.), 
Hattiesburg (Miss.), and the Raleigh mountain district of North Caro- 
lina. This system is observed more commonly by large mills than by 
small; the latter adjust their prices in most markets to meet competi- 
tion. In areas adjacent to Atlantic ports, such as Baltimore, southern 
pine comes into direct competition with western softwood shipped by 
water. Prices will usually be modified accordingly to meet this com- 
petition. 

Maple flooring. — Maple flooring is sold on a single basing-point 
system. Prices are quoted f. o. b. Cadillac, Mich. 

Oak flooring. — Oak flooring is sold on a multiple basing point system, 
with bases at Johnson City and Memphis (Tenn.) and Alexandria 
(La.). Prices are quoted f. o. b. destination and include full freight 
from the basing point most favorably situated. The computed freight 
is rounded at 50-cent intervals; thus a mill quotation of $65 per thou- 
sand board feet in carlots plus a freight charge of $7.80 would be 
quoted f. o. b. destination at $73 per thousand board feet. 

Philippine mahogany. — Although Philippine mahogany is not a true 
mahogany, it is directly competitive with Honduran, African, and 
Cuban mahogany for most purposes. It is sold on a smgle basing- 
point system, f. o. b. San Francisco, Calif. 

Mahogany — Honduran, African, and Cuban. — These varieties of true 
mahogany are sold at delivered prices which are, at least nominally, 
uniform throughout the United States. However, it is understood 
that prices may be varied to meet the competition of other hardwoods 
and particularly of Philippine mahogany. 

Doors — Douglas fir and Ponderosa pine. — A zone-price structure is 
observed in the sale of doors and prices are quoted f. o. b. destination. 
One manufacturer lists 21 zones in which he competes, but the prices 
in 2 or more zones may be the same. The method of price quotation 
for this product is a varying discount off a nominal fixed list price. 

Windows and vdndow frames. — Windows and window frames are 
also quoted by varying discounts from a nominal list price. Plants 
are small and more widely distributed than for doors. The sales 
territory of individual plants is usually circumscribed and sales are 
made at uniform delivered prices anywhere in this territory. 

Wooden boxes. — Wooden boxes are usually quoted either delivered 
to destination or f. o. b. plant with a maximum freight allowance. 
Of three quotations reported to the Bureau of Labor Statistics, two 
are on tiie former basis and one on the latter. 

Wooden caskets and coflins. — Wooden caskets are also usually quoted 
either delivered to destination or f . o. b. plant with a maximum freight 
allowance. 

Axe handles. — Axe handles are quoted on a delivered basis east of 
the Rocky Mountains and on a basis o a maximum freight allowance 
west of the Rocky Mountains. 

Ladders. — Quotations are usually f. o. b. factory with freight allow- 
ances limited either as to territory or amount. In some cases freight 
will be allowed only on shipments exceeding a specified weight, such as 
100 pounds or 200 pounds. Several manufacturers allow only the 
carload rates on 1. c. 1. shipments. 



310 CONCENTRATION OF ECONOMIC POWER 

Plywood. — Quotations for plywood in the Engineering News Record 
indicate the existence of a single basing point at Seattle, Wash. A 
series of rail-freight increments for various points in the country is 
published together with this base quotation. However, the buyer 
may take advantage of water shipment to reduce the delivered price 
in case he is located at or near a seaboard. 

Summary. — The prevailing geographic price structures for these 
products are summarized below. 

Lumber— Douglas fir: Unsystematic freight equalization. 

Lumber — Ponderosa pine: Unsystematic freight equalization. 

Lumber — southern pine: Multiple basing point, subject to equalization for 
competing varieties. 

Maple flooring: Single basing point. 

Oak flooring: Multiple basing point. 

Philippine mahogany: Single basing point. 

Mahogany-Honduran, African, Cuban: Uniform delivered prices. 

Doors — Douglas fir and Ponderosa pine: Zone delivered prices. 

Windows and window frames: Uniform delivered prices, area of shipment 
limited. 

Wooden boxes: Uniform delivered prices or limited freight allowance. 

Wooden caskets and coffins: Uniform delivered prices or limited freight allow- 
ance. 

Axe handles: Uniform delivered prices or limited freight allowance. 

Ladders: Limited freight allowance. 

Plywood: Single basing point. 

TURPENTINE 

Turpentine is usually sold on a delivered basis but the price is said 
to include full freight from plant in each instance. Sellers will quote 
f. o. b. plant prices but this will involve no difference in the net price 
dehvered. 

The ability of turpentine producers to maintain uniform plant 
realizations for a standard product of this character may be explained 
by the high concentration of the producing area. Of a total value of 
product for 1935 of $19,000,000, $10,000,000 was produced in Georgia 
and $18,000,000 in the 3 States, Georgia, Florida, and Alabama. 
Consequently, freight differentials between rival producers are unlikely 
to bo important. 

BUILDING MATERIALS OTHER THAN STEEL AND LUMBER PRODUCTS 

Although building materials cover a very wide range of commodities, 
they have many market characteristics in common. The most im- 
portant of these, from the point of view of geographic price structures, 
is their relatively low price per unit of weight, with the result that 
transportation charges in most cases form a very appreciable part of 
their delivered price. For some items in this group, in fact, trans- 
portation costs are so great that they cannot be shipped over long 
distances; brick, sand, and gravel, for example, have distinctly local 
markets. Moreover, since they are usually sold not to the ultimate 
consumer but to building contractors, the significance of brand names 
as a factor directing competition into nonprice channels is usually 
limited. In addition, there is possible a substantial degree of substi- 
tution of one material for another; thus lumber, steel, and reinforced 
concrete ma}^ all be used for similar purposes. Consequently com- 
parisons of delivered prices play an important role in competition. 



CONCENTRATION OF ECONOMIC POWER 



311 



This has been reflected in the case of most building materials in the 
development of more or less elaborate systems for equalizing freight. 

The following discussion is concerned with building materials other 
than steel and lumber which, because of their major economic im- 
portance, have been accorded separate treatment. 

Lime. — Lime is sold at delivered prices which are determined on 
the basis of a system of freight equalization. The price at any locality 
is the lowest sum of any applicable plant price plus freight from that 
plant. Plant prices and freight rate schedules are both published, 
so that it is possible for each seller to quote the same delivered price 
in any market in which he chooses to compete. In general, sales Will 
not be rftade when the amount of freight absorption required is con- 
sidered excessive. According to members of the industry, price cut- 
ting below the accepted level is approved only in "cases of emergency." 
Such an "emergency" is described, for example, as a situation in which 
a carload of lime is misdirected through an error in the traffic depart- 
ment, with the result that a lower price must be accepted in order to 
avoid the necessity of paying freight or storage. 

The following table indicates the extent of variation of the delivered 
prices of hydrated lime in the major geographic regions of the United 
States, as reported to the Bureai. of Labor Statistics. For each region 
the highest and lowest prices recorded are sho^\Ti. 

Lime {hydrated, Mason's) — Variations in delivered prices for selected destinations 
within major geographic regions 



Region 


Price per ton 


1 

Region 


Price per ton 


High 


Low 


High 


Low 


New England.. 


$11. 69 
9.70 
10.50 
13.30 


$10. 81 
9.55 
9.60 
11.30 


South / tlantic 


$14. 89 
13.40 
13.80 
19.70 


$8.00 


Middle Atlantic 


East Soi th Central- . 


10.35 


East North Central 


West So ath Central.. 


11.80 


West North Central. 


Mountain and Pacific 


15.50 











Cement. — Cement is sold in accordance with a multiple basing point 
system. The delivered price is determined in each instance by the 
usual method of taking the lowest sum of any applicable base price 
plus freight. 

The system as it now exists represents a gradual evolution from a 
single basing point in the Lehigh Valley, which was once thought to 
constitute the only acceptable source of raw material. As new plants 
were established in other areas, there was a tendency for additional 
basing points to be added, though the process of readjustment often 
involved severe price wars. At the present time a fairly large number 
of territories has become recognized, each of which is permitted to 
determine its own basing point structure; mills from outside of this 
area do not usually cut under this price structure when they ship 
into it. 

The basing point structure is modified by the existence of a few 
arbitrary points, such as New York City, in which the delivered price 
is adjusted to meet the competition of imports and is not directly 
related to the price prevailing at the nearest basing point. 

Variations in delivered prices are shown below. 



-4711!!— 41 — No. 1- 



-22 



312 



CONCENTRATION OF ECONOMIC POWER 



Cement (portland)- 



-Variation in delivered prices for selected destinations within 
major geographic regions 



Ecglon 


Price per barrel 
(in cloth) 


Region 


Price per barrel 
(in cloth) 




High 


Low 


High 


Low 


New England and Middle At- 


$2.25 
1.94 
2.16 


$1.72 
1.55 
1.81 


South Atlantic. --. 


$2.36 
2 35 
2.93 
2.40 


$1.81 


lantic 


South Central- 


1.76 


East North Central 


Mountain . .. 


1 40 


West North Central -. 


Pacific 


1.40 









Brick. — Brick manufacture and distribution is purely local, except 
for certain very high grade face brick, because the high cost of trans- 
portation precludes shipping the product over any considerable dis- 
tance. It is usually sold on the basis of delivery to the job, with 
prices uniform within any locality. 

Sand and gravel. — Geographic pricing practice is the same as for 
brick. 

Building tile. — Building tile is also largely a local item, though the 
radius of its distribution is somewhat greater than for brick. It, 
too, is usually sold delivered to the job, with prices uniform within 
each local it3^ 

Floor tile. — Floor tile is sold on a freight-equalized basis with each 
seller equalizing freight with his most advantageously located com- 
petitor. However, full freight equalization is applied only to certain 
products such as the standard T inch wide hexagon tile; for other 
items the amount of freight which a manufacturer will absorb is 
limited. 

Sewer pipe. — Sewer pipe is also sold on a freight equalization basis. 
The method of quotation is f. o. b. destination in carlots and the ele- 
ment of equalization is introduced in calculating this destination price. 

Gypsum plaster. — The geographic price structure for gypsum 
plaster is very similar to that for lime. F. o. b. prices vary from 
plant to plant, even for the same company, and the delivered price 
at any point is the lowest sum of plant price plus freight. In some 
large metropolitan markets, such as New York City, prices are 
quoted "flat"; that is, on a delivered basis. Control in this industry 
is highly concentrated and the leading producer is in a position to 
determine and police the price structure very effectively. The extent 
of variation in delivered prices in important cities in each major 
geographic region is shown below. 



Gypsum^ plaster (Neat)- 



-Variation in delivered prices for selected destinations within 
major geographic regions 



Region 


Price per ton 


Region 


Price per ton 


High 


Low 


High 


Low 


New England 


$12. 20 
9.50 
13.80 
17.00 
15.00 


$9.50 
8.50 
11.50 
13.00 
9.75 


East South Central 


$16. 80 
17.40 
17.40 
17.00 


$14.20 


Middle Atlantic 


West South Central 


14.40 


East North Central.... 




12.50 


West North Central 


Pacific 


13.40 


South Atlantic 











CONCENTRATION OF ECONOMIC POWER 



313 



Insulation board. — Insulation board is sold on a zone-price system, 
with most of the large companies delivering in three or four zones. 
Prices are quoted f. o. b. shipping point with full freight allowed to 
destination. On straight carlot and half carlot shipments, delivery 
is made to customers on private rail siding or to the freight station 
or public team track nearest destination or, in the case of water trans- 
portation, to the steamship dock nearest destination. No allowance 
is made for trucking from these points to the buyer's warehouse. 
On 1. c. 1. shipments, if delivery is made by truck to the customer's 
regularly estabUshed warehouse, trucking charges are allowed to 
point of delivery; on rail shipments the allowance is to the nearest 
rail destination. In no instance is delivery made to a specific job 
site. Although the customer can apparently select his own method 
of delivery, he cannot profit by using cheaper methods of transpor- 
tation such as water carrier, because the freight allowance wiU be 
reduced correspondingly and the delivered price remains the same. 

Prepared roofing. — The geographic price structure for prepared 
roofing is quite complex. Most companies publish detailed price 
lists for the various products and include a detailed description of 
their terms of delivery. 

Prices are quoted on an f. o. b. shipping point basis. For certain 
defined areas surrounding a manufacturer's factories and warehouses, 
full freight is allowed. Beyond these "factory point" zones, freight 
will be equalized to the nearest published competitive shipping point. 
Freight in each instance is paid by the buyer who deducts the amount 
of the applicable freight allowance in paying the seller Quotations 
include provision for adjusting prices in case a price decline is an- 
nounced during transit. 

Not all companies equalize fully, nor on all products. For example, 
several manufacturers limit their freight absorption to not more than 
30 cents per hundred pounds. East of the Rocky Mountains the 
dealer plant price is usually the same for each plant operated by a 
company. In the West, however, prices are higher and vary be- 
tween plants. 

The extent of price variation for certain roofing products for the 
major geographic zones in the United States is shown below. 

Prepared roofing (asphalt strip shingles, 12 inches, 210 pounds per .square) — 
variation in delivered prices for selected destinations within major geographic 
regions 



Region 


Price per square 


Region 


Price per square 


High 


Low 


mgh 


Low 


New England 


$4.56 
4.29 
4.39 
4.71 
5.03 


$4.25 
4.25 
4.25 
4.25 
4.25 


East South Central 


$4.76 
6.05 
5.93 
4.66 


$4.24 


Middle Atlantic 


West South Central 


4.53 


East North Central 


Mountain 


5.03 


West North Central 


Pacific . 


4.14 


South Atlantic. 











Heating boilers and radiation. — rOeographic pricing structure for 
these products varies for different States. Throughout most of the 
Northeast a uniform delivered price prevails; quotations are f. o. b. 
manufacturing or assembling plants, with full freight allowed to rail- 
road points at destination. 



314 CONCENTRATION OF ECONOMIC POWER 

Throughout most of the rest of the United States prices will be 
equalized with competitive points of manufacture or distribution. 
Where competing plants are not a factor freight not to exceed 30 
cents per hundred pounds is in any event allowed on shipments 
f. o. b. manufacturing pomts, but no freight allowance is granted under 
such circumstances from assembling points. 

No freight allowance is made on shipments of less than 100 pounds. 

Plumbing fixtures, closets, lavatories, sinks, and bathtubs. — Three 
leading manufacturers in this industry sell in carlots at uniform 
prices throughout the United States; that is, full freight is allowed to 
every wholesaler. However a plumbing contractor who is located 
outside a recognized "jobbing center" must pay freight on shipments 
from*the wholesaler. 

Paint materials — linseed oil. — Linseed oil is marketed on a zone 
price system with each seller maintaining uniform delivered prices 
within each zone. Zone 1, comprising the North Central States 
including Minnesota, is generally the base zone from which differentials 
to other zones are calculated. The position of this zone may be 
explained by the fact that Minnesota is the largest linseed oil producing 
State. Delivered prices in other zones rise progressively with the 
smallest advances in the East and Northeastern States, and the largest 
advance in the Pacific and Mountain States. Neither base prices nor 
zone differentials are the same for all sellers. The maximum difter- 
ential between the base zone and zone 8 (the area last described) is 
0.6 cents per pound. 

Paint materials — white lead. — The largest companies sell through 
retail dealers on a consignment basis, thus exercising direct control 
over retail prices. Prices vary on a zone basis. Areas nearest ware- 
house or manufacturing points are "freight free" and this is called the 
"par zone." Beyond this area, freight charges are added in small 
increments; thus there is a one-fourth-cent zone, a one-half-cent zone, 
etc. It is understood that much of the white lead sold is marketed in 
the "par zone." 

Prepared paints. — There is no uniformity of geographic pricing 
practice in the sale of prepared paints. This may be partly due to the 
fact that there are material quality differences between the product of 
rival producers with resultant emphasis upon nonprice competition. 

Several of the larger paint manufacturers who distribute on a 
national basis use a 4-zone system. Zone 1, comprising most of the 
Northeast, is the base zone; prices in zone 2 range from 4 cents to 6 
cents higher, in zone 3 from 8 cents to 12 cents higher, and in zone 4 
from 13 cents to 18 cents higher. In each zone full freight is allowed 
to every jobbing center, and transportation costs from these jobbing 
centers must be paid by the purchaser. 

The usual practice of medium-sized producers, operating on a 
regional basis, is to quote f. o. b. destination prices or f. o. b. plant 
prices with full freight allowed or prepaid. In some cases, however, 
freight will not be allowed on shipments of less than a hundred pounds. 

Some small plants with limited sales areas quote a straight f. o. b. 
plant price and make no attempt to equalize delivered costs. 

Of 29 companies from which data were obtained, 7 operate on the 
multiple-zone basis with freight allowed to job or warehouse points 



CONCENTRATION OF ECONOMIC POWER 315 

in each zone; 17 quote an f. o. b. price with full freight allowed to every 
jobbing destination, and 5 quote straight f. o. b. plant. 

Wiridow glass. — Window glass is sold on a full freight equahzation 
basis. The basis of quotation is a discount from a published list price. 
The latter is purely nominal and changes rarely, modifications in 
price being made by altering discounts. Thus the nominal list price 
was unchanged from 1913 to 1938. There are two list prices in effect 
in the United States, one applying to the territory east of the Rockies 
and the other to the west coast. It is said that the west .coast differ- 
ential reflects the pressure of foreign competition in that area. 

Summary. — The prevailing geographic price structure for the build- 
ing materials which have been described are summarized below: 

Lime. — Full freight equalization. 

Cement. — Multiple basing points. 

Brick. — Purely local, with uniform prices, delivered to job. 

Sand and gravel. — Local, with uniform prices, delivered to job. 

Building tile. — Local, with uniform prices, delivered to job, but 
shghtly greater radius than brick. 

Floor tile. — Limited freight equalization. 

Sewer pipe. — Limited freight equalization. 

Gypsum plaster. — Full freight equalization. 
. Insulation board. — Uniform delivered price, nation-wide. 

Prepared roofing. — Limited freight equalization from pubUshed 
shipping points. 

Heating boilers and radiation. — F. o. b. plant, limited freight allow- 
ance. 

Plumbing fixtures. — Full freight allowance, uniform delivered prices, 
anywhere in the United States. 

Linseed oil. — Zone system, with uniform delivered prices in each 
zone. 

White lead. — Uniform delivered zone prices, on consignment. 

Prepared paints. — 1. Companies selling on national scale: Uniform 
delivered zone prices. 2. Companies operating in limited region: 
Full freight allowed. 3. Small plants: F. o. b. plant. 

Window glass. — Full freight equahzation. 

FURNITURE INDUSTRY 

There are two major divisions of the furniture industry — household 
furniture, and oflfice furniture and fixtures. In 1935, according to the 
Census of Manufactures, the total value of household furniture pro- 
duced was $336,000,000, of which $301,000,000 was made of wood, 
$32,000,000 of metal, and $3,000,000 of fiber, reed, etc. Office furni- 
ture and fixtures were considerably less important; their total value 
was $72,000,000, of which $45,000,000 was wood and fiber, and 
$27,000,000 metal. ^"^ Household furniture is usually sold on a straight 
f. o. b. factor}^ basis, while business furniture is quoted on a zone 
basis. 

Household furniture. — Household furniture is sold on an f. o. b. 
factory basis with virtually no freight allowance or equalization. 
The principal exceptions follow: 

(1) Prices for furniture are usually "crated" prices. Sometimes, 
however, furniture is shipped by private or contract carrier "un- 

•' Bureau of Census, Biennial Census of Manufactures, 1935, p. 456. 



316 CONCENTRATION OF ECONOMIC POWER 

crated." In the latter case, the manufacturer frequently assumes 
the cost of shipping up to 50 or 100 miles "in lieu of crating." 

(2) In some cases the buyer may not wish to assume title until 
furniture is set up. In such cases sales may be on a contract basis and 
the price quoted will be a delivered and set-up price. 

This difference applies only to the forna of quotation, however, 
and the delivered price is arrived at by adding shipping and handling 
costs to the plant price. 

(3) Certain minor geographic and product subdivisions of the indus- 
try apparently sell their products on the basis of systematic delivered 
pricing practices, involving freight absorption. Some of the largest 
furniture producers on the west coast quote uniform delivered prices 
to all retailers throughout their trading area. Cedar chests, a special- 
ized item, the bulk of which is produced by four large mills located 
in different sections of the East, are sold freight equalized. 

(4) There is occasional sporadic unsystematic freight absorption 
to meet special competitive conditions or in order to make a desired 
sale. 

The general observance of uniform plant p^rices occurs despite the 
fact that freight is by no means a negligible element. According to 
Interstate Commerce Commission figures,*^ the ratio of freight 
revenue to value at destination on carload shipments of furniture, other 
than metal, during 1936 was 10.6 percent. For metal furniture this 
ratio was 6.8 percent. Presumably the ability to maintain uniform 
plant prices reflects the fact that the product is highly differentiated 
so that competition. is largely on a nonprice basis. 

Business furniture. — Business furniture is generally sold on a basis 
of three uniform delivered price zones; the East, the Midwest, and the 
far West. In general, prices in the far western and middle western 
zones are about 20 percent and 10 percent, respectively, higher than 
in the eastern zone. 

These relationships may be partly explained by the fact that all 
manufacturers doing business on a national scale are located in the 
eastern zone which, moreover, accounts for about 70 percent of total 
consumption. Presumably, smaller manufacturers located in the 
Midwest and West and doing business on a regional or local basis 
find it expedient to conform generally with the prices set by their 
larger rivals. The difference in structure between office and house- 
hold furniture may reflect to some extent the fact that the former is a 
more standardized product, in the sale of which, therefore, price is a 
major market factor. 

CHEMICALS 

The chemical industry includes an extremely wide variety of 
products sold under many conditions and to many dift'erent kinds of 
buyers. Competition differs widely in form and in intensity for differ- 
ent products and in different markets. Thus the price structures of 
some chemicals must be adjusted to meet the competition of imports; 
in the case of others, substitute products offer a serious problem. For 
many iterns production is concentrated in a narrow geographic area, 
for others it is widely scattered. 

"Op. cit.. p. 11. 



CONCENTRATION OP ECONOMIC POWER 317 

Under such circumstances, it is only natural that the geographic 
price structures encountered should show a similar diversity. Differ- 
ences in practice appear not only between products but extend also 
to the sales of the same products under different forms or different 
conditions. One practice may be followed in one section of the coun- 
try and a totally dift'erent one in another. The size of the shipment 
is important; thus there are variations as between carload and 1. c. 1. 
lots. Differences may be introduced by the method of packaging, as 
between products sold in bulk, tank cars, drums, cylinders, and other 
kinds of containers. For example, the distribution of a product in 
cylinders involves problems distinct from those encountered in its 
shipment in drums or carboys, since transportation costs are much 
higher and the problem of returning the cylinder and often of servicing 
is added. 

There is, moreover, a major distinction between spot and contract 
markets. The bulk of heavy chemicals, such as sulfuric acid and soda 
ash — 90 percent or more in the case of many important products — 
moves on the basis of contract agreements. According to some mem- 
bers of the industry, however, both price and geographic structure is 
the same for many products for contract and for spot sales, the only 
important Hifferonce being that contracts guarantee the purchaser 
against pr'^e increases for the period specified. However contract 
prices are g merally materially under the spot market for most chem- 
icals. 

Before describing the extent to which particular types of geograph- 
ical price practice are observed, it is useful to consider briefly the 
pattern of variation for a few important products, in order to indicate 
some of the considerations which influence the choice of practice. 

One product whose price structure is quite complex is carbon black, 
production of which is concentrated in Texas. About 95 percent of 
carbon black is sold in carload lots. The buyer may purchase either 
on a delivered basis, for which purpose the country is divided into 
five zones, or else he may buy f. o. b. Gulf ports. On November 13, 
1939, for example, the price f. o. b. Gulf ports for delivery in North 
America was $0.0275 per pound for the standard grade, packed in 
bags. Zone delivered prices varied from $0,031 per pound in Texas 
and adjoining States (Arkansas, Colorado, Kansas, part of Missouri, 
and New Mexico) to $0.0375 in the most distant zone, which includes 
New England, the Middle Atlantic States, Virginia, and the Carolinas. 
The high concentration of production in Texas apparently makes it 
possible to maintain this zone sj^stem with delivered prices increasing 
in rough approximation to the distance from the Texas area. 

A totally different structure is observed in the case of 1. c. I. lots. 
Here again the buyer has the option of purchasing on a delivered or 
f. o. b. basis. The f. o. b. price was $0.0575 per pound on November 
13, 1939, or substantially above the carload price. On f. o. b. sales, 
freight is equalized to the nearest competing plant. However, for a 
premium of $0,005 per pound, that is, for a total price of $0.0625 per 
pound, the product is delivered anywhere in the United States. This 
is equivalent to a freight equalization system for the areas immediately 
surrounding producing centers, and a postage-stamp system through 
the balance of the country. 



318 CONCENTRATION OF ECONOMIC POWER 

In the case of industrial benzol, which is a basic coal tar product, 
the structure varies both with the quantity shipped and the type of 
packaging. The great bulk (probably 99 percent) of industrial benzol 
is shipped in tank cars. Tank car shipments east of Omaha ar^sold 
on an f. o. b. basis with full freight allowed; that is, the delivered 
price is uniform throughout the entire eastern part of the United States 
where the bulk of the product is manufactured. When the destination 
is Omaha or West, a basing point system is used, with prices quoted 
f. o. b. Minnequa, Colo., at which point an important plant is located. 
On November 13, 1939, the f. o. b. Minnequa price was quoted at the 
same level as the freight-allowed price east of Omaha. 

Some industrial benzol is sold in drums, obviously a more expensive 
method of packaging and shipping. Under such circumstances freight 
is not allowed. On carload lots, however, freight is equalized to the 
nearest competing plant, while on 1. c. 1. lots there is no equalization. 

In the case of these two products alone, therefore, almost every 
common variety of geographic structure is encountered. A simple 
f . o. b. system is used for 1, c. 1. shipments of benzol ; prices are quoted 
f. o. b. with freight equalized for carload shipments of benzol in drums 
and for 1. c. 1. shipments of carbon black. Carload lots of carbon 
black are sold on a zone basis and the eastern part of the country 
constitutes a single zone for tank cars of benzol. A postage-stamp 
system applies to carbon black in 1. c. 1. lots except for areas adjacent 
to producing centers; tank cars of benzol are sold in the West on a 
basing-point system, while Gulf ports constitute optional basing points 
for carload lots of carbon blaclc. 

Because of the vast number of products involved and the complexity 
and diversity of practices encountered, it would be impractical to 
attempt to present a comprehensive analysis of price structures in the 
chemical industry as a whole. Instead, a limited number of important 
and representative products have been selected as illustrative. Infor- 
mation regarding the practices for these products was derived in part 
directly from the members of the industry and in part from the form 
of price quotation in the Oil, Paint and Drug Reporter. 

Practically all of these products are standard in character so that 
it is almost imperative for each producer to meet the quotation of 
more advantageously located rivals in every market in which he 
wishes to sell. Consequently it is not surprising that for virtually 
every product regarding which information was obtained, some scheme 
for equalizing freight or otherwise meeting competitive delivered 
prices within each market was encountered. 

Simple f. 0. b. plant systems. — Simple f . o. b. plant systems with no 
form of freight allowance are uncommon in the chemical industry. 
They are encountered primarily in the case of small lots where the 
amount involved in the transaction is not large enough to offer the 
seller any incentive to absorb freight in order to dispose of his product. 
L. c. I. lots of benzol have been mentioned as an example. Another 
is cellulose acetate in quantities of less than 100 pounds, at least in 
the case of some producers. 

This system may also be used when there are substantial quality 
differences between products produced in different areas, as in the 
case of phosphate rock, an item which will be considered under the 
heading of fertilizer materials. 

Freight equalization systems. — The practice most commonly en- 
countered in the limited group of products covered is simple freight 



CONCENTRATION OF ECONOMIC POWER 319 

equalization to the nearest competing plajit. Usually f. 0. b. prices 
at each mill are identical or nearly so. This is the system used, for 
example, in the case of sulfuric acid which is sold f. o. b. works, 
freight equalized. Manufacturers report that the same practice is 
followed in the case of sodium bichromate, tribasic calcium phosphate, 
and aluminum sulfate. Of course, the manufacturer may simply 
decline to sell "in territory so remote that excessive freight absorption 
is required. 

Frequently this form of freight equalization is restricted to certain 
kinds of sales, usually to carload lots. This is true, for example, of 
soda ash, sodium hydroxide, sodium silicate, and benzol shipped in 
drums. 

F. o. b. pricing with freight equalization to the nearest plant is also 
used for hydrochloric acid, anh3^drous ammonia in tank cars only, 
sodium bicarbonate, calcium carbide, tribasic sodium phosphate and 
nitrocellulose. In the case of acetic acid, commercial grade, the same 
system is used except in States on the eastern seaboard and the 
Pacific coast. 

Postage stamp and zone pricing. — Although freight equalization to 
the nearest competitive plant seems to be the practice most commonly 
encountered in chemical markets, many chemicals are sold on some 
basis which achieves uniformity of delivered prices within specified 
zones or, more rarely, throughout the United States. In some cases 
a delivered price is quoted directly, in others the quotation is f. o. b. 
plant but freight is allowed or prepaid by the seller. 

Among products which are apparently sold on the basis of uniform 
delivered prices throughout the United States are cellulose acetate in 
quantities of 100 pounds or more, and butyl acetate in drums or tanks. 
For the first of these the delivered price is quoted directly, for the 
other two the price is f. o. b. plant with full freight allowed. Postage- 
stamp systems are also common in the case of coal-tar dyes, which are 
usually shipped in 1. c. 1. lots. 

A practice intermediate between freight equalization and delivered 
price uniformity has been already described in the case of carbon 
black, sold in 1. c. 1. lots.*^ 

For most chemicals sold on a delivered price or freight allowed basis, 
zone systems rather than postage-stamp systems are observed. This 
may be due to the fact that freight constitutes a relatively important 
element in the price of many of these products and the major centers 
of production and consumption are often concentrated so that it is 
not considered desirable to ship to minor remote markets at the same 
rate as to more fortunately located users. In some cases, moreover, 
the existence of foreign competition makes it necessary to treat sea- 
board areas on a special basis. 

For example, acetic acid is sold at a uniform delivered price in 
Atlantic Seaboard States (in contiast with the practice of freight 
equalization used elsewhere). Benzol in tank cars (by far the most 
important means of shipment) is sold freight allowed to points east of 
Omaha. Although for normal butyl acetate freight is allowed any- 
where in the United States, secondary butyl acetate ** is sold on this 
basis only east of the Mississippi River, possibly because its price per 
pound is lower so that freight becomes a relatively larger item. Carbon 
black in carload quantities is quoted on a delivered basis with prices 

" It is understood that less than 5 percent of carbon black is sold In 1. c. 1. lots. 

♦* Normal and secondary butyl acetate are different chemicals; not merely different grades of the same 
chemical. 



320 CONCENTRATION OF ECONOMIC POWER 

varying for five zones. There are four zones for synthetic methyl 
alcohol. In the case of carbon tetrachloride, four zones are observed' 
both for carload and 1. c. 1. quantities, but in zone 4 (Pacific and Moun- 
tain States) the price is f. o. b. cars at specified Pacific ports (Los 
Angeles, San Francisco, Portland, Seattle). Zone systems are also 
used for 1. c. 1. shipments only of caustic soda and soda ash. On June 
7, 1940, a leading producer of flake calcium chloride started quoting 
prices for that chemical on the basis of a zone sj^stem, involving 10 
zones and 3 subzonos. This superseded a postage stamp system which 
had been previously observed. 

The zone system for anhydrous ammonia in cylinders is in some 
aspects a special case. There are two sets of prices quoted for this 
product by a major producer. One of these is a series of State-wide 
delivered prices for practically every State in the Union for delivery 
from base points only, located in Philadelphia, St. Louis, New York, 
Newark, Niagara Falls, Detroit, Chicago, and Boston. In addition 
there are stock-point prices within various States or areas for deliveries 
from stock; these latter prices apply to particular cities only. There 
are also a number of zone systems for delivery from stock points in 
addition to the State-wide delivered price zones previously mentioned. 
The reason for this price structure is probably the fact that the use of 
cylinders in the distribution of the product entails very heavy trans- 
portation costs both in outgoing and incoming shipments of the cylin- 
ders. In addition a certain amount of servicing is necessary. As a 
result, zones for this product are smaller in size and much greater in 
number than for most of the other products described. 

Zone dijfe?mtials and changes in zone systems. — The uniformity 
with which zone boundaries and price differentials are maintained 
over a period of time is significant in interpreting the significance 
of zone systems. Consequently an analysis has been prepared of 
zone relationships since July 193G for four chemicals; caustic soda 
(1. c. 1.), soda ash (1. c 1.), synthetic methanol (1. c. 1.) and carbon 
black (standard, carloads). This is presented in table 2. 

It is evident that for some of these products zone relationships are 
more persistent than for others. Zone price differejitials have remained 
unchanged since July 1936 for 1. c. 1. shipments of caustic soda and soda 
ash. In the case of synthetic methanol, prices and price relationsliip 
between zones w^ere changed nationally between July 1936 and July 
1937 and then remained uniform till April 1940. Prices of carbon 
black were drastically revised between July 1937 and July 1938 and 
the revision involved some change in zone difi'erentials. In general 
there seems to have been no tendency to change zone boundaries as 
such during the period covered, but in several instances zones have 
been merged since 1936. Thus all Northeastern States were combined 
into a single zone for the caustic soda and soda ash markets between 
July 1936 and July 1937, while New Mexico, Texas, and Wyoming, 
which constituted a separate zone for methanol during 1936, were 
quoted on the same basis as other Mountain and Southern States by 
1937. If this small group is representative there seems to be a general 
tendency for zone relationships in chemical markets to persist over a 
period of time, but modifications to meet changing conditions do occur. 

Basing-poiiU systems. — Basing-point systems as such are apparently 
uncommon in chemical markets. Examples already referred to are 



CONCENTRATION OF ECONOMIC POWER 



321 



benzol in tank carlo ts which is quoted f. o. b. Minnequa, Colo., for 
delivery at Omaha and West; carbon black which can be purchased 
f. o. b. Gulf ports at the buyer's option, and carbon tetrachloride which 
is quoted f. o. b. Pacific ports for dehvery in Pacific and Mountain 
States, 

Summary. — It is clear that the geographic price structure of the 
chemical industry falls into no simple pattern and that practices often 
show wide variation for a single product sold under somewhat different 
terms. For convenience in reference the geographic structures prevail- 
ing for the products discussed are summarized in table 1. 

The reasons for the establishment of particular types of geographic 
price structure for individual products under specific conditions are 
difficult to trace. Undoubtedly many factors enter, including the 
historical development of the industry and its present competitive 
conditions, the relative importance of the cost of freight, etc. If any 
generalization is possible, it may be that simple freight equalization is 
most common in the case of heavy chemicals, for which transportation 
costs bulk importantly, while delivered or zone systems are more likely 
to occur where freight is a less important factor. Thus, such basic 
chemicals as sulfuric acid, soda ash, sodium bicarbonate, and hydro- 
chloric acid are all sold on a freight-equalized basis, while products 
which cost more per pound, such as cellidose, butyl acetate, and coal- 
tar dyes are sold on a delivered basis. On the other hand, this is far 
from an invariable rule and many of the more expensive products are 
also sold on an f. o. b. plant, freight-equalized basis. 

Table 1. — Geographic 'price structures for selected chemicals, summarized 



Product 


F. 0. b. 
plant— No 
equaliza- 
tion 


F. 0. b. 

plant- 
freight 
equalized 


Uniform 

delivered 

prices 


Zone system 


Basing-point 
system 






X 












X 








Soda ash 




Carloads 




L.c.l 

L.c.l 

L.c.l - 




Sodium hvdroxide 




Carloads 






Sodium silicate 




Carloads 










X . .. 










X 








Sodium bichromate 




X 








Calcium phosphate (tribasic) 




X 








Calcium carbide . . 




X 








Calcium chloride (flake)..- 




X . 








Aluminum sulfate 




X 








Anhydrous ammonia 




Tank cars 




Cylinders .. 
Seaboard 
States. 




Acetic acid 




Except sea- 
board 
States. 

Cans 






Butyl acetate (normal) 




Drums or 
tanks. 

East of the 
Missis- 
sippi. 

100 pounds 
or more. 




Butyl acetate (secondary) 








Cellulose acetate.. 


Loss than 
100 pounds. 








Synthetic methyl alcohol 




X 




Carbon tetrachloride 








Except I'a- 
cific and 
Mountain 
States. 

Carload lots. 


Pacific and 


Carbon black . 




L.c.l. (buy- 
er's op- 
tion). 

X 


L.c.l. (buy- 
er's op- 
tion). 


Mountain 
States. 

Carload lots 


Nitrocellulose ... 




(alterna- 
tive). 


Benzol 


Drums— 
l.c.l. 


Drums- 
carlots. 


Tank cars 
(east of 
Omaha). 

X 




Tank cars 


Coal-tar dyes. 




(Omaha 
and West). 








1 





322 



CONCENTRATION OF EKIONOMIC POWER 



Table 2. — Zone prices and zone differentidls — Selected chemicals 

CAUSTIC SODA, FLAKE, DJRUMS, L. C. L., PER 100 POUNDS 





Delivered prices 


Differentials from zone 1 


Zone 


July 27, 
1936 


July 26, 
1937 


July 25, 
1938 


Nov. 17, 
1939 


July 27, 
1936 


July 26, 
1937 


July 25, 
1938 


Nov. 13, 
1939 


1 


$4.00 
4.05 
4.15 
4.40 
4.80 
4.05 


$3.45 


3.55 


$3.55 










la 


$0.05 
.15 
.40 
.80 
.05 








2 

3 


3.60 
3.S5 
4.25 


3.70 
3.95 
4.35 


3.70 
3.95 
4.35 


$0.15 
.40 
.80 


$0.15 
.40 
.80 


.$0. 15 
.40 


4 


.80 


5 . -.•..- 



















SODA ASH, DENSE, 58 PERCENT, BARRELS. L. C. L., PER 100 POUNDS 



1 . 


$2.37 
2.42 
2.52 
2.77 
3.17 
2.47 


• $2.25 


$2.35 


. $2. 35 










la 


$0.05 
.15. 
.40 
.80 
.10 








2 


2.40 
2.65 
3.05 


2.50 
2.75 
3.15 


2.50 
2.75 
3.15 


$0.15 
.40 
.80 


..$0.15 
.40 
.80 


$0.15 


3 


.40 


4 ^.... 


.80 


5 



















ZONE LIMITS FOR CAUSTIC SODA AND SODA ASH 

Zone /.—East of Mississippi River, but including Davenport, Iowa, and St. Louis, Mo., to south bound- 
ary rtf Vircinia and Kentucky. 

Zone la.— New England (combined with zone 1 after 193R). 

Zone '.— Alabama, Florida, Georgia, Iowa (except Davenport), east Kansas (including Wichita), Minne- 
sota, Mississippi. Missouri (except St. Louis), North Carolina, Omaha, South Carrlina, and Tennessee. 

Zonf -S — .Arkansas, Kansas (west of Wichita), Louisiana, Nebraska (except Omaha), North Dakota, 
Oklahoma, South Dakota, Texas (exceprt EI Paso). 

Zonr 4-— Arizona, Colorado, El Paso, Idaho, Montana, Nevada, New Mexico, Spokane, Utah, Wyoming. 

Zone 6.— California, Oregon, Washington (except Spokane). 





METHANOL 


SYNTHETIC, DRUMS, L. 


C. L., PER GALLON 






^one 


Delivered prices 


Differentials from zone 1 


5 


July 27, 
1936 


July 26, 
1937 


July 25, 
1938 


Nov. 13, 
1939 


July 27, 
1936 


July 26, 
1937 


July 25, 
1938 


Nov. 13, 
1939 


1 


$0. 425 
.470 
.455 
.610 
.520 


$0. 405 
.470 
.445 
.600 


$0. 405 
.470 
.445 
.600 


$0. 405 
.470 
.445 
.600 










2 


$0,045 
.030 
.185. 
.095 


$0. 065 
.040 
.195 


$0. 065 
.040 
.195 


$0. 065 


3 


.040 


4 


.195 


5 





















ZONE UMITS FOR SYNTHETIC METHANOL 

Zone /.—Connecticut, Delaware, District of Columbia, Illinois, Indiana, Iowa, Kentucky, Maine, Mary- 
land, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, North 
Carolina, Ohio, Pennsylvania, Rhode Island, Tennessee. Vermont, Virginia, West Virginia, Wisconsin. 

Zone 2.— Alabama, Arkansas, Colorado, Florida, Georgia, Kansas, Louisiana, Mississippi, Nebraska, 
North Dakota, Oklahoma. South Carolina. South Dakota; after lvi36 Texas and Wyoming included. 

Zone S.— Los Ansreles and San Francisco, Calif.; Portland, Oreg.; Seattle, Wash. 

Zone 4 —Arizona. California (except Los Angeles and San Francisco), Montana, Nevada, Idaho, Oregon 
(except Portlan.I), Utah, Washington (except Seattlel: New Mexico, included after 1930. 

Zone 5. —New Mexico, Texas, Wyoming for 1936 only. 



CONCENTRATION OF ECONOMIC POWER 



323 



Table 2. — Zone prices and zone differentials — Selected chemicals — Continued 
CARBON BLACK, STANDARD. BAGS, PER- POUND, C. L. 





Delivered prices 


Difierentials from zone 


A 


Zone 


July 27, 
1936 


July 26, 
1937 


July 25, 
1938 


Nov. 13, 
1939 


July 27, 
1936 


July 26, 
1937 


July 25, 
1938 


Nov. 13, 
1939 


A .-- - - 


$0. 0445 
.0475 
.0605 
.0490 
.0505 
.0535 
.0530 

.0700 
.0750 

.0825 


$0. 0445 
. 0475 
.0505 
. 0490 
.0505 
. 05:'.5 
.0455 

.0700 
.0750 

. os:.o 


$0. 0275 
.0310 
.0335 
.0325 
.0341 
.0375 
.0300 

.0575 
.0625 

.0700 


$0. 0275 
.0310 
.0335 
.0325 
.0341 
.0375 
.0300 

.0575 
.0025 

.0700 










B -- 


$0. 0030 
. OORO 
.0045 
. 0060 
. 0090 
.0085 

. 0255 
.0305 

. 0380 


$0. 0030 
.0060 
.0045 
.0060 
. OO'JO 

.oo;o 

.0255 
.0305 

.0380 


$0. 0035 
.0060 
.0050 
. 0066 
.OiOO 
.0025 

.0300 
.0350 

0425 


$0. 0035 


c 


0060 


D 


.0050 


E - 


.0066 


F -- 


0100 


G ...- 

L. c 1. f. 0. b. whole- 
sale 


.0025 
.0300 


L. c. 1 delivered 

Gartens 1. r. 1. de- 
livered 


.0350 
. 042.") 



ZONE LIMITS FOB CARBON BLACK 

Zone /I.— Delivered rnil (Gulf ports) for delivery in North America (water freights extra) 

Zone B. — Arkansas. Colorado, Kansas, part of Missouri, New Mexico, Te.xas (except coastal ports). 

Zone C— P-iciflt Coa«t States. 

Zone /).— Illinois, Iowa, Wisconsin. 

Zone E. — Florida, Oeoreia, Indiana, Kentucky. Michigan, part of New York, Ohio, part of Pennsyl- 
vania. Tennessee, West Vrpini . 

Zone F.— Maine, Maryland. Massachusetts. New Hampshire, New Jersey, part of New York, North 
Carolina, part of Pennsylvania, Rhode Island, South Carolina, Vermont, Virrinia. 

Zone G.— Mexico (f. o. b. border 1938-30). 

Source: Oil, Paint and Drug ReP'-rter. 



DRUGS, COSMETICS, AND TOILETRIES 

Most cosmetics, toiletries, and proprietary drugs are sold at uniform 
delivered prices throug-hout the United States. In some cases the 
price is quoted directly on a delivered basis; in others freight may be 
allowed or be prepaid. Wliile this is the general practice, it is not 
universal, the most common variant being the provision that the seller 
will pay freight only on shipments of a specified minimum quantity. 
Thus one toothpaste manufacturer prepays freight only on lots of one 
gross or over, while one seller of proprietary medicines sets the mini- 
mum limit at orders of at least $70. 

This form of price structure reflects a number of characteristics 
common to the market for most of these products. In the first place, 
the cost of transportation is rarely more than an insignificant element 
in the price of the delivered product. In fact, for many of these items 
costs of promotion such as advertising so far outweigh the physical 
costs of manufacture and shipment that the latter can readily be 
ignored by the seller. 

Moreover, minimum resale prices both at retail and at wholesale 
have been established for many of these products under the provisions 
of the so-called fair trade laws in the 44 States having such statutes. 
Prices to distributors are usualh' related to retail list prices by a system 
of discounts. Distributors are well organized and, have been vigilant 
in protecting or expanding their sales margins. Consequently, resent- 
ment might be aroused on the part of distributors remote from tJie 
seller's plant or warehouse if they were called upon to pay freight and 
thereby found their margin reduced below that of more favorably 
located wholesalers or retailers. 



324 CONCENTRATION OP ECONOMIC POWER 

In addition, many of the larger manufacturers maintain warehouses 
throughout the country, while some distribute to retailers through del 
credere agents in order to retain control over prices paid by retailers. 
In these circumstances the adoption of a system of uniform delivered 
prices has the merit of simplicity and it has become the general prac- 
tice. 

In the case of merchandise not bearing an advertised trade-mark, 
the same practice is commonly followed, although there is probably 
greater tendency to use f. o. b. pricing in some instances. This is 
particularly true in the case of standard unbranded drugs and chem- 
icals such as cocaine, dextrose, ether, etc. These are quoted in the 
Druggists Circular, a standard trade periodical, on the following basis: 

These prices are average prices for quantities retail druggists usually buy. 
They are f. o. b. New York or St. Louis, and are subject to market fluctuations. 
Retailers at points distantly located from market centers may expect to pay 
jobbers an advance over the quoted prices to cover transportation costs. 

FERTILIZER AND FERTILIZER MATERIALS 

The price structure of fertilizer and fertilizer materials is extremely 
complex, as regards both geographic differentials and other terms and 
conditions of sale. Some of the types of price variation are described 
in a report by the National Resources Committee. ^^ 

Freight constitutes a fairly important element in price; on rail 
shipments in 1936 freight revenue averaged 13 percent of delivered 
value at destination. *** Producing facilities, at least for mixed 
fertilizer, are scattered and, although more fertilizer is used in the 
southeastern States than anywhere else in the United States, fertilizer 
is sold all over the country. Since brand names are not particularly 
important, any differences in delivered price would yield a significant 
local competitive advantage. Consequently an extremely detailed 
structure for eliminating freight as a competitive element has developed 
in the industry. 

Insofar as sales to farm users are involved, the basic feature of this 
structure is a zone system, but it is subject to many modifications, 
which will be described below. Some fertilizer materials, however, 
particularly when shipped in carload lots to fertilizer manufacturers 
or mixers, are quoted on an f. o. b. or basing point system. 

Fertilizer materials. — Fertilizer contains three basic ingredients — 
nitrogen, phosphorus, and potassium. These essential elements can 
be supplied by a number of different chemicals, which can either be 
purchased by the farmer separately or in prepared mixtures suitable 
to the requirements of his soil and crops. However, some raw- 
materials, such as phosphate rock, are not in form suitable for direct 
use and must be processed further in order to render the essential 
element available for the soil. 

When farmers purchase fertilizer materials directly in less-than- 
carload quantities, the price structure is generally similar to that for 
mixed fertilizer, described below. On sales of these materials to 
fertilizer manufacturers, or to users in straight carload lots, geographic 
pricing practices vary with the product. Since it is impractical to 

. «» National Resources Committee, Structure of the Americr.n Economy, pt. I, pp. 175-176. 
<" Interstate Commerce Commission, op. cit. 



CONCENTRATION OF ECONOMIC POWER 325 

describe the geographic structure for each material in common use, a 
few of the more important will be presented as illustrations. 

The first basic ingredient of fertilizer is nitrogen. One common 
source of this element is ammonium sulphate, about one-fifth of which 
is imported; the balance is produced in domestic ovens. Despite the 
relatively small proportion supplied from outside sources, the price 
structure apparently reveals the effect of this competition. Prices 
are quoted either f. o. b. Atlantic or Gulf ports, or f. o. b. cars at the 
nearest inland producing oven with inland prices regularly $1 below 
prices at the ports. Freight is equalized so that the buyer pays the 
lowest combination of port or plant price and freight to destination. 

An important alternative source of nitrogen is cyanamid, but the 
amount of cyanamid that can be used in a mixed fertilizer is limited 
by technical considerations. The great bulk of this product is manu- 
factured in Niagara Falls, Ontario. Price quotations in the United 
States are on a uniform delivered basis. The reason for this form of 
quotation is uncertain, but it may be because cyanamid must always 
face the competition of other nitrogen carriers and the uniform price 
permits itr to compete over a wider area than would otherwise be 
possible. 

The primary original source of the second basic fertilizer ingredi- 
ent — phosphorus — is phosphate rock. There are two major sources 
of thiB product, Tennessee and Florida. Apparently the Tennessee 
product is somewhat superior in purity to that in Florida, but its cost 
of extraction is materially greater. Consequently, the Tennessee pro- 
ducers make little effort to compete with the Florida pebble in most 
markets but confine their sales to superphosphate producers located 
in Tennessee. Selling to this restricted market, there is no need for 
freight equalization and they can operate on a straight f. o. b. basis. 

The Florida pebble mines are themselves located within a fairly 
narrow geographical area, and most of the product is shipped north 
by boat. Variations in the locations of individual mines do not affect 
freight charges appreciably and can be ignored. As a result there 
seems to be no pressure for any form of freight equalization, and prices 
are quoted on a straight f. o. b. basis. 

In order to be rendered available as plant food, the phosphate rock 
must be transformed into superphosphate. A large proportion of 
superphosphate is produced in Baltimore, and published quotations 
are usually f. o. b. that city. However, there are many superphos- 
phate plants in other areas, as in Tennessee, which also quote f. o. b. 
their own plants with an effort to equalize freight. 

The third primary element — potassium — can be supplied by muriate 
of potash. There are two primary domestic sources of this product, 
New Mexico and California. However, the price structure has been 
governed not by the domestic product but by foreign imports arriving 
at Atlantic, Gulf, and Pacific ports. Moreover, a substantial portion 
of the domestic product is also shipped by water, either through the 
Panama Canal from California or via the Gulf from New Mexico. 
As a result the price has been quoted c. i. f. ports plus freight to the 
inland destination. There are 40 ports which are recognized as basing 
points, and the base price at