Competition, going enterprise, and economic activity

Post-Keynesians from the 1970s onwards utilized various pricing models in their theoretical work. The most popular one was mark-up pricing which consisted of either marking up average direct labor costs or average direct material and labor costs to set the price, with the mark-up covering overhead costs and profits. 1 In addition, it was often assumed that average direct costs were constant and labor was the only input used to produce output. This latter assumption was derived from the view that circular production, as represented in input-output tables and Sraffian production models, was a fact that was irrelevant for theoretical work. Finally, it was assumed that the profit mark-up used for pricing was determined by the investment needs of the enterprise or by a degree of monopoly, which in some cases was defined in terms of price elasticity of demand (see Lee 1998: 11-16).