Money as a Medium Exchange Barter Trading is too Clumsy Large-Scale Production requires a Medium of Exchange Recognition and measurement of changes in the value of money. Classification of Money Stabilization of the Price Level The Value of Money or General Level of Prices Where The Unit of Account is a Fixed Quantity of Bullion, Uncoined or Coined. The value of money or general level of prices where the unit of account is a coin of which the issue is limited. The value of money or general level of prices where the unit of account is a bank-note or currency note. Causes of Change in the General Price Level Possible Occasions of Inflation Ways of Dealing with Risk: Transfer To Specialists Choice Criteria Under Risk Hedging The origin and the functions of money Money, when its use has grown habitual The early history of money Currency in the hunting state Currency in the pastoral state Articles of ornament as currency Currency in the agriculture state Manufactured and miscellaneous articles as currency The invention of coining Qualities of the material of money Utility and value Protability Indestructibility Homogeneity Divisibility Stability of value Cognisability Legal Tender The Greenbacks - The Fluctuating Premium on Gold The Greenbacks - The Effects of Greenbacks Upon Wages Rent - Urban Rents Rent - Farm Rents Interest and Loan Capital Purchasing Power of the Principal of Loans The Rate of Interest Profits Profits in Agriculture Statistical Evidence Regarding Profits The Production and Consumption of Wealth Production Consumption Cost of the Civil War Greenbacks and Expenditures The Greenbacks and Receipts Contraction and Inflation of the Legal Tenders Passage of the Resumption Act The Struggle for Resumption The Purchasing Power of the Dollar Measurement of Changes in the Purchasing Power of Dollar Results of Changes in the General Price Level Buying Problems of the Consumer What is Good Buying? The Principles of Foreign Exchange The General Price Level Price Policies Price Flexibility Price Leadership Price Discrimination Special Pricing Practices Postage Stamp System Policy Implications

Price leadership exists when a given firm in an industry sets a price pattern which most of the other producers then follow. One should not conclude, however, that price leadership necessarily means collusion. When the number of producers in an industry is small, each producer becomes fully aware of the repercussions of his own actions. Hence, he knows that he might generate a price war if he initiates a price-cutting program. He finds it to his advantage, under principles of recognizing mutual interdependence of each producer, to follow the leader. Price leadership characterizes many markets today, particularly those in which there is an oligopoly. A compelling reason for following a leader may be the recollection of unpleasant experiences associated with a prior price war when cut prices did not increase sales. Larger concerns exert a greater influence in establishing leadership policies. Since price leadership may exist without collusion, however, it is only when the leadership is coupled with predatory practices that the accusation of illegality can be sustained. In this connection, the line of distinction between price leadership and following the leader, on the one hand, and price collusion, on the other, is misinterpreted. It is not unusual in markets for such industrial goods or basic materials as steel or aluminum to have printed price lists published by the sellers. These lists are readily available to potential customers and even to the public. Now, if one firm publishes a list or quotes a price to a prospective customer, it is reasonable to expect that buyer to look over the market to see if he can get a lower price. In doing so, he can be expected to tell the other sellers about the best price that he has been offered; the next seller can then meet this price. If the price lists are published, then each seller knows what the others are doing, and, recognizing the mutual interdependence of each seller, each quotes the same price to avoid a price war. It is not even necessary that a price list be published, since potential customers can be expected to indicate to some sellers what sort of prices they have been offered by others. In this same manner, it is possible for several potential suppliers to submit identical bids on a contract even though the bids are sealed. A recent example illustrates this point. The Federal Government had requested bids for a certain basic product. One of the bids was lower than the others, and the successful bidder only then recognized that he had used an obsolete price catalogue. What is important, then, is not that the bids are identical but what procedures the bidders used to arrive at the identical price. Was there collusion or was the identity of prices the result of price leadership with open prices announced and followed in the industry? It is likely that additional indictments might follow, for industries now under suspicion include those dealing in brass, chlorine, caustic soda, and fertilizers. The Department of Justice is preparing an extensive study of identical bids received by governmental agencies, to determine whether their pattern suggests illegal collusion. This now stands as one of the most famous instances where price leadership failed to hold together. However, there were a number of extraneous factors at work that easily interfered with the normal case of price leadership. To begin with, the President of the United States severely criticized the leader and much of the industry, which could arouse public antagonism toward the industry. Moreover, there was the further mandate that governmental agencies should refrain from granting contracts to those concerns that raised their prices. Also, the timing might have been very inopportune in that the steel industry already was confronted with a difficult demand situation in the face of existing prices. And one of the big issues raised by this case is: How much power should be vested in the Chief Executive of the nation to interfere with the market price-determining forces?