2
in most cases replacing an old equipment with a technically
superior one will incidentally also involve an increase in
capacity. ( Or, in the case of a shrinking market - think
of the steel industry - the worry about the market will
exist even without expansion ).
Now in all cases where capacity does matter - and that probably
is the majority of all cases - there is a strong presumption
that the additional market will be sought abroad. In fact,
it may be presumed that the behaviour, price policy
of firms is fundamentally different in domestic and foreign
markets. Very broadly speaking, the domestic market is
dominated by the policy of conventional mark-up a la Kalecki,
( fix price according to Hicks ), whereas the foreign markets
are predominantly flex-price, i.e. they are nearer to the
pattern of the markets for agricultural products though not
quite the same. There is, very briefly, more competition on
these markets. Now the essence of my contention is that
for an aggressive policy of gaining new sales the choosen terrain
is almost always abroad and not at home.
This contention would seem more easily evident in a pre-war
economy with heavily protected markets, which in practice
would be subject to open or tacit cartel^, agreements.
\
But the mentality appropriate to these institutions has not
disappeared. 5ft b
Aggressive policies on the domestic market are restrained
by the fact that there is in many cases only a restricted
number of competitors and their reacttion must be correspondingly
strong.