The price behavior of trade-marked and standardized products is here examined with a view to discovering the relationship, if any, between product differentiation and the flexibility and sensitivity of prices. For this purpose, the relationship between frequency of price change and amplitude of price movement is here considered for the standard and trade-marked goods which are included in the Bureau of Labor Statistics wholesale price series.

In general, trade-marked or highly differentiated products tend to have highly rigid price structures. When the trade-marked products included in the Bureau of Labor Statistics series are grouped on the basis of frequency of price change according to the classification given in appendix 2, table II, one-half of all the price series for trade-marked products are to be found in groups I and II. Not a single trade-marked or highly differentiated commodity is to be found in the three most flexible price groups-groups VIII to X, inclusive.

In order to see whether the relationship between rigidity and amplitude of price movements is the same for trade-marked and for standard products, prices whose flexibility is similar are compared on the basis of sensitivity. For this purpose the average price 3 of trade-marked, semidifferentiated and standard products falling within each of the frequency groups in appendix 2, table II, which included any trade-marked products, were computed, group by group, for each year during the period 1926 to 1936.

This computation reveals a very striking difference in behavior between the prices of standard and of trademarked products of approximately the same degree of flexibility. The chart illustrates this difference. In each case the price of trade-marked products shows a significantly greater amplitude of movement than does the price of the standard products of the same frequency of price change. The trade-marked products consistently show a more rapid decline during the depression and a sharper rise subsequently than did the standard products in the same price group. Table I expresses this comparison in terms of percentage decline between 1929 and 1932 and percentage rise from 1932 to 1936. In every group but one, trade-marked products show a significantly sharper price decline during the depression,

1 Appendix 3 was prepared by Saul Nelson.

2 With few exceptions, standardized commodities are those classified as standard and trade-marked commodities are those classified as unique or differentiated, in appendix 2, table I, column 15.

3 Geometric averages were used.