Industry Total Cost Functions and the Status of the Core
AbstractThe industry total cost function gives the least total cost to an industry of producing a prescribed total output. For standard demand schedules where price and quantity vary inversely, a nonempty core requires nondecreasing returns to scale. Because a nonempty core is necessary for a neoclassical competitive equilibrium, this means an industry can be in a competitive equilibrium only if it has nondecreasing returns to scale. Thus, industries in which the firms have identical U-shaped average cost (Viner industries) or flat-bottomed average cost do not satisfy this condition so they cannot have a competitive equilibrium for arbitrary standard demand schedules. Copyright 1991 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Industrial Economics.
Volume (Year): 39 (1991)
Issue (Month): 3 (March)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
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- Germán Coloma & Alejandro Saporiti, 2006. "Bertrand equilibria in markets with fixed costs," The School of Economics Discussion Paper Series 0627, Economics, The University of Manchester.
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- Alejandro Saporiti & German Coloma, 2009. "Bertrand's price competition in markets with fixed costs," RCER Working Papers 549, University of Rochester - Center for Economic Research (RCER).
- Kenneth Button & Peter Nijkamp, 1997. "Network Industries, Economic Stability and Spatial Integration," Tinbergen Institute Discussion Papers 97-047/3, Tinbergen Institute.
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