Intrinsic comparative statics of a general class of profit-maximizing rate-of-return regulated firms
AbstractAn exhaustive comparative statics analysis of a general rate-of-return regulated, profit-maximizing model of the firm is carried out under a minimal set of assumptions. The resulting intrinsic comparative statics are contained in a positive semi-definite matrix. Each element of this matrix consists of a product of the A-J effect term and a Slutsky-like expression, thereby permitting the familiar interpretation of a compensated price change. The minimal set of assumptions allows a range of anomalous behavior that includes, inter alia, a reversal of the sign of the A-J effect and an increase in the use of an unregulated factor as a result of a compensated own-price increase. The implications of additional assumptions for the mathematical structure of the model and its economic consequences are discussed, and the equivalency relations among those assumptions are delineated. Throughout, mathematical results of the analysis are interpreted with a view to elucidating their intuitive economic significance. Copyright 2008 , Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 60 (2008)
Issue (Month): 2 (April)
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- Michael Caputo & Dmitriy Popov, 2010. "Comparative Statics of a Monopolistic Firm Facing Rate-of-Return and Command-and-Control Pollution Constraints," Working Papers, University of Central Florida, Department of Economics 2010-06, University of Central Florida, Department of Economics, revised Jun 2012.
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