Variability and average profits - does Oi's result generalize?
AbstractAverage profits of a price taker are increasing in the variability of the output price (Oi, 1961). We show that, for the same reason, average profits of the price taker are increasing in the variability of the price of inputs. We proceed to establish that the same holds for a firm with a downward sloping demand curve. Unless the inverse demand curve of the firm with market power is very convex, the profit function of the price taker forms an upper limit for the convexity of profit (assuming constant curvature of costs).
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 402.
Length: 11 pages
Date of creation: 14 Sep 2000
Date of revision:
Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
cost uncertainty; convexity of profit function;
Find related papers by JEL classification:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-09-18 (All new papers)
- NEP-MIC-2000-09-18 (Microeconomics)
- NEP-TID-2000-09-18 (Technology & Industrial Dynamics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Jellal, Mohamed & wolff, François charles, 2005.
"Free entry under uncertainty,"
38376, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Lundin).
If references are entirely missing, you can add them using this form.