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Fixed Cost, Variable Cost, Markups and Returns to Scale

Author

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  • Xi Chen
  • Bertrand M. Koebel

Abstract

This paper derives the structure of a production function which is necessary and sufficient for generating a fixed cost. We extend the classical production function in order to allow each input to have a fixed and a variable part. We characterize and estimate both fixed and variable components of the cost function and study how fixed and variable costs interact and affect firms' behavior in terms of price setting and returns to scale.

Suggested Citation

  • Xi Chen & Bertrand M. Koebel, 2017. "Fixed Cost, Variable Cost, Markups and Returns to Scale," Annals of Economics and Statistics, GENES, issue 127, pages 61-94.
    • Handle: RePEc:adr:anecst:y:2017:i:127:p:61-94
    DOI: 10.15609/annaeconstat2009.127.0061
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    Cited by:

    1. A. Panakhov U. & E. Babkova G. & А. Панахов У. & Э. Бабкова Г., 2019. "Интеграция методов управленческого учета в системе функционального учета затрат // The Integration of Management Accounting Techniques in the Functional-based Costing System," Учет. Анализ. Аудит // Accounting. Analysis. Auditing, ФГОБУВО "Финансовый университет при Правительстве Российской Федерации" // Financial University under The Government of Russian Federation, vol. 6(4), pages 42-52.
    2. Ryosuke Shimizu & Shohei Momoda, 2021. "Does Automation Technology increase Wage?," Discussion papers ron343, Policy Research Institute, Ministry of Finance Japan.
    3. Michał Gradzewicz & Jakub Mućk, 2024. "Globalisation and the fall of markups," The World Economy, Wiley Blackwell, vol. 47(3), pages 1089-1116, March.
    4. Ryosuke Shimizu & Shohei Momoda, 2020. "Does Automation Technology increase Wage?," KIER Working Papers 1039, Kyoto University, Institute of Economic Research.

    More about this item

    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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