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Revisiting Long-Run Industry Supply

Author

Listed:
  • Robert E. Martin

    (Centre College)

Abstract

Scale economies play an important role in the "new economic geography" and in "product life cycle" models. These models have important implications for world trade, innovation, and the re-distribution of wealth. Unfortunately, existing treatments of long run industry supply, internal/external scale economies, and market concentration are very fragmented. This paper contains a simple, unified model of long run industry supply. The difference between internal and external scale economies is examined. The impact of scale economies on industry supply is identified and their role in industry equilibrium is discussed. The effect of market concentration is also explored. Among other results, I find reasonable conditions under which the monopolist will produce more output at a lower price than would occur under competition. This surprising result is due to the monopolist's ability to internalize external scale economies.

Suggested Citation

  • Robert E. Martin, 1998. "Revisiting Long-Run Industry Supply," Eastern Economic Journal, Eastern Economic Association, vol. 24(2), pages 207-215, Spring.
  • Handle: RePEc:eej:eeconj:v:24:y:1998:i:2:p:207-215
    as

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    File URL: http://web.holycross.edu/RePEc/eej/Archive/eeconj/Volume24/V24N2P207_215.pdf
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    References listed on IDEAS

    as
    1. Krugman, Paul, 1991. "History and Industry Location: The Case of the Manufacturing Belt," American Economic Review, American Economic Association, vol. 81(2), pages 80-83, May.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    3. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Concentration; Scale Economies;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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