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Consistent firm choice and the theory of supply

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  • Indraneel Dasgupta

Abstract

This paper analyzes the problem of deriving predictions, regarding supply behavior of a competitive firm, from prior consistency postulates about input-output choices made by such a firm. It extends the literature by introducing a consistency postulate for firm choice, which is weaker than profit-maximization. This consistency postulate is nevertheless both necessary and sufficient for supply responses predicted by the standard theory of firm choice based on the postulate of profit-maximization. Furthermore, our rationality postulate, in conjunction with another condition, is shown to be equivalent to firm choice behavior that can be rationalized in terms of profit maximization. Copyright Springer-Verlag Berlin/Heidelberg 2005

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  • Indraneel Dasgupta, 2005. "Consistent firm choice and the theory of supply," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(1), pages 167-175, July.
    • Handle: RePEc:spr:joecth:v:26:y:2005:i:1:p:167-175
    DOI: 10.1007/s00199-004-0526-0
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    References listed on IDEAS

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    1. Taradas Bandyopadhyay & Indraneel Dasgupta & Prasanta Pattanaik, 2004. "A general revealed preference theorem for stochastic demand behavior," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 23(3), pages 589-599, March.
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    Cited by:

    1. Dasgupta Indraneel & Pattanaik P. K, 2010. "Revealed Preference with Stochastic Demand Correspondence," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-21, August.
    2. Indraneel Dasgupta, 2011. "Contraction consistent stochastic choice correspondence," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 37(4), pages 643-658, October.
    3. W D A Bryant, 2009. "General Equilibrium:Theory and Evidence," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 6875, January.
    4. Jan Heufer, 2011. "Stochastic revealed preference and rationalizability," Theory and Decision, Springer, vol. 71(4), pages 575-592, October.
    5. Dasgupta Indraneel, 2009. "Supply Theory sans Profit Maximization," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-16, July.
    6. Jan Heufer, 2009. "Stochastic homothetically revealed preference for tight stochastic demand functions," Economics Bulletin, AccessEcon, vol. 29(3), pages 2472-2477.
    7. Paul Oslington, 2012. "General Equilibrium: Theory and Evidence," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 446-448, September.

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