Economic theorists for years have considered the possibility that the direction of technical change is altered by changes in relative prices. Prices have also been identified as one of the determinants of technical change through innovation. This paper extends the theory of the firm to cover situations in which the firm's technology set is conditional on expected prices. The basic idea is to distinguish between "market prices," or the prices that guide the firm's choices subject to the technology that is in place, and "normal prices," the prices conditioning the choice of technology. A "generalized" price effect is obtained that includes the traditional price effect as well as the technical change effect of price changes and an example is presented.
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- Chris Fawson & C. Richard Shumway & Robert L. Basmann, 1990. "Agricultural Production Technologies with Systematic and Stochastic Technical Change," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(1), pages 182-199.
- Lilyan E. Fulginiti & Richard K. Perrin, 1992.
"Prices and Productivity in Agriculture,"
Food and Agricultural Policy Research Institute (FAPRI) Publications
93-gatt2, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
- Fulginiti, Lilyan E. & Perrin, Richard K., 1993. "Prices and Productivity in Agriculture," Staff General Research Papers Archive 773, Iowa State University, Department of Economics.
- Lilyan E. Fulginiti & Richard K. Perrin, 1992. "Prices and Productivity in Agriculture," Center for Agricultural and Rural Development (CARD) Publications 93-gatt2, Center for Agricultural and Rural Development (CARD) at Iowa State University.
- Fulginiti, Lilyan E. & Perrin, Richard K., 1992. "Prices and Productivity in Agriculture," Staff General Research Papers Archive 543, Iowa State University, Department of Economics.
- Basmann, R. L. & Hayes, K. J. & Slottje, D. J. & Molina, D. J., 1987. "A new method for measuring technological change," Economics Letters, Elsevier, vol. 25(4), pages 329-333.
- R. E. Lucas, 1967. "Tests of a Capital-Theoretic Model of Technological Change," Review of Economic Studies, Oxford University Press, vol. 34(2), pages 175-189.
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