Supply theory sans profit maximization.
We utilize the analytical construct of a stochastic supply function to provide an aggregate representation of a finite collection of standard deterministic supply functions. We introduce a consistency postulate for a stochastic supply function that may be satisfied even if no underlying deterministic supply function is rationalizable in terms of profit maximization. Our consistency postulate is nonetheless equivalent to a stochastic expansion of supply inequality, which summarizes the predictive content of the traditional theory of competitive supply. A number of key results in the deterministic theory follow as special cases from this equivalence. In particular, it yields a probabilistic version of the law of supply, which implies the traditional specification. Our analysis thus provides a necessary and sufficient axiomatic foundation for a de-coupling of the predictive content of the classical theory of competitive firm behavior from its a priori roots in profit maximization, while subsuming the traditional theory as a special case.
Year of publication: |
2009-07-01
|
---|---|
Authors: | Dasgupta, I. |
Publisher: |
The Berkeley Electronic Press |
Saved in:
freely available
Saved in favorites
Similar items by person
-
'Living’ wage, class conflict and ethnic strife.
Dasgupta, I., (2009)
-
Conditionality and fragility in long-term financial contracts
Bougheas, Spiros P., (2007)
-
Women or children? : intra-household redistribution under gender-asymmetric altruism
Dasgupta, Indraneel, (2007)
- More ...