Firms' Cost Functions: A Reconstruction

Firms' Cost Functions: A Reconstruction Three empirical stylized facts characterize afirm's cost functions: AVC is generallyhorizontal; scale economies are often important;and capital usage (as well as labor usage)varies with the rate of output. In contrast ourstandard theory of diminishing marginalproducts, variable proportions, and U-shapedunit cost curves does not adequately reflectthese stylized facts of industrial reality. Explicit distinction between capital stocks andcapital flows allows a remodeling of a firm'scost curves to conform with these empirical facts. Review of Industrial Organization Springer Journals

Firms' Cost Functions: A Reconstruction

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Kluwer Academic Publishers
Copyright © 2001 by Kluwer Academic Publishers
Economics; Industrial Organization; Microeconomics
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