I. Dasgupta
Supply Theory sans Profit Maximization
Dasgupta, I.
Authors
Abstract
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.
Citation
Dasgupta, I. (2009). Supply Theory sans Profit Maximization. BE Journal of Theoretical Economics, 9(1), https://doi.org/10.2202/1935-1704.1571
Journal Article Type | Article |
---|---|
Publication Date | Jul 1, 2009 |
Deposit Date | Sep 29, 2009 |
Publicly Available Date | Nov 13, 2009 |
Journal | BE Journal of Theoretical Economics |
Electronic ISSN | 1935-1704 |
Publisher | De Gruyter |
Peer Reviewed | Peer Reviewed |
Volume | 9 |
Issue | 1 |
DOI | https://doi.org/10.2202/1935-1704.1571 |
Public URL | https://durham-repository.worktribe.com/output/1549598 |
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