Producer's Optimum under Conditions of Unremitting Increase of Returns to Scale
|Author(s):|| prof. RNDr. Jiří Hlaváček CSc., |
PhDr. Michal Hlaváček Ph.D.,
|Type:||IES Working Papers|
|ISSN / ISBN:|
|Published in:||IES WP 2001/5|
|Abstract:||The article formulates optimal firm's strategy under conditions of unremitting increase of returns to scale and multiple threats of firm's downfall. The firm spends very high initial fixed costs for entry to industry and than faces zero marginal costs. The firm is threatened by two threats at one time: by too low profit and by the destructive entrance of a new firm to the market. The optimum is a compromise strategy. The problem has [for both regular and normal distribution of the probability of extinction] just one decision. It enables us to create the supply function.
Key words : generalized microeconomic criterion of producer, danger of firm's exit, mathematical models of economic behavior, unremitting increase of returns to scale