Revisiting Long-Run Industry Supply

Robert Martin
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Robert Martin: Centre College

Eastern Economic Journal, 1998, vol. 24, issue 2, 207-215

Abstract: Scale economies play an important role in the "new economic geography" and in "product life cycle" models. These models have important implications for world trade, innovation, and the re-distribution of wealth. Unfortunately, existing treatments of long run industry supply, internal/external scale economies, and market concentration are very fragmented. This paper contains a simple, unified model of long run industry supply. The difference between internal and external scale economies is examined. The impact of scale economies on industry supply is identified and their role in industry equilibrium is discussed. The effect of market concentration is also explored. Among other results, I find reasonable conditions under which the monopolist will produce more output at a lower price than would occur under competition. This surprising result is due to the monopolist's ability to internalize external scale economies.

Keywords: Concentration; Scale Economies (search for similar items in EconPapers)
JEL-codes: D23 D24 L11 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:24:y:1998:i:2:p:207-215

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