On inferior inputs and marginal returns
Paolo Bertoletti () and
Journal of Economics, 2013, vol. 109, issue 3, 303-313
An input is inferior if and only if an increase in its price raises all marginal productivities. A sufficient condition for input inferiority under quasi-concavity of the production function is then that there are increasing marginal returns with respect to the other input and a non-positive marginal productivity cross derivative. Thus, contrary to widespread opinion, input “competitiveness” is not needed. We discuss these facts and illustrate them by introducing a class of simple production function functional forms. Our results suggest that the existence of inferior inputs is naturally associated with increasing returns, and possibly strengthen the case for inferiority considerably. Copyright Springer-Verlag 2013
Keywords: Inferior and normal inputs; Marginal productivity; Homotheticity; D11; D21; D24 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:109:y:2013:i:3:p:303-313
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