Consistent firm choice and the theory of supply

Indraneel Dasgupta ()

Economic Theory, 2005, vol. 26, issue 1, 167-175

Abstract: This paper analyzes the problem of deriving predictions, regarding supply behavior of a competitive firm, from prior consistency postulates about input-output choices made by such a firm. It extends the literature by introducing a consistency postulate for firm choice, which is weaker than profit-maximization. This consistency postulate is nevertheless both necessary and sufficient for supply responses predicted by the standard theory of firm choice based on the postulate of profit-maximization. Furthermore, our rationality postulate, in conjunction with another condition, is shown to be equivalent to firm choice behavior that can be rationalized in terms of profit maximization. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Weak axiom of profit maximization; Supply inequality; Non-reversibility. (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (10)

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DOI: 10.1007/s00199-004-0526-0

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