Arbeitspapier

Supply theory sans profit-maximization

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.

Language
Englisch

Bibliographic citation
Series: IZA Discussion Papers ; No. 4018

Classification
Wirtschaft
Firm Behavior: Theory
Subject
Supply aggregation
stochastic supply function
stochastic consistency
weak axiom of profit maximization
stochastic supply inequality
law of supply
Angebot
Mikroökonomik
Stochastischer Prozess
Theorie der Unternehmung
Gesamtwirtschaftliches Angebot
Ökonomisches Prinzip
Theorie

Event
Geistige Schöpfung
(who)
Dasgupta, Indraneel
Event
Veröffentlichung
(who)
Institute for the Study of Labor (IZA)
(where)
Bonn
(when)
2009

Handle
URN
urn:nbn:de:101:1-20090304744
Last update
20.09.2024, 8:25 AM CEST

Data provider

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Object type

  • Arbeitspapier

Associated

  • Dasgupta, Indraneel
  • Institute for the Study of Labor (IZA)

Time of origin

  • 2009

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