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Duality of welfare and profit maximization

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  • Boccard, Nicolas

Abstract

Many economists are aware that the conditions for the efficiency and monopolization in a partial equilibrium framework are the extremes of the Ramsey–Boiteux formula when the Lagrange multiplier for the budget varies. We formalize the duality existing between the welfarist and monopolist constrained maximization programs by proving the following “folk theorem”: maxWelfares.t.profit≥fixed cost⇔maxProfits.t.output≥minimum.

Suggested Citation

  • Boccard, Nicolas, 2011. "Duality of welfare and profit maximization," Economics Letters, Elsevier, vol. 113(3), pages 215-217.
    • Handle: RePEc:eee:ecolet:v:113:y:2011:i:3:p:215-217
    DOI: 10.1016/j.econlet.2011.07.010
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    References listed on IDEAS

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    1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
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    4. Boiteux, M., 1971. "On the management of public monopolies subject to budgetary constraints," Journal of Economic Theory, Elsevier, vol. 3(3), pages 219-240, September.
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    More about this item

    Keywords

    Duality; Welfare; Regulation; Ramsey–Boiteux;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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