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Strictly convex variable cost does not imply U-shaped average cost

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  • Balletta, Luigi
  • Tesoriere, Antonio

Abstract

We show that strictly convex variable costs do not imply U-shaped average costs and provide a sufficient condition for U-shaped average costs. As an application we study endogenous entry when firms have market power and they have decreasing average cost but increasing marginal cost.

Suggested Citation

  • Balletta, Luigi & Tesoriere, Antonio, 2016. "Strictly convex variable cost does not imply U-shaped average cost," Research in Economics, Elsevier, vol. 70(4), pages 766-770.
    • Handle: RePEc:eee:reecon:v:70:y:2016:i:4:p:766-770
    DOI: 10.1016/j.rie.2016.05.002
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    References listed on IDEAS

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    1. Gunter Knieps & Ingo Vogelsang, 1982. "The Sustainability Concept under Alternative Behavioral Assumptions," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 234-241, Spring.
    2. Oliver D. Hart, 1985. "Monopolistic Competition in the Spirit of Chamberlin: A General Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 529-546.
    3. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
    4. Hart, Oliver D, 1985. "Monopolistic Competition in the Spirit of Chamberlin: Special Results," Economic Journal, Royal Economic Society, vol. 95(380), pages 889-908, December.
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    Cited by:

    1. Tesoriere, Antonio, 2017. "Stackelberg equilibrium with many leaders and followers. The case of zero fixed costs," Research in Economics, Elsevier, vol. 71(1), pages 102-117.

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