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Average cost and marginal cost pricing in Marshall: Textual analysis and interpretation

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  • Luca Zamparelli

Abstract

This paper proposes a textual analysis of Marshall's theory of firm pricing behavior under competitive conditions. Average cost and marginal cost pricing theories have very distinct origins as they are rooted, respectively, in the classical and marginalistic theory of competition. I analyze to what extent and under which circumstances the two theories joined in the work of Alfred Marshall; and I argue that, even though only partial evidence can be found to support the adoption of the notion of marginal cost pricing by Marshall, he developed some concepts, such as the distinction between short and long periods and the notion of quasi-rents, which turned out to be fundamental for the joint acceptance of marginal cost and average cost pricing principles by the Marshallian school.

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  • Luca Zamparelli, 2009. "Average cost and marginal cost pricing in Marshall: Textual analysis and interpretation," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 16(4), pages 665-694.
    • Handle: RePEc:taf:eujhet:v:16:y:2009:i:4:p:665-694
    DOI: 10.1080/09672560903201276
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    References listed on IDEAS

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    1. Harris, Donald J, 1988. "On the Classical Theory of Competition," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 12(1), pages 139-167, March.
    2. Michel Quéré, 2003. "Increasing Returns and Competition: Learning from a Marshallian Perspective," Palgrave Macmillan Books, in: Richard Arena & Michel Quéré (ed.), The Economics of Alfred Marshall, chapter 10, pages 182-201, Palgrave Macmillan.
    3. Pierangelo Garegnani, 2024. "Heterogeneous Capital, the Production Function and the Theory of Distribution," Springer Studies in the History of Economic Thought, in: Roberto Ciccone (ed.), Capital Theory, the Surplus Approach, and Effective Demand, pages 147-193, Springer.
    4. Paul J. McNulty, 1967. "A Note on the History of Perfect Competition," Journal of Political Economy, University of Chicago Press, vol. 75(4), pages 395-395.
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    6. John K. Whitaker, 2003. "Alfred Marshall’s Principles and Industry and Trade: Two Books or One? Marshall and the Joint Stock Company," Palgrave Macmillan Books, in: Richard Arena & Michel Quéré (ed.), The Economics of Alfred Marshall, chapter 8, pages 137-157, Palgrave Macmillan.
    7. Paul J. McNulty, 1968. "Economic Theory and the Meaning of Competition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(4), pages 639-656.
    8. Peter Groenewegen, 1995. "A SOARING EAGLE: Alfred Marshall 1842–1924," Books, Edward Elgar Publishing, number 193.
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    15. Joan Robinson, 1934. "What is Perfect Competition?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 49(1), pages 104-120.
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    17. Peter Groenewegen, 2003. "Competition and Evolution: The Marshallian Conciliation Enterprise," Palgrave Macmillan Books, in: Richard Arena & Michel Quéré (ed.), The Economics of Alfred Marshall, chapter 7, pages 113-133, Palgrave Macmillan.
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    Cited by:

    1. Oggioni, Giorgia & Smeers, Yves, 2012. "Evaluating the application of different pricing regimes and low carbon investments in the European electricity market," Energy Economics, Elsevier, vol. 34(5), pages 1356-1369.

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    More about this item

    Keywords

    Marshall; classical competition; perfect competition; marginal and average cost;
    All these keywords.

    JEL classification:

    • D46 - Microeconomics - - Market Structure, Pricing, and Design - - - Value Theory
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)

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