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Revisting Adjustment Cost and Its Stabilizing Impact on the Long Run Behavior of Profit Maximizing Firms with Increasing Returns to Scale

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  • Dominique, C.R.

Abstract

Relaxing the concavity assumption to quasi-concavity in the classical programming problem strengthens the Theory of the Consumer but is said to weaken that of the firm. This paper combines the Euler equation and the concept of sub-manifolds to show that there may be stable, multiple or unique path of capital accumulation under quasi- concavity. Thus whether or not the path is unique and therefore optimal depends on the evenness or oddness of the order of the Hessian matrix of the production function.

Suggested Citation

  • Dominique, C.R., 1996. "Revisting Adjustment Cost and Its Stabilizing Impact on the Long Run Behavior of Profit Maximizing Firms with Increasing Returns to Scale," Papers 9609, Laval - Recherche en Politique Economique.
    • Handle: RePEc:fth:lavape:9609
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    Keywords

    COSTS; CORPORATIONS; PROFIT; MATHEMATICS;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D20 - Microeconomics - - Production and Organizations - - - General
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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