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Industry Equilibrium Under Price Distribution and Cost Shifts

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  • Hennessy, David A.

Abstract

Using a reference utility entry and exit criterion, we consider an equilibrium model of production where market price is random but endogenous with respect to industry output. General conditions are identified for industry output to increase under shifts in costs and in the distribution of demand. Comparative statics of firm level production and farm numbers are also studied. Results confirm the intuition that improvements in cost and demand conditions increase industry production. However, firm level responses are not as intuitive, and depend upon the relationship between the source of disturbance and the compensation through the altered distribution of output price.

Suggested Citation

  • Hennessy, David A., 1998. "Industry Equilibrium Under Price Distribution and Cost Shifts," Staff General Research Papers Archive 1348, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:1348
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