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Full Cost, Profit and Competition

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  • Jael, Paul

Abstract

During the marginalist controversy, full costers failed to convince economists of the superiority of full cost pricing over marginal theory of imperfect competition. The controversy was closed prematurely; various contributions published immediately thereafter in the fifties did not renew the debate despite their relevance. Topics included entry prevention, target rate of profit and the emergence of the market price The present paper shows that the full cost pricing is not so justified by the need for a rule of thumb than as a rational behaviour aiming at long term profit maximisation, especially in the case of highly competitive markets with few suppliers. The paper focuses also on the relationship between full cost pricing and changes in demand (mostly cyclical). It is also shown that the race for performance deserves a central position in the analysis of competition; it is too often neglected in favour of the sole competition on margins.

Suggested Citation

  • Jael, Paul, 2014. "Full Cost, Profit and Competition," MPRA Paper 59630, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59630
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    References listed on IDEAS

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    7. Philippe Mongin, 1990. "The Early Full-Cost Debate and the Problem of Empirically Testing Profit Maximization," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 13(2), pages 236-251, December.
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    9. F. S. Lee & J. Irving-Lessmann, 1992. "The Fate of an Errant Hypothesis: The Doctrine of Normal-Cost Prices," History of Political Economy, Duke University Press, vol. 24(2), pages 273-309, Summer.
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    Cited by:

    1. Jael, Paul, 2015. "Prix, taux de profit cible et prévention de l’entrée [Price, Target Rate of Profit and Entry Preventing]," MPRA Paper 69015, University Library of Munich, Germany.
    2. Jael, Paul, 2020. "A Rational Theory of Producer’s Equilibrium in Fifteen Principles," MPRA Paper 99456, University Library of Munich, Germany.
    3. Jael, Paul, 2015. "Price, target rate of profit and entry preventing," MPRA Paper 65970, University Library of Munich, Germany.

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    More about this item

    Keywords

    pricing; competition; market structure; full cost;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other

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