Intrinsic comparative statics of a general class of profit-maximizing rate-of-return regulated firms

    Authors

    M. R. Caputo;M. H. Partovi

    Comments

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    Abbreviated Journal Title

    Oxf. Econ. Pap.-New Ser.

    Keywords

    CONSTRAINT; BEHAVIOR; Economics

    Abstract

    An exhaustive comparative statics analysis of a general rate-of-return regulated, profit-maximizing model of the firm is carried out under a minimal set of assumptions. The resulting intrinsic comparative statics are contained in a positive semi-definite matrix. Each element of this matrix consists of a product of the A-J effect term and a Slutsky-like expression, thereby permitting the familiar interpretation of a compensated price change. The minimal set of assumptions allows a range of anomalous behavior that includes, inter alia, a reversal of the sign of the A-J effect and an increase in the use of an unregulated factor as a result of a compensated own-price increase. The implications of additional assumptions for the mathematical structure of the model and its economic consequences are discussed, and the equivalency relations among those assumptions are delineated. Throughout, mathematical results of the analysis are interpreted with a view to elucidating their intuitive economic significance.

    Journal Title

    Oxford Economic Papers-New Series

    Volume

    60

    Issue/Number

    2

    Publication Date

    1-1-2008

    Document Type

    Article

    Language

    English

    First Page

    369

    Last Page

    382

    WOS Identifier

    WOS:000254294900009

    ISSN

    0030-7653

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