Naslov
Pseudoproduction, Pseudocost and Profit Functions in Monopoly from the Dual Perspective

Autori
Vrankić, Ilko ; Krpan, Mira

Izvornik
Business systems research (1847-8344) 7 (2016), 2; 49-64

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
duality; pseudoproduction function; pseudocost function; profit function; Hotelling’s lemma

Sažetak
Background: Duality in microeconomic theory enables us to represent consumers’ preferences and production technology with various dual functions satisfying certain regularity conditions. Objectives: Since the basis for the application of duality in microeconomic theory is the price taking behaviour, the challenge is to apply principles of duality in monopolistic case where the single producer has an influence on the price which he charges for its product and this is done in this paper. Methods/Approach: The standard approach of deriving the profit function for the monopolist from the production function and defined pseudoproduction function is accompanied by an alternative approach in which the starting point is the pseudocost function. Starting from the derived profit function the pseudoproduction function and the pseudocost functions are recovered and a version of Hotelling’s lemma is given. Results: The structure of the profit maximization problem in monopolistic case was made similar to the structure of the profit maximization problem in the perfectly competitive case and it is shown that all starting functions can be recovered back from derived functions. A version of Hotelling’s lemma is illustrated which brings us indirectly from the profit function to the supply function. Conclusions: By introducing the pseudoproduction function in the profit maximization model of a monopolist, the structure of the problem becomes similar to the perfectly competitive case and duality results can be applied. The profit function is derived from the pseudoproduction and the pseudocost function, and all starting functions are recovered back from derived profit function.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

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