We show that strictly convex variable costs do not imply U-shaped average costs and provide a sufficient condition for U-shaped average costs. As an application we study endogenous entry when firms have market power and they have decreasing average cost but increasing marginal cost.
Balletta, L., Tesoriere, A. (2016). Strictly convex variable cost does not imply U-shaped average cost. RESEARCH IN ECONOMICS, 70(4), 766-770 [10.1016/j.rie.2016.05.002].
Strictly convex variable cost does not imply U-shaped average cost
BALLETTA, Luigi;TESORIERE, Antonio
2016-01-01
Abstract
We show that strictly convex variable costs do not imply U-shaped average costs and provide a sufficient condition for U-shaped average costs. As an application we study endogenous entry when firms have market power and they have decreasing average cost but increasing marginal cost.
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