Fixed Cost, Variable Cost, Markups and Returns to Scale

Abstract : This paper derives the structure of a production function which is necessary and sufficient for generating a fixed cost. We extend the classical production function in order to allow each input to have a fixed and a variable part. We characterize and estimate both the fixed and variable components of the cost function and study how fixed and variable costs interact and affect firms' behavior in terms of price setting and returns to scale.
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https://hal.univ-lorraine.fr/hal-02166757
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Submitted on : Thursday, June 27, 2019 - 10:42:05 AM
Last modification on : Friday, June 28, 2019 - 1:39:01 AM

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Xi Chen, Bertrand Koebel. Fixed Cost, Variable Cost, Markups and Returns to Scale. Annals of Economics and Statistics, CNGP-INSEE, 2017, pp.61-94. ⟨10.15609/annaeconstat2009.127.0061⟩. ⟨hal-02166757⟩

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