Beyond Viner: Smoothed Cost Curves and Co-Detetermination of Output and Production Capacity

14 Pages Posted: 23 May 2017

See all articles by Louis de Mesnard

Louis de Mesnard

University of Burgundy - Institute of Business Administration Dijon (IAE) - CREGO (EA 7317)

Date Written: May 21, 2017

Abstract

We address two problems of traditional cost functions: the discontinuity caused by the production capacity (the marginal cost abruptly becomes infinite when production capacity is reached) and the production capacity is artificially exogenous. So, we introduce a smoothed form of marginal cost function. It progressively tends to infinity when it approaches to the production capacity. Then, we prove that it is perfectly possible to determine directly output, fixed costs and production capacity simultaneously, even if this could lead to a system of equations that is not so elementary to solve because it includes a Lambert function. We also show that the smoothed cost function prevails in both the short and long run because the firm is always placed at the minimum of the average cost.

Keywords: Cost Curves, Production Capacity, Lambert, Viner

JEL Classification: C65, D24

Suggested Citation

de Mesnard, Louis, Beyond Viner: Smoothed Cost Curves and Co-Detetermination of Output and Production Capacity (May 21, 2017). Available at SSRN: https://ssrn.com/abstract=2971838 or http://dx.doi.org/10.2139/ssrn.2971838

Louis De Mesnard (Contact Author)

University of Burgundy - Institute of Business Administration Dijon (IAE) - CREGO (EA 7317) ( email )

2 Bd Gabriel
Dijon, 21000
France

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
27
Abstract Views
317
PlumX Metrics