Book contents
- Frontmatter
- Contents
- List of tables and figures
- List of propositions
- Preface
- Glossary of symbols
- Introduction
- 0 A preliminary view of capital utilization
- Part I Shift-work and the theory of the firm
- 1 Cost minimization
- 2 Specific functional forms: additional results
- 3 Profit maximization
- Part II Estimation
- Part III Results
- Part IV Implications
- References
- Index
3 - Profit maximization
Published online by Cambridge University Press: 05 March 2012
- Frontmatter
- Contents
- List of tables and figures
- List of propositions
- Preface
- Glossary of symbols
- Introduction
- 0 A preliminary view of capital utilization
- Part I Shift-work and the theory of the firm
- 1 Cost minimization
- 2 Specific functional forms: additional results
- 3 Profit maximization
- Part II Estimation
- Part III Results
- Part IV Implications
- References
- Index
Summary
In the previous chapters the analysis has relied on the assumption that the level of output that the firm plans to produce during the day will be the same for all systems of operation. With this assumption, profitmaximizing behavior leads to the same results as cost-minimizing behavior. In this chapter we shall investigate the consequences of relaxing this assumption for the previously established results, and we shall establish several additional results.
In the next section we discuss the issues that arise for the analysis of the shift-work decision when each system operates at its optimal level of output under the criterion of profit maximization. The discussion of these issues suggests the need to analyze the decision to work shifts under two different types of technologies. This analysis is undertaken in Section 3.2 under the assumption of a constant-β technology, which is a technology such that the degree of economies of scale is independent of the level of output. The results presented in this section are by and large available in the literature, primarily in the work of Clague (1975, Section II) and Millan (1975, Chapter 3). As a matter of fact, one of the main conclusions of this section is that the cost ratio discussed in earlier chapters always provides an accurate guide to the choice of system under profit maximization (Proposition 6A), and this conclusion is available in our earlier work (Betancourt and Clague 1975, footnote 13).
- Type
- Chapter
- Information
- Capital UtilizationA Theoretical and Empirical Analysis, pp. 44 - 64Publisher: Cambridge University PressPrint publication year: 1981