By Alfred S. Eichner
This booklet presents either an evidence of the inflation which has bedeviled financial coverage within the West because the finish of global warfare II and a micro-economic idea to purge Keynesian versions of the Walrasian pressure derived from Marshall's ideas. by way of targeting what's taken to be the consultant enterprise enterprise of the 20 th century - the massive company or megacorp - the microeconomic version awarded within the booklet reverses the standard assumptions of financial research. rather than assuming the lifestyles of businesses with out regulate over costs, the ebook examines how the megacorp makes use of its pricing energy to finance its personal inner fee of progress. the result's a determinant version of the way costs are set lower than this type of oligopolistic stipulations which be triumphant in most up-to-date industries in the course of the global.
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Extra resources for The Megacorp and Oligopoly: Micro Foundations of Macro Dynamics
There are three other characteristics - each of which requires a specific modification of the conventional microana lytical apparatus - that define the megacorp as the representative firm in oligopoly. These characteristics are ( 1 ) the separation of management from ownership, this leading to a different behavioral pattern from that usually assumed in pricing models , 1 (2) multi-plant operation with fixed factor, or technical , coefficients, this producing a different set of cost curves, and (3) membership in at least one oligopolistic industry, this giving rise to a different type of revenue curve for the individual firm.
This means that the marginal cost curve for the firm as a whole will rise in step-like fashion, as shown in figure 2, the number of steps depending on the number of operating cost differen tials among the plant segments. At the same time, the higher average variable cost of any marginal plant or plant segment, when added to or subtracted from the average variable costs of the other plant segments, will cause the overall average of per unit direct costs to increase as output expands. This means that the average variable cost curve for the firm as a whole will also rise, though more slowly than the marginal cost curve.
Berle and Gardiner C. Means in their classic 1933 volume , has now been confirmed by a more recent study. 2 While a comparable investigation has yet to be made of lesser corporations, there is no reason to assume that the phenomenon is limited only to the 200 largest such firms. This separation of management from ownership, a characteristic observed in other countries with a similarly well developed market-type of economy, reflects two historical trends: first, the proliferation of stockholders in large corporations over time as personal considerations have necessitated the selling off of portions of the original blocks of 19 20 The nature of the megacorp stock and, second, the indispensability of professional, technically trained managers for the successful operations of a large company.