In simulating the long-run effects of changes in protection, Abayasiri-Silva and Horridge (hereafter A-S and H) reach a striking conclusion: ‘AGE models which assume CRTS and perfect competition [PC] also treat some types of IRTS and imperfect competition [IPC] quite accurately’. This result can be understood via Figure 14.7, whose axes indicate the number of firms (N) in an industry and the average markup (R) defined by
where P is product price and M is variable cost per unit of output.


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  1. Bloch, H. (1992), ‘Pricing in Australian Manufacturing’, The Economic Record, 68, 365–76.CrossRefGoogle Scholar
  2. Hall, R.E. (1988), ‘The Relation Between Price and Marginal Cost in US Industry’, Journal of Political Economy, 96, 921–47.CrossRefGoogle Scholar

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© Palgrave Macmillan, a division of Macmillan Publishers Limited 1998

Authors and Affiliations

  • Peter B. Dixon

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