THE LAW OF DEMAND, POSITIVE SLOPING MARGINAL REVENUE, AND MULTIPLE PROFIT EQUILIBRIA |
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Authors: | JOHN P FORMBY STEPHEN LAYSON W JAMES SMITH |
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Abstract: | This paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized. Simple transformations of any well-behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping. For this reason, positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed. The existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility. |
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