TY - JOUR
T1 - ON THE REVISITED ILLYRIAN MODEL AND PERVERSITY
T2 - THE CASE OF THE LONG‐RUN
AU - Kahana, Nava
AU - Weiss, Avi
PY - 1994/4
Y1 - 1994/4
N2 - The modified theory of the Illyrian firm was developed, in part, to correct a perversity exhibited by the traditional theory of the Illyrian firm — that output rises in response to a fall in output price or a rise in fixed costs. We show that while this revised model has solved the problem for the short‐run the problem remains in the long‐run, and this long‐run perversity may have important policy implications for the short‐run as well. We also show that the under‐production problem associated with the traditional LMF is mitigated (and perhaps even reversed) in the modified LMF.
AB - The modified theory of the Illyrian firm was developed, in part, to correct a perversity exhibited by the traditional theory of the Illyrian firm — that output rises in response to a fall in output price or a rise in fixed costs. We show that while this revised model has solved the problem for the short‐run the problem remains in the long‐run, and this long‐run perversity may have important policy implications for the short‐run as well. We also show that the under‐production problem associated with the traditional LMF is mitigated (and perhaps even reversed) in the modified LMF.
UR - http://www.scopus.com/inward/record.url?scp=84990482256&partnerID=8YFLogxK
U2 - 10.1111/j.1467-8586.1994.tb00583.x
DO - 10.1111/j.1467-8586.1994.tb00583.x
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AN - SCOPUS:84990482256
SN - 0307-3378
VL - 46
SP - 131
EP - 137
JO - Bulletin of Economic Research
JF - Bulletin of Economic Research
IS - 2
ER -