Production theory with profit‐constrained revenue‐maximization: The duality approach

This paper derives a general version of Baumol's production theory, where the main behavioral assumption is ‘revenue maximization subject to a profit constraint’ instead of ‘profit maximization’. This theory turns out to be analogous to the neoclassical (competitive) production and consumption theories. Employing the fruitful duality approach it is presented here in a unified and very economical form that provides a complete and general analysis of the comparative static behavior of Baumol's firm.