TY  - RPRT
        AU  - Dasgupta, Indraneel
        TI  - Supply Theory sans Profit-Maximization
        PY  - 2009/Feb/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 4018
        UR  - https://www.iza.org/publications/dp4018
        AB  - We utilize the analytical construct of a stochastic supply function to provide an aggregate representation of a finite collection of standard deterministic supply functions. We introduce a consistency postulate for a stochastic supply function that may be satisfied even if no underlying deterministic supply function is rationalizable in terms of profit maximization. Our consistency postulate is nonetheless equivalent to a stochastic expansion of supply inequality, which summarizes the predictive content of the traditional theory of competitive supply. A number of key results in the deterministic theory follow as special cases from this equivalence. In particular, it yields a probabilistic version of the law of supply, which implies the traditional specification. Our analysis thus provides a necessary and sufficient axiomatic foundation for a de-coupling of the predictive content of the classical theory of competitive firm behavior from its a priori roots in profit maximization, while subsuming the traditional theory as a special case.
        KW  - supply aggregation
KW  - stochastic consistency
KW  - stochastic supply inequality
KW  - stochastic supply function
KW  - law of supply
KW  - weak axiom of profit maximization
        ER  -