Fixed cost, variable cost and the markup

Prof. Dr. Bertrand Koebel, University of Strasbourg

The distinction between fixed and variable cost is fundamental but quite neglected in production analysis. Few theoretical contributions have studied the substitutability between
fixed and variable inputs. Empirically, most specifications of production and cost functions assume that fixed cost are nonexistent. We extend the usual production function in order to allow each input to have a fixed and a variable part. It turns out that fixed cost can be either exogenous or endogenous. This paper characterizes and estimates both fixed and variable components of the cost function, investigates their heterogeneity over firms and study how fixed cost affect firm behavior in terms of price setting and input demand.

About the speaker
Bertrand Koebel is professor of Economics at the Faculty of Economics and Management at University of Strasbourg, and member of the research lab BETA. He joined the University of Strasbourg in 2004 after several doctoral and post-doctoral research fellowships at Mannheim,Magdeburg, and London. Bertrand Koebel's research is related to production analysis (duality, imperfect competition, technical change); econometrics (demand system specification, inequality constraints, nonlinear models); and labour economics (impact of technological change and international trade on skill groups)

Venue: Conference Room

Date: 28 June 2012

Time: 12:30 - 13:30