Generalized Cobb-Douglas Production Functions and Aggregate Production Efficiency by a Monopoly

Abstract

Increasing returns yields scale merits of production. Under these technologies monopoly may produce more output than two or more firms combined can do. However, increasing returns alone do not lead monopoly to achieve aggregate production efficiency. In this paper we consider an economy with one output, two inputs and two increasing returns technologies expressed by generalized Cobb-Douglas production functions and derive a sufficient condition for monopoly to lead aggregate production efficiency under increasing returns.