Average Cost and Marginal Cost Pricing in Marshall: Textual Analysis and Interpretation

Abstract

This paper proposes a textual analysis of Marshall’s theory of firm pricing behavior under competitive conditions. It considers to what extent average cost and marginal cost pricing rules characterize Marshall’s competitive partial equilibrium, and it shows that the two rules differ for origins and can be reconciled only with great difficulty in a general equilibrium framework.Marshall, classical competition, perfect competition, marginal and average cost