DYNAMIC PROBLEMS IN THE THEORY OF THE FIRM,
RAND CORP SANTA MONICA CALIF
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This paper extends the familiar analysis of the theory of the firm to dynamic deterministic situations. A method for obtaining the optimal time profile of production and sales for a firm facing known demand and cost schedules over n periods is discussed. Demand is assumed to be a function of the price charged during the period, anand costs include direct manufacturing expenses, inventory holding charges, and fixed or setup costs incurred when period production takes place. The purpose is to frame and solve the problem in terms and with techniques familiar to most economists. From a mathematical point of view, the analysis is another application of dynamic programming type procedures. From a conceptual and computational point of view, the approach heavily rests on standard constructs in economic theory, thus potentially offering added insight into the logic of the solution.