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Do Profit Maximizers Take Cold Showers?, Neil Campbell, Jeffrey Kline
Do Profit Maximizers Take Cold Showers?, Neil Campbell, Jeffrey Kline
Neil Campbell
A firm takes a "cold shower" if removal of a protective subsidy induces investment in a cost-reducing technology. We show that if the investment lowers marginal cost everywhere, then profit maximizers never take cold showers. However, if the investment does not lower marginal cost everywhere, a profit maximizer may take a cold shower.