ABSTRACT
Recently there has been a discussion (Eichner, 1973) and series of exchanges (Hazledine, 1974; R. Robinson, 1974; Eichner, 1974, 1975; De Lorme and Rubin, 1975) concerning the determination of the size of margins in industries characterized by ‘oligopoly-cum-price leadership’ (Kaldor, 1970, p. 3). The focus of the discussion has been the demand for and supply of finance for investment purposes obtained as a result of varying the firm’s mark-up policy. One element of the investment decision, its finance aspect, has been singled out as a prime determinant of the mark-up under oligopoly. However, in principle, three main decisions with regard to investment expenditure may be distinguished (the decisions, of course, may be made simultaneously): first, the amount of extra capacity to be laid down each period; second, the sort of investment to be done, that is, the choice between alternative ways of producing the same product; and third, the method and cost of finance. 1 The main aim of this article is to incorporate all of these aspects of the investment decision into a theory of the determination of the mark-up. It will become obvious as the argument proceeds that we are extending Salter’s pioneering analysis of technical progress and the investment decision (Salter, 1960) into a non-perfectly competitive setting.
