Bhagwati extended Modigliani's model in two directions. Firstly, he incorporated two additional determinants of the limit price in Modigliani's expression. Secondly, he introduced a term which renders the limit-price theory dynamic, in the sense that it can predict the changes in the limit price arising from a growing market. The two factors which Bhagwati introduced into Modigliani's model are the [...]
The Model of Franco Modigliani of Limit-Pricing: Assumptions, Preparation and Other Details! The Assumptions of the Model: Modigliani relaxed the restrictive assumptions which underlie Sylos's model, but retained the assumption of scale-barriers and the behavioural pattern of Sylos's Postulate. Modigliani's assumptions may be stated as follows: 1. The technology is the same for all firms in the industry. There is [...]
Sylos-Labini developed a model of limit-pricing based on scale-barriers to entry. His model is clumsy, due to its unnecessarily stringent assumptions and the use of arithmetical examples. However, his analysis of the economies-of-scale barrier is more thorough than that of Bain. He highlighted the determinants of the limit price and discussed their implications, thus providing the basis for Modigliani's more [...]