Sorry, Michael. I used the term "fixed cost function" to refer to a cost function that is fixed. When people use the term "fixed cost," they practically always assume that the cost function is fixed because they are practically always referring to a static setting. If the cost function is variable, as it would be if technology is changing, the fixed cost is like to vary as well, which makes the idea of fixed cost rather irrelevant to the analysis you seem to be using. If these words sound like nonsense, it is because I am trying to follow your lead of using static-analysis words to describe a dynamic situation. Just as we would not ordinarily do this, I find your use of the term "fixed cost" in a description of a dynamic setting to reveal confusion. But let me go on. Your dynamic analysis, as I read it, suggests that entrepreneurs would be afraid to invest because future costs of production are lower than existing costs of production. Of course, this is possible. But if it were true of every entrepreneur, there would be no investment at all. But there is a more important issue, it seems to me. Assuming that there is likely to be some investment and technological change, there is no public policy that would resolve this problem of high startup or overhead costs. A government could itself pay the startup or overhead costs. This could encourage investment. But technological change would make the government subsidy just as wasteful as the entrepreneur's investment. Surely, the economists of the era did not systematically make this mistake in reasoning. Let me repeat that the American economists of the era who I read were concerned with economies of scale and with combinations of, takeovers of, or predation on firms producing the same good or service. They were not concerned with Marshallian fixed cost. Perhaps you have a reference that could demonstrate the naivety of my interpretation? Or perhaps some economist of the era used the term "fixed cost" to refer to startup costs or to overhead costs in relation to the monopoly problem or economic inefficiency. I remain to be persuaded. With respect, Pat Gunning