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Questions tagged [monopoly]

A market structure in which there is a single firm acting as supplier.

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Why is collective bargaining by a group of employees not the same thing as price-fixing?

Employees sell their labor for wages. If a critical mass of employees get together and demand higher wages, how is this not the same thing as a critical mass of merchants illegally fixing the price of ...
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Monopolies are just a mathematical misunderstanding

A little head-scratcher (and a good example why we should be careful with notation). Consider a profit maximizing monopoly, that solves over price $$\max \pi = PQ(P) - C(Q(P)) \tag{1}$$ Following ...
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4 answers
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Has monopoly theory incorporated network effects as a source of monopoly?

I studied industrial organization for my Econ. Ph.D. four decades ago. At that time industrial organization had no way to incorporate 'network effects' into monopoly theory. With the advent of social ...
Andrew's user avatar
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Price discrimination- how much is optimal?

I am of the understanding that as a general rule, price discrimination does not benefit consumers. Yet I can think of a situation where it does. Look at two countries, Australia and India. The price ...
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For what demand function is a monopoly most harmful?

Consider a firm with zero marginal cost. If it gives the product for free, then all the demand is satisfied and the social welfare increases by the maximum possible amount; call this increase $W$. ...
Erel Segal-Halevi's user avatar
8 votes
3 answers
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Can a monopoly INCREASE the market surplus compared with a competitive market?

Monopolies are often blamed for DWLs(Dead Weight Losses), while competitive markets believed to work without DWLs (assuming zero taxes/subsidies and zero externalities). But I think I found an ...
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Do companies have non compete agreements between each other?

Do companies also know for a better lack of words armistice? When searching for non compete agreements everything that comes up are agreements between companies and employees, but do whole companies ...
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Can destruction be profitable?

We often see news that some company destroys items they couldn't sell in time. Also we can see news of supermarkets destroying food just because it's not fresh although it's perfectly edible. If ...
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What are good books about monopolies and market failures?

Is there a good undergraduate level book specifically about economic monopolies and market failures?
good_one's user avatar
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Why don't consumers subsidize monopolies?

Monopolies don't maximize welfare because they set prices above the equilibrium price, leading to dead-weight loss. It is possible for the government to provide a per unit subsidy to a monopoly until ...
InquisitivePerson's user avatar
7 votes
1 answer
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How to determine the price a monopolist will set when the demand curve the firm faces isn't known?

I'm reviewing the following question from my microeconomics course notes. I don't understand how to do part (b). A firm faces a perfectly elastic demand curve because the product it sells has a ...
josh milligan's user avatar
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Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
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Modelling Pay what you want

I have been trying to model a Pay What you Want scheme. Now, for a monopoly it is clear that monopoly will have more profit by setting monopoly pricing assuming all players are selfish. But consider a ...
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The Backward Bending Supply Curve, Asymmetric Information, and Monopoly

This recent question about when monopoly is undesirable made me curious about when monopoly is actually desirable? I was reminded of an argument for the efficiency of monopolies when moral hazard ...
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How can the abuses of monopoly power lead to market failure?

I know that the abuses of monopoly power can cause market failure, but I don't know why that is. I am guessing that because monopolies face a lack of competition, they have no incentive to improve ...
user7848's user avatar
5 votes
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Monopolies on Giffen Goods

I’m taking an intermediate microeconomics course in college and just got to the topic of monopolies. I know the concept of a Giffen good. As always, Revenue is given by $R= Pq$. Since the monopoly has ...
Nicolas Torres's user avatar
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Clarification about Market Structure Oligopoly or Monopoly

As per the definition i found in the internet, Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. Monopoly, where there is only ...
Rajneesh Kumar Gobin's user avatar
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1 answer
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What has been the reception of Posner & Weyl’s claim that property rights lead to market power?

Posner & Weyl claim that property rights lead to monopoly rents: Property Is Only Another Name for Monopoly Radical Markets Have their claims been elaborated, tested, or peer-reviewed? In ...
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Can marginal revenue be increasing?

As per my calculations, the derivative of the MR curve is given by: $MR'(q)=2p'(q)+qp''(q)$, where $p(q)$ is the inverse demand curve. Therefore,for a downward sloping demand curve, if the second ...
Student's user avatar
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Is there a class of demand functions that deliver equal surplus to consumers and a monopolist?

Consider a market with a monopolist firm that has zero marginal cost and faces demand $D(p;\mathbf{a})$, where $\mathbf{a}$ is a vector of parameters and $p$ is the price. The monopolist maximizes ...
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Hayek's defense of competition regulation

This article claims Hayek endorsed competition regulation: As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from ...
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Monopoly pricing under constant elasticity of demand

While reading Ch. 24-Monopoly from Intermediate Microeconomics by Hal Varian (8 th edition), on pg. 441, he writes that a monopolist will never choose to operate where the demand curve is inelastic. I ...
Dhruv Goel's user avatar
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Monopoly firm's block pricing strategy making max. profit

I have question about max. profit condition for monopolist block pricing. I learned that to maximize profit in block pricing, given a linear demand curve function and constant MC, calculate $Q_2(...
gungungom's user avatar
4 votes
1 answer
288 views

Extraction and royalty time path for a non-renewable resource under a monopolist assumption

I am trying to understand the time path of extraction and royalty (price) for a non-renewable resource under a monopolist framework. The problem is that in the main books on environmental/resource ...
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Why companies choose to make zero economic profits in the long-term when it can maximize it instead? Why does Apple have large profit margins?

I read that companies in the monopolistic competition make zero economic profit in the long term. Why would a company do that when it can maximize the profit instead? My reasoning is that the former ...
Isa's user avatar
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Why is the Marginal Cost (MC) of a monopoly horizontal

I presume it's because they're price makers, but this doesn't really answer much. Furethermore, in a monopoly is it Marginal Cost or Long run marginal cost that's horizontal?
tsp216's user avatar
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Two part tariff-income effects

I understand that a monopolist optimally sets a two-part tariff by pricing at marginal cost and then extracting CS as a lump sum fee. However, wouldn't the lump sum fee induce a decrease in consumer ...
TariffMan's user avatar
3 votes
2 answers
134 views

What are possible solutions when promoting competition is not applicable?

Usually, more competition means lower prices and higher quality as less effective businesses go out of business. However, it appears that it's not always the case. When there're a lot of health ...
Sergey Zolotarev's user avatar
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1 answer
64 views

$p(0)\geq c'(0)$ in monopoly

$p(0)\geq c'(0)$ is assumed so that the inverse demand curve originates above the marginal cost curve. But what is the intuition behind this assumption? The highest willing-to-pay consumer is more ...
Frank Swanton's user avatar
3 votes
1 answer
1k views

Why does demand curve shift in, in a monopolistic competitive market?

In a monopolistic competitive market, demand curves shift in, if more firms enter the market. I can't seem to wrap my head around it. Demand remains the same, supply has increased. Shouldn't entry of ...
NeoButFemale's user avatar
3 votes
1 answer
130 views

Efficiency in a market that is both a monopoly and a monopsony

We know that market power in general leads inefficient outcomes (in terms of Pareto efficiency). This makes instinctive appeal as, for example, a powerful seller who has a lot of market power can ...
Ishan Kashyap Hazarika's user avatar
3 votes
1 answer
89 views

Will the monopolist inevitably increase the price if demand grows?

Supposing that demand for a product in a monopolised market has grown, is it possible that equilibrium price will go down? In most cases we simply draw curves D, MR, MC and make conclusions. I ...
Dahn's user avatar
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3 votes
1 answer
202 views

3rd Degree Price Discrimination

I came across a True/False question in my economics problem set: Is the following statement true or false? "A monopolist can practice third-degree price discrimination in the two markets it ...
kyusj's user avatar
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3 votes
1 answer
139 views

Comparative statics of a monopoly

Consider a profit maximising monopolist with linear demand Q(P*) and total production cost C(Q(P*)) who faces a per unit tax t. Suppose the slope of marginal cost is decreasing in some parameter, μ. ...
Javid's user avatar
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1 answer
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Why do anti-trust regulators in China need to approve NXP's takeover?

Qualcomm is currently awaiting Chinese regulatory approval for its acquisition of rival NXP. Both companies aren't based in China. I'd understand that vehicles like tariffs can be used by countries ...
Mussé Redi's user avatar
3 votes
1 answer
65 views

Simplifying a monoplist's objective function under incomplete information

I am working through Rochet and Stohle (2003) chapter on multi-dimensional screening, and I am struggling filling in the blanks between equation (2.1) p. 154, and its simplified form on page 155. In ...
Boaten's user avatar
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2 answers
409 views

Does profit maximization imply cost minimization in both pure competition and monopoly?

How do I show that profit maximization implies cost minimization (in pure competition)? Suppose we only consider inputs $l,k$ whose prices are $w,r$ and output price $p$. Profit is $\pi = pf(k,l) - wl ...
Rick_Morty's user avatar
3 votes
3 answers
242 views

Are monopolies almost always a creation of government intervention?

In this video by John Stossel the libertarian economist Daniel J. Mitchell states the following: ...
CuriousIndeed's user avatar
3 votes
2 answers
2k views

Price discriminating monopolist question

A price discriminating monopolist sells in two markets. Inverse demand in market 1 is given by: $$P_1(Q_1) = 80 - (1/2)Q_1$$ and inverse demand in market 2 is given by: $$P_2(Q_2) = 100 - Q_2$$ The ...
mizichael's user avatar
3 votes
2 answers
9k views

Effect of a subsidy on a monopoly

I'm trying to understand how a subsidy on a monopoly would affect the deadweight loss. I know a subsidy shifts the marginal cost curve downwards, creating a new equilibrium price (price decreases) and ...
Irene Castañeda's user avatar
3 votes
2 answers
855 views

What are examples of natural monopolies that don't have overwhelming economies of scale?

On wikipedia, I read that the currently-used formal definition of a natural monopoly is where “[a]n industry in which multi-firm production is more costly than production by a monopoly”. I tried ...
B T's user avatar
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1 answer
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Monopoly second degree discrimination - two part tariff

In a Monopoly with second degree discrimination - two part tariff will the consumer with higher demand always pay a higher entrance fee and lower unit price than the cunsumer with lower demand or is ...
Doron's user avatar
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1 answer
203 views

Monopoly with price discrimination

A city has a single electricity supplier. Electricity production cost is $c$ per unit. Utility function $U(q,t)=a\ln(1+q) - t$, where $q$ is electricity consumption and $t$ is electricity tariff. What ...
light 's user avatar
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2 answers
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Monopoly and Taxes (Nicholson Exercise)

Hello I'm working through Microeconomic Theory : Basic Principles and Extensions of Nicholson and Snyder 10e, for an exam and I fail to get how to answer this question (p.517) : A specific tax is a ...
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1 answer
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Why is AC = MC in the monopoly?

Using the Microeconomic Theory Basic Principles and Extensions, Nicholson, W. and Snyder, C., I've reached to the point where Monopoly and Imperfect Competition is discussed (Chapter 14 and 15 to be ...
dekio's user avatar
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1 answer
278 views

Price in Second-degree Price Discrimination

In 2nd degree price discrimination, the producer only knows that there are different consumer groups who have different demand curves. He thus adjusts the quantity/quality of the product in a way that ...
Marta's user avatar
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2 votes
1 answer
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How price is determined in the following monopoly model question?

I am studying microeconomics, and got stuck on the following question, specifically, part (b) and part (c): A monopoly-owned retail store is located next to a monopoly-owned parking lot. (The store ...
Grand Minister's user avatar
2 votes
2 answers
2k views

Pareto Improvement with Monopolies

This may be one of the more 'elementary' questions on this site.. But I really can't wrap my head around it and a search on the web hasn't yielded much. Given that Pareto efficiency is defined as when ...
shine yang's user avatar
2 votes
1 answer
392 views

Monopoly: Demand Curve and Marginal Revenue Curve Intercepts

I'm doing an introductory economics course, having never done economics before. In our topics, we covered monopoly and the principle that the marginal revenue slope is twice that of the demand slope. ...
E P's user avatar
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1 answer
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What is the difference between the demand schedule and the demand curve?

What is the difference between the demand schedule and the demand curve that a monopolist or monopsonist has? Could someone provide details for both cases or even some paradigm or a graph. I can not ...
Hunger Learn's user avatar