Questions tagged [monopoly]

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

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22
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3answers
3k views

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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2answers
2k views

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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3answers
500 views

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 ...
9
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1answer
401 views

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 $W$. ...
7
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4answers
5k views

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 ...
7
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4answers
1k views

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 ...
7
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3answers
885 views

What are good books about monopolies and market failures?

Is there a good undergraduate level book specifically about economic monopolies and market failures?
7
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3answers
751 views

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 ...
7
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2answers
2k views

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 ...
7
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1answer
239 views

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 ...
7
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1answer
1k views

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 $\...
6
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103 views

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 ...
5
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3answers
991 views

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 ...
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4answers
677 views

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 ...
4
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2answers
19k views

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?
4
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1answer
139 views

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 ...
4
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2answers
10k views

How can the abuses of monopoly power lead to market failure?

So 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 monopoly's face a lack of competition, they have no incentive to improve ...
4
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1answer
101 views

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 ...
4
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1answer
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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 ...
4
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2answers
3k views

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 ...
4
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3answers
3k views

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(...
4
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1answer
235 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 ...
3
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2answers
91 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 ...
3
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1answer
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 ...
3
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1answer
69 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 ...
3
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1answer
119 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 ...
3
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1answer
48 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 ...
3
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1answer
116 views

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 ...
3
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1answer
52 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 ...
3
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2answers
1k 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 ...
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2answers
4k 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 ...
3
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2answers
792 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 ...
3
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1answer
241 views

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 ...
3
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1answer
172 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 ...
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2answers
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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 ...
2
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1answer
17k views

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 ...
2
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1answer
39 views

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 ...
2
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1answer
199 views

How much is someone willing to pay to own a monopoly?

I'm currently working on a problem from Intermediate Microeconomics Workouts by Varian and I've become stuck on a particular question to do with monopolies. We are given the demand curve for a ...
2
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1answer
234 views

What exactly is a trust?

In my history class, we're studying the Industrial Revolution and how Rockefeller came to dominate the oil industry with his Standard Oil company. According to our textbook, a man named Samuel Dodd (...
2
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1answer
21 views

Does the theory of contestable markets apply to industries where there is a natural monopoly?

The theory contestable markets requires that there be no barriers to entry, no sunk costs, and access to the same level of technology. I know common industries that have natural monopolies (like ...
2
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1answer
346 views

Elasticity of Supply for a Monopolist

Is the supply of output for a monopolist less elastic than that of a perfectly competitive firm with the same production function? On one hand, it seems impossible to calculate the elasticity of ...
2
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1answer
209 views

Can monopolistic dead weight loss persist without government intervention? If so how?

Can monopolistic dead weight loss persist without government intervention? If so how? I am researching monopolies and find dead weight loss proposed as an evil of monopolies but i can not find any ...
2
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2answers
172 views

Effect on monopoly price

Suppose a monopolist adopts a technology that allows him to produce his product at lower cost. What is the likely effect on the monopoly price ?
2
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2answers
225 views

Help trying to find Economic Profit for a Monopoly

I'm given a demand function ( $p = 60-.002q$), Marginal Cost (\$10) and Fixed Costs (\$300,000) for a monopoly. I've figured the profit maximizing output and price: Marginal revenue function $MR = ...
2
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1answer
92 views

Can't government experiment on price in the case of a monopoly?

In the lecture given by Jon Gruber at MIT, he talks about the governmental regulations on monopolies, and he states that (in short) for government to regulate a monopoly, it needs to know the price ...
2
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1answer
4k views

Block pricing vs Perfect price discrimination

I have just learned about Perfect price discrimination and block pricing. And I was wondering, in the case of these two graphs Block pricing & Perfect price discrimination. Why, in case of the ...
2
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1answer
115 views

How effective is progressive tax at regulating monopoly?

Regardless of the morality of progressive taxes, the economical benefit of progressive tax is at least debatable. But could a highly progressive tax replace at least some of the american/european anti-...
2
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1answer
179 views

Does a perfectly price discriminating natural monopoly cause externalities or any type of market failure?

In perfect price discrimination, all mutually beneficial trades take place, the natural monopoly captures 100% of the surplus, and pareto efficiency is achieved. However, I've read various sources ...
2
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0answers
183 views

The pricing of complementary goods if one of them is purchased only once

Sorry for asking a homework question, however, I'll try to generalize it as much as possible for a future use. There are two complementary goods (A and B). B is produced under perfect competition, ...
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Why are so many pharmaceutical drugs so expensive? [closed]

In the US, the drug sofisbuvir, brand name sovaldir, and used to treat liver disease hepatitis C, was launched with a price tag of $1000 a pill; and in the UK, the manufacturer Gilead recommended a ...