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Linear Demand (linear + demand)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting66%

Selected Abstracts

Spatial Pricing Policies Reconsidered: Monopoly Performance and Location

JOURNAL OF REGIONAL SCIENCE, Issue 4 2001
Lin-Ti Tan
This paper reexamines the welfare implications of three pricing regimes (mill, uniform, and discriminatory) for a monopoly. Assuming linear demand and constant marginal costs, I show that with the introduction of endogenous location choice, uniform delivered pricing may provide the highest social welfare when demands in different markets are sufficiently heterogeneous; whereas discriminatory pricing always dominates uniform pricing when demands in different markets are similar. [source]

Innovation and the opportunity cost of monopoly

MANAGERIAL AND DECISION ECONOMICS, Issue 8 2008
Michael Reksulak
Innovation enables monopolists to lower their costs, expand their outputs, and reduce their prices. It is conventional to conclude that social welfare unambiguously increases as a result. Assuming linear demand and marginal cost, this paper shows, however, that innovation raises the opportunity cost of monopoly: as a firm enjoying market power becomes more efficient, greater amounts of surplus are sacrificed by consumers because of the progressive monopolist's failure to produce the new, larger competitive output. Innovation, in other words, increases the social value of competition by raising the deadweight cost of monopoly. Copyright © 2008 John Wiley & Sons, Ltd. [source]

A Generalized Oligopoly Model

METROECONOMICA, Issue 1 2002
Richard Watt
This paper generalizes and unifies the traditional quantity competition oligopoly models of Cournot and Stackelberg. Traditional oligopoly models predict that, under constant marginal costs, there will only be one market share (Cournot) or a single firm with a large market share and all others with the same market share (Stackelberg). Without altering the basic assumption set, in particular the assumptions of common marginal cost functions, perfect information and linear demand, the paper presents a general model that may be useful to explain many real-life situations of oligopoly competition, where many different market shares may coexist. Finally, it is shown that certain existing social welfare results are robust to the generalization. [source]

Optimal control of a revenue management system with dynamic pricing facing linear demand

OPTIMAL CONTROL APPLICATIONS AND METHODS, Issue 6 2006
Fee-Seng Chou
Abstract This paper considers a dynamic pricing problem over a finite horizon where demand for a product is a time-varying linear function of price. It is assumed that at the start of the horizon there is a fixed amount of the product available. The decision problem is to determine the optimal price at each time period in order to maximize the total revenue generated from the sale of the product. In order to obtain structural results we formulate the decision problem as an optimal control problem and solve it using Pontryagin's principle. For those problems which are not easily solvable when formulated as an optimal control problem, we present a simple convergent algorithm based on Pontryagin's principle that involves solving a sequence of very small quadratic programming (QP) problems. We also consider the case where the initial inventory of the product is a decision variable. We then analyse the two-product version of the problem where the linear demand functions are defined in the sense of Bertrand and we again solve the problem using Pontryagin's principle. A special case of the optimal control problem is solved by transforming it into a linear complementarity problem. For the two-product problem we again present a simple algorithm that involves solving a sequence of small QP problems and also consider the case where the initial inventory levels are decision variables. Copyright © 2006 John Wiley & Sons, Ltd. [source]

Welfare-Reducing Mergers in Differentiated Oligopolies with Free Entry,

THE ECONOMIC RECORD, Issue 273 2010
NISVAN ERKAL
Antitrust authorities regard the possibility of post-merger entry and merger-generated efficiencies as two factors that may counteract the negative effects of horizontal mergers. This article shows that in differentiated oligopolies with linear demand, all entry-inducing mergers harm consumer welfare. This is because if there is entry following a merger, it implies that the merger-generated efficiencies were not sufficiently large. Mergers which induce exit, owing to sufficiently high cost savings, always improve consumer welfare. [source]

ASYMMETRIC MULTIPRODUCT FIRMS, PROFITABILITY AND WELFARE

BULLETIN OF ECONOMIC RESEARCH, Issue 2 2009
George Symeonidis
L13; D43 ABSTRACT In a differentiated multiproduct Cournot duopoly with linear demand, industry profit usually falls (even though concentration rises) when the distribution of products across firms becomes more asymmetric, if the products are not very differentiated or the total number of products is large. Consumer surplus and overall welfare always fall as the degree of asymmetry increases. These results contrast with the conventional wisdom on the effects of firm heterogeneity and the links between concentration and industry profits. [source]