Monopolist’s mark-up and the elasticity of substitution
This paper analyzes the mark-up of the price of a product over marginal costs for a monopolist using Appelbaum’s theoretical model. The profit maximization model of an industry that uses the monopolist’s product as its input is formulated. Our goal is to express the monopolist’s mark-up as a functio...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Croatian Operational Research Society
2017-01-01
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| Series: | Croatian Operational Research Review |
| Online Access: | http://hrcak.srce.hr/file/285557 |
| _version_ | 1798044904536932352 |
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| author | Ilko Vrankić Mira Krpan Tomislav Herceg |
| author_facet | Ilko Vrankić Mira Krpan Tomislav Herceg |
| author_sort | Ilko Vrankić |
| collection | DOAJ |
| description | This paper analyzes the mark-up of the price of a product over marginal costs for a monopolist using Appelbaum’s theoretical model. The profit maximization model of an industry that uses the monopolist’s product as its input is formulated. Our goal is to express the monopolist’s mark-up as a function of the elasticity of substitution for the respective industry and to analyze how changes in the elasticity of substitution affect the mark-up ratio. Consequently, the CES production function along with its substitution parameter is chosen. An analytical description of changes in the elasticity of substitution and its influence on the monopolist's mark-up is given. All scenarios are supplemented by geometrical illustrations, economic interpretations and numerical examples. |
| first_indexed | 2024-04-11T23:12:15Z |
| format | Article |
| id | doaj.art-a6ca1c7fb8df41edb574cf3645c869eb |
| institution | Directory Open Access Journal |
| issn | 1848-0225 1848-9931 |
| language | English |
| last_indexed | 2024-04-11T23:12:15Z |
| publishDate | 2017-01-01 |
| publisher | Croatian Operational Research Society |
| record_format | Article |
| series | Croatian Operational Research Review |
| spelling | doaj.art-a6ca1c7fb8df41edb574cf3645c869eb2022-12-22T03:57:48ZengCroatian Operational Research SocietyCroatian Operational Research Review1848-02251848-99312017-01-018237739010.17535/crorr.2017.0024193537Monopolist’s mark-up and the elasticity of substitutionIlko Vrankić0Mira Krpan1Tomislav Herceg2Department of Economic Theory, Faculty of Economics and Business, University of Zagreb, J. F. Kennedy 6, 10 000 Zagreb, CroatiaDepartment of Economic Theory, Faculty of Economics and Business, University of Zagreb, J. F. Kennedy 6, 10 000 Zagreb, CroatiaDepartment of Economic Theory, Faculty of Economics and Business, University of Zagreb, J. F. Kennedy 6, 10 000 Zagreb, CroatiaThis paper analyzes the mark-up of the price of a product over marginal costs for a monopolist using Appelbaum’s theoretical model. The profit maximization model of an industry that uses the monopolist’s product as its input is formulated. Our goal is to express the monopolist’s mark-up as a function of the elasticity of substitution for the respective industry and to analyze how changes in the elasticity of substitution affect the mark-up ratio. Consequently, the CES production function along with its substitution parameter is chosen. An analytical description of changes in the elasticity of substitution and its influence on the monopolist's mark-up is given. All scenarios are supplemented by geometrical illustrations, economic interpretations and numerical examples.http://hrcak.srce.hr/file/285557 |
| spellingShingle | Ilko Vrankić Mira Krpan Tomislav Herceg Monopolist’s mark-up and the elasticity of substitution Croatian Operational Research Review |
| title | Monopolist’s mark-up and the elasticity of substitution |
| title_full | Monopolist’s mark-up and the elasticity of substitution |
| title_fullStr | Monopolist’s mark-up and the elasticity of substitution |
| title_full_unstemmed | Monopolist’s mark-up and the elasticity of substitution |
| title_short | Monopolist’s mark-up and the elasticity of substitution |
| title_sort | monopolist s mark up and the elasticity of substitution |
| url | http://hrcak.srce.hr/file/285557 |
| work_keys_str_mv | AT ilkovrankic monopolistsmarkupandtheelasticityofsubstitution AT mirakrpan monopolistsmarkupandtheelasticityofsubstitution AT tomislavherceg monopolistsmarkupandtheelasticityofsubstitution |