Regulating monopoly price discrimination
A monopolist sells its product in separated markets. The effects of requiring a uniform profit margin instead of monopoly pricing are assessed. A margin equal to the output-weighted arithmetic mean of the monopoly margins raises consumer surplus but reduces total output. When the margin equals the (...
| Main Author: | |
|---|---|
| Format: | Journal article |
| Published: |
Springer Verlag
2018
|
| Summary: | A monopolist sells its product in separated markets. The effects of requiring a uniform profit margin instead of monopoly pricing are assessed. A margin equal to the output-weighted arithmetic mean of the monopoly margins raises consumer surplus but reduces total output. When the margin equals the (lower) harmonic mean total output exceeds the monopoly level if the demand functions are convex, and social welfare rises. Extensions cover a uniform price- marginal cost ratio and a uniform margin when the initial price is uniform and costs differ. The analysis uses convexity relations and the implications of profit-maximization. |
|---|