产业组织理论第四版 chapter4

MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGECHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMSDr.XiaoyongCaoSchoolofInternationalEconomicsandBusinessUniversityofInternationalBusinessandEconomicsSpring,2010CHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(1/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGEContents1MONOPOLYBEHAVIORSingleProductMultiProduct2THECOSTSANDBENEFITSOFMONOPOLY3CREATINGANDMAINTAININGAMONOPOLY4PROFITSANDMONOPOLY5MONOPSONY6DOMINANTFIRMWITHACOMPETITIVEFRINGECHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(2/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGESINGLEPRODUCTMULTIPRODUCTOutline1MONOPOLYBEHAVIORSingleProductMultiProduct2THECOSTSANDBENEFITSOFMONOPOLY3CREATINGANDMAINTAININGAMONOPOLY4PROFITSANDMONOPOLY5MONOPSONY6DOMINANTFIRMWITHACOMPETITIVEFRINGECHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(3/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGESINGLEPRODUCTMULTIPRODUCTTheInverseElasticityRuleDemand:q=D(p)andinversedemand:p=P(q).c=C(q)andD0(p)0.Theproblemofthemonopoly,choosingp=pmtomaximizemaxp[pD(p)-C(D(p))].FOC:D(pm)+pmD0(pm)=C0(D(pm))D0(pm)whichisequivalenttopm-C0(D(pm))=-D(pm)D0(pm)or(=-D0pmD)pm-C0pm=1theleftsideisprice-costmargin,whichisalsocalledastheLernerIndexofmarketpower.Therelationshipbetweenprofitmaximizationandrevenuemaximization.CHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(4/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGESINGLEPRODUCTMULTIPRODUCTTheInverseElasticityRuleRewritetheFOCMR(qm)P(qm)+P0(qm)qm=C0(qm).RelativeMarkuppm-MCpm=1:LennerIndex.Someremarks:Socialoptimalpricep,pmp.Monopolyoperatesinapriceregionsuchthattheelasticityofdemandexceeds1.Monopolypricingisanondecreasingpriceofmarginalcost.CHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(5/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGESINGLEPRODUCTMULTIPRODUCTProfitMaximizationAmonopolycansetitspriceaboveitsmarginalcostbutdoesnotnecessarilymakeasupracompetitiveprofit.(FixedCost)Itiscommonpracticetosaythatwheneverafirmcanprofitablysetitspriceaboveitsmarginalcostwithoutmakingaloss,ithasmonopolypowerormarketpower.Ifimprovingtheefficiencyofoperationsincreasesprofits,thefirmshoulddoit,whetheritisamonopolyoracompetitor.Amonopolymaynothavethesameabilitytoproduceasefficientlyasacompetitivefirm.Amonopolymayoperateintheinelasticportionofitsshort-rundemandcurvetoavoidlong-runsubstitution.CHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(6/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGESINGLEPRODUCTMULTIPRODUCTDependentDemandsandSeparableCostsC(q1,q2,


,qn)=Pni=1Ci(qi)FOCleadstopi-C0ipi=1ii-Xj,i(pj-C0j)DjijRiiiAllgoodsaresubstitutes:Allgoodsarecomplements:someLernerindexmaybenegative.CHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(7/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGEOutline1MONOPOLYBEHAVIORSingleProductMultiProduct2THECOSTSANDBENEFITSOFMONOPOLY3CREATINGANDMAINTAININGAMONOPOLY4PROFITSANDMONOPOLY5MONOPSONY6DOMINANTFIRMWITHACOMPETITIVEFRINGECHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(8/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGETheCostsandBenefitsofMonopolyMonopolycreatesadeadweightlossasataxdoes.Ponserarguesthatthemonopolyprofitsmayalsorepresentsalosstothesocietytotheextentthatitcreatesincentivesforafirmtouserealresourcestobecomeamonopoly.(rentseeking)HerecalculatestheDWLfromregulatedandunregulatedmonopoly,whichexceedspreviousestimates.Ifthisistrue,therecentrescindingofmanygovernmentregulationswillprovidesizablebenefitstothesociety.CHAPTER4:MONOPOLIES,MONOPSONIES,ANDDOMINANTFIRMS(9/26)MONOPOLYBEHAVIORTHECOSTSANDBENEFITSOFMONOPOLYCREATINGANDMAINTAININGAMONOPOLYPROFITSANDMONOPOLYMONOPSONYDOMINANTFIRMWITHACOMPETITIVEFRINGETheCostsandBenefitsofMonopolyAnexamplewithlineardemand,seepp.97.Asthedemandcurvebecomeslesselasticatthemonopolyequilibrium,peopleaslesswillingtodowithoutthisgood:anincreaseinpricecausesthequantitytheypurchasetofalllessthanifdemandweremoreelastic.Asthedemandcurvebecomessteeperatagivenquantity,thedeadweightlossincreases.Thewelfareharmsfrommonopolymaybeoffsetbyseveralbenefits.Forexample,theprospectofreceivingmonopolyprofitsmaymotivatefirmstodevelopnewproducts,improveproducts,orfindlower-costmethodsofmanufacturing.Ifmonopolyhadnooffsettingbenefits,competitionwouldbepreferable.CHAPTER4:M