Efficient demands in a multi-product monopoly

Kai Hao Yang

Journal of Economic Theory, 2021, vol. 197, issue C

Abstract: This paper characterizes the efficient market demands among those with a fixed surplus level in a multi-product monopoly, where the monopolist is able to produce a continuum of quality-differentiated products with a cost function that is convex in quality. We show that any efficient market demand must be affine-unit-elastic. This further reduces the problem of characterizing the efficient frontier to a finite dimensional constraint optimization problem. From this characterization, it follows that deadweight losses are positive even under efficient demands; that both consumer surplus and total welfare are nonmonotonic in cost; and that the monopolist sells at most two distinct quality levels under any efficient market demand.

Keywords: Multi-product monopoly; Second-degree price discrimination; Upgrade markets; Efficient demand; Affine-unit-elastic demand; Technology (search for similar items in EconPapers)
JEL-codes: D42 D82 L11 L12 L15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:197:y:2021:i:c:s0022053121001472

DOI: 10.1016/j.jet.2021.105330

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