On three welfare properties of monopoly in bilateral exchange

Francesca Busetto, Giulio Codognato, Sayantan Ghosal and Damiano Turchet

Journal of Mathematical Economics, 2025, vol. 119, issue C

Abstract: We establish three welfare properties of the model of monopoly introduced by Busetto et al. (2023), where one commodity is held only by the monopolist, represented as an atom, and the other is held only by small traders, represented by an atomless part. First, we prove that a monopoly allocation is Pareto optimal if and only if it is an allocation which corresponds to an efficiency equilibrium. Second, we reformulate a paradox, due to Shitovitz (1997), to show that for any monopoly allocation there is another core allocation, distinct from both a monopoly allocation or a Walras allocation, which is, utility-wise, advantageous for the monopolist and nonadvantageous for the small traders. Finally, we prove a theorem which shows that monopoly is advantageous for the monopolist and nonadvantageous for each trader in the atomless part with respect to all Walras allocations which are not monopoly allocations.

Keywords: Monopoly; Bilateral; Exchange; Welfare (search for similar items in EconPapers)
JEL-codes: D42 D51 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:119:y:2025:i:c:s0304406825000643

DOI: 10.1016/j.jmateco.2025.103147

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