A Monopolist Can Never Price in the Inelastic Range of a Demand Curve or Can It?1

C. W. Yang, C. B. Hawley, B. N. Huang and M. J. Hwang

The American Economist, 2011, vol. 56, issue 2, 108-117

Abstract: In this paper, we expand the double price elasticity theory developed by Greenhut, Hwang, and Ohta (1974) by including a general cost condition for a profit-maximizing monopolist, cartel, or price leader. Our model generalizes the conventional second-order condition as it incorporates the non-converging price elasticity. Contrary to the textbook prediction, a structural changes or an income effect in tobacco, crude oil and other demand inelastic markets can render the price elasticity of demand to oscillate for a long time but never reach its theoretical limit even in a very long time.

Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:sae:amerec:v:56:y:2011:i:2:p:108-117

DOI: 10.1177/056943451105600213

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