Optimal control of price through restricted production

Steven A. Lippman and Wayne L. Winston

Naval Research Logistics Quarterly, 1981, vol. 28, issue 3, 463-474

Abstract: Consider a regulated monopolist whose current profits would be maximized if they could charge a price p̄, where p̄ exceeds the current market price. By reducing production below current consumer demand the monopolist can create an illusion of a shortage and induce the regulator to allow a price increase. Conditions are given for which the production rate that maximizes the monopolist's expected discounted profits over an infinite horizon will have the property that the amount of unsatisfied consumer demand will be a non‐increasing function of current market price.

Date: 1981
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Persistent link: https://EconPapers.repec.org/RePEc:wly:navlog:v:28:y:1981:i:3:p:463-474

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