Firm Behavior in Monopolistic Markets

Martin Kolmar and Magnus Hoffmann
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Martin Kolmar: University of St. Gallen

Chapter 10 in Workbook for Principles of Microeconomics, 2018, pp 133-171 from Springer

Abstract: Abstract 1. The optimality condition “marginal costs = marginal revenues” characterizes the optimality condition only in a monopolistic but not in a perfectly competitive market. 2. Assume a non-price-discriminating monopolist who faces a decreasing demand function. Marginal revenues can be decomposed into a price and a quantity effect, and the price effect is always smaller than the quantity effect. 3. Assume a non-price-discriminating monopolist. Marginal revenues consist of a price and quantity effect. The price effect is always larger than the price effect under perfect competition. 4. If a firm owns a patent for a product, it can enforce prices above marginal costs, because the patent leads to a monopoly.

Keywords: Marginal Revenue; Decreasing Demand Function; Effect Amounts (QE); Perfect Price Discrimination; Discriminatory Pricing (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-3-319-62662-8_10

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