Optimal Product Proliferation in Monopoly: A Dynamic Analysis

Luca Lambertini ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: The monopolist s incentives towards product proliferation are evaluated in an optimal control model considering three alternative regimes: profit-seeking; social planning; and a hybrid case with monopoly pricing and a regulator setting product innovation to maximise welfare. In equilibtium, the profitseeking firm supplies a socially suboptimal number of varieties to reduce cannibalisation while the social planner exploits the same effect to satisfy consumers love for variety and decrease the market price of all products. In terms of the Schumpeter vs Arrow debate on the relationship between market structure and innovation incentives, the results obtained in this model have a definite Arrovian flavor

Date: 2008-10
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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Journal Article: Optimal Product Proliferation in Monopoly: A Dynamic Analysis (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:648

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