Strategic Middlemen and the Neutralization of Monopoly Power

Sherrill Shaffer

No 1983021, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper shows how a monopolist can be induced to produce at the optimal output level and price, by utilizing a strategic middleman to represent to the monopolist a synthetic demand curve such that perceived marginal revenue equals true (inverse) demand. Conditions are derived for insuring the financial viability of such a middleman, and the inability of an unregulated market to enforce these conditions is discussed.

Pages: 9
Date: 1983-06-01
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