Monopoly Persistence under the Threat of Supply Function Competition

Ismail Saglam

MPRA Paper from University Library of Munich, Germany

Abstract: Can a monopoly persist by expanding its operation to a new market after strategically bidding for an exclusive license under the threat of supply function competition with a potential entrant? The answer may be yes or no depending on how the monopolist's existing product and the new product are related. The monopolist can win the bidding for the new market and thus expand its operation if the marginal cost (to produce a unit output) is sufficiently low with respect to the degree of product differentiation, while its likelihood of winning is higher if the two products are substitutes than if they are complements.

Keywords: Monopoly persistence; supply function competition; strategic bidding. (search for similar items in EconPapers)
JEL-codes: D42 D43 L13 (search for similar items in EconPapers)
Date: 2022-02-04
New Economics Papers: this item is included in nep-com, nep-ind, nep-mic, nep-ore and nep-reg
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