Monopolistic Price Flexibility and Social Welfare: the Linear Case
نویسنده
چکیده
We explore the case for monopolistic price flexibility in a linear setting. With different marginal costs, by changing the production mix price differentiation can improve welfare and also aggregate consumer surplus even if total output does not increase (as in the linear case). This depends on the variability of cost and demand parameters, and on their correlation. We also show that the welfare criterion (developed for the case of common marginal costs) based on total output can be replaced by the computation of well-defined price indexes. These results possibly pave the way for a more optimistic assessment of monopolistic pricing.
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