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Pareto‐Improving Redistribution in a Monopoly

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  • Jacques Thépot

Abstract

This paper discusses the impact of income transfers between consumers of a monopoly. In this context, redistributing the incomes could induce an increase of the demand elasticity which leads to a lower monopoly price, beneficial to any consumer. Under mild assumptions on the demand function, we prove the existence of a transfer maximizing the market coverage which remains advantageous for any contributing consumer. It is proved that the producer is also better off. Then the transfer is Pareto‐improving. In the linear demand case, analytical results are found. Extensions to Cournot oligopoly and natural monopoly pricing are considered. JEL Classification Numbers: D31, D64, H2, L13

Suggested Citation

  • Jacques Thépot, 2003. "Pareto‐Improving Redistribution in a Monopoly," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 165-178, June.
    • Handle: RePEc:bla:jecrev:v:54:y:2003:i:2:p:165-178
    DOI: 10.1111/1468-5876.00252
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
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    Cited by:

    1. Pedro Garcia-del-Barrio, 2012. "External economies of scale, government purchasing commitment and welfare improvements in the vaccines industry," European Journal of Government and Economics, Europa Grande, vol. 1(2), pages 163-179, December.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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