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Monopoly Pricing over Time and the Timing of Investments

Author

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  • Tarola Ornella

    (University of Rome)

Abstract

We consider a monopoly producing a good whose demand grows over time. Whatever the price policy which is adopted, the monopolist invests in order to meet the resulting demand growth. She can only invest in indivisible factory units. We identify the optimal price policy, and the ensuing optimal sequence of investment time points the monopoly selects through time. We show that this sequence satisfies the constant cycle property observed under capacity expansion for an exogenous increase in demand (Manne, 1961).

Suggested Citation

  • Tarola Ornella, 2006. "Monopoly Pricing over Time and the Timing of Investments," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 6(1), pages 1-19, December.
    • Handle: RePEc:bpj:bejtec:v:topics.6:y:2006:i:1:n:20
    DOI: 10.2202/1534-598X.1263
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    Cited by:

    1. Ornella Tarola & Sandro Trento, 2010. "Timing of Investment and Dynamic Pricing in Privatized Sectors," DISA Working Papers 1005, Department of Computer and Management Sciences, University of Trento, Italy, revised 20 Oct 2010.
    2. Demichelis, S. & Tarola, O., 2006. "Capacity expansion and dynamic monopoly pricing," Research in Economics, Elsevier, vol. 60(4), pages 169-178, December.
    3. Sandro Brusco & Ornella Tarola & Sandro Trento, 2016. "Timing Of Lumpy Investment, Pricing And Technical Progress," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 16-33, January.

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