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Monopolistic Marginal Cost Pricing

Author

Listed:
  • Paolo Bertoletti

    (Pavia University)

Abstract

It is usually argued that the monopolistic pricing distortion arises because "a monopoly can raise its price above marginal cost without losing all its clients" (Tirole, 1988). We discuss a simple well-behaved example in which: i) monopoly price gets as close as desired to marginal cost, and ii) nevertheless it is associated to a significant dead-weight welfare loss.

Suggested Citation

  • Paolo Bertoletti, 2016. "Monopolistic Marginal Cost Pricing," Economics Bulletin, AccessEcon, vol. 36(3), pages 1384-1387.
    • Handle: RePEc:ebl:ecbull:eb-16-00368
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I3-P137.pdf
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    References listed on IDEAS

    as
    1. Bertoletti, Paolo & Epifani, Paolo, 2014. "Monopolistic competition: CES redux?," Journal of International Economics, Elsevier, vol. 93(2), pages 227-238.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    3. Paolo Bertoletti & Federico Etro, 2022. "Monopolistic competition, as you like it," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 293-319, January.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Monopoly Pricing; Consumer Preferences.;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D1 - Microeconomics - - Household Behavior

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