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Robust lower bounds on monopoly profit with α-concave demand

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  • Le, Toan

Abstract

I extend Condorelli’s lower bound on monopoly profit from log-concave demand to a broader class of α-concave demand, with α=0 corresponding to log-concavity and α=1 to concavity. The monopoly profit is at least 1(1+α)1/α of the area under the demand curve. I further derive upper bounds for consumer surplus and deadweight loss relative to monopoly profit and show all three bounds are sharp.

Suggested Citation

  • Le, Toan, 2024. "Robust lower bounds on monopoly profit with α-concave demand," Economics Letters, Elsevier, vol. 244(C).
  • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524005214
    DOI: 10.1016/j.econlet.2024.112037
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    References listed on IDEAS

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    1. Condorelli, Daniele, 2022. "A lower-bound on monopoly profit for log-concave demand," Economics Letters, Elsevier, vol. 210(C).
    2. Mark Bagnoli & Ted Bergstrom, 2006. "Log-concave probability and its applications," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 217-241, Springer.
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    4. Condorelli, Daniele & Szentes, Balázs, 2022. "Surplus sharing in Cournot oligopoly," LSE Research Online Documents on Economics 111890, London School of Economics and Political Science, LSE Library.
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    More about this item

    Keywords

    Monopoly; α-concave demand;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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