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Production and Advertising in a Dynamic Hotelling Monopoly

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  • L. Lambertini

Abstract

I characterise the dynamics of capacity accumulation and investment in advertising in a spatial monopoly model, contrasting the socially optimal behavior of a benevolent planner against the behaviour of a profit-maximising monopolist. I show that, in steady state, the monopolist always distorts both kinds of investment as compared to the social optimum, except in a situation where the Ramsey equilibrium prevails under both regimes.

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  • L. Lambertini, 2001. "Production and Advertising in a Dynamic Hotelling Monopoly," Working Papers 395, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:395
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