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Technology Adoption and Welfare Under a Monopoly: An Illustration of Microeconomic Policy Analysis

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  • Hennessy, David A.

Abstract

Conventional classroom analysis of technology adoption in a monopoly neglects some important situations. A more comprehensive analysis provides the instructor with opportunities to present some critical economic concepts. By permitting intersecting cost functions, one can show why innovations may be adopted, whether adoption increases welfare, and what relationship exists between quantity, welfare, and adoption. A graph can be used to illustrate the importance of quantity in determining consumer welfare and to illustrate how private and social welfare diverge in a monopoly. A further insight allows comparison of graphical and mathematical approaches to economic analysis.

Suggested Citation

  • Hennessy, David A., 1998. "Technology Adoption and Welfare Under a Monopoly: An Illustration of Microeconomic Policy Analysis," Staff General Research Papers Archive 1206, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:1206
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    1. Ghemawat, Pankaj, 1993. "Commitment to a Process Innovation: Nucor, USX, and Thin-Slab Casting," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 135-161, Spring.
    2. Hjalmarsson, Lennart, 1976. "On Monopoly Welfare Gains, Scale Efficiency and the Costs of Decentralization," Empirical Economics, Springer, vol. 1(4), pages 231-249.
    3. Mills, David E. & Smith, William, 1996. "It pays to be different: Endogenous heterogeneity of firms in an oligopoly," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 317-329, May.
    4. Pankaj Ghemawat, 1993. "Commitment to a Process Innovation: Nucor, USX, and Thin‐Slab Casting," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 135-161, March.
    5. Robert L. Bishop, 1968. "The Effects of Specific and Ad Valorem Taxes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(2), pages 198-218.
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    Cited by:

    1. Davis, Andrew, 2017. "Failures in adopting green technology under perfect pollution pricing and monopoly," International Review of Economics Education, Elsevier, vol. 26(C), pages 9-13.

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