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Prices and Deadweight Loss in Multi-Product Monopoly

Author

Listed:
  • Rabah Amir

    (University of Arizona and University of Luxembourg)

  • Jim Y. Jin

    (University of St Andrews)

  • Gerald Pech

    (American University in Bulgaria)

  • Michael Tröge

    (ESCP-Europe)

Abstract

This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firm's rivals' total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that it is always enhanced by having more firms in the market and/or by technological improvements. We also characterize the e¤ects of market structure on industry performance, with an emphasis on departures from standard markets. The approach relies on lattice-theoretic methods, which allow for a unified treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided.

Suggested Citation

  • Rabah Amir & Jim Y. Jin & Gerald Pech & Michael Tröge, 2010. "Prices and Deadweight Loss in Multi-Product Monopoly," DEM Discussion Paper Series 10-15, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:10-15
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    Citations

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    Cited by:

    1. Jie Ma & Ian Wooton, 2020. "Market size, product differentiation and bidding for new varieties," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(2), pages 257-279, April.
    2. Camille Cornand & Rodolphe Dos Santos Ferreira, 2020. "The social value of information and the competition motive: price versus quantity games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 70(4), pages 1101-1137, November.
    3. Mark Armstrong & John Vickers, 2018. "Multiproduct Pricing Made Simple," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1444-1471.
    4. Amani Kahloul & Rim Lahmandi-Ayed & Hejer Lasram & Didier Laussel, 2017. "Democracy and competition: Vertical differentiation and labor in a general equilibrium model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(4), pages 860-874, August.
    5. Etro, Federico, 2019. "Mergers of complements and entry in innovative industries," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 302-326.
    6. Stefanie Bossard & Armin Schmutzler, 2021. "Selecting valuation distributions: non-price decisions of multi-product firms," ECON - Working Papers 396, Department of Economics - University of Zurich.
    7. Matthew T. Cole & Carsten Eckel, 2014. "Tariffs Passing Through Retailers: Do Tariffs Actually Protect Domestic Manufacturers?," Working Papers 1404, Florida International University, Department of Economics.
    8. Amir, Rabah & Jin, Jim Y. & Lasselle, Laurence, 2023. "Uniform, efficient and independent Ramsey taxes across markets," Games and Economic Behavior, Elsevier, vol. 138(C), pages 373-386.
    9. Jim Y. Jin & Shinji Kobayashi, 2016. "Impact of risk aversion and countervailing tax in oligopoly," Annals of Finance, Springer, vol. 12(3), pages 393-408, December.
    10. Cole, Matthew T. & Eckel, Carsten, 2018. "Tariffs and markups in retailing," Journal of International Economics, Elsevier, vol. 113(C), pages 139-153.
    11. Choné, Philippe & Linnemer, Laurent, 2020. "Linear demand systems for differentiated goods: Overview and user’s guide," International Journal of Industrial Organization, Elsevier, vol. 73(C).

    More about this item

    Keywords

    multi-product monopoly prices; interdependent products; pricing complements; pricing substitutes; linear demand;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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