Abstract
In economic literature it is frequently the case that one or more of the assumptions of a model are not stated explicitly. Sometimes this neglect is not serious, but it can be of the utmost importance. One such assumption is that the quantity demanded and the quantity supplied are the same. In the following it is shown that it can be profitable for a monopolist to intentionally supply less than is demanded. Thus the conventional monopolist of economic theory who produces and sells that output for which marginal cost and marginal revenue are equal can be shown to be failing to maximize profits. Furthermore, the cost function and the demand function are interdependent in a manner which prevents the usual separation of these functions. Indeed it is this interrelationship which makes shortages profitable for appropriate cost and revenue parameter values.
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1977 H. E. Stenfert Kroese B.V., Leiden
About this chapter
Cite this chapter
Whitin, T.M. (1977). Planned Shortages and Price Theory. In: Van Bochove, C.A., Van Eijk, C.J., Siebrand, J.C., De Vries, A.S.W., Van Der Zwan, A. (eds) Modeling for Government and Business. Springer, Boston, MA. https://doi.org/10.1007/978-1-4613-4253-3_7
Download citation
DOI: https://doi.org/10.1007/978-1-4613-4253-3_7
Publisher Name: Springer, Boston, MA
Print ISBN: 978-1-4613-4255-7
Online ISBN: 978-1-4613-4253-3
eBook Packages: Springer Book Archive