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Firm Behavior in Monopolistic Markets

  • Martin Kolmar
  • Magnus Hoffmann
Chapter
Part of the Springer Texts in Business and Economics book series (STBE)

Abstract

  1. 1.

    The optimality condition “marginal costs = marginal revenues” characterizes the optimality condition only in a monopolistic but not in a perfectly competitive market.

     
  2. 2.

    Assume a non-price-discriminating monopolist who faces a decreasing demand function. Marginal revenues can be decomposed into a price and a quantity effect, and the price effect is always smaller than the quantity effect.

     
  3. 3.

    Assume a non-price-discriminating monopolist. Marginal revenues consist of a price and quantity effect. The price effect is always larger than the price effect under perfect competition.

     
  4. 4.

    If a firm owns a patent for a product, it can enforce prices above marginal costs, because the patent leads to a monopoly.

     

Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  • Martin Kolmar
    • 1
  • Magnus Hoffmann
    • 1
  1. 1.School of EconomicsUniversity of St. GallenSt. GallenSwitzerland

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