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Capital accumulation for production in a dynamic spatial monopoly

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Abstract

This paper characterises the dynamics of capacity accumulation in a spatial monopoly, contrasting the socially optimal behavior of a benevolent planner against that of a profit-seeking monopolist. In steady state, the monopolist always distorts its investment as compared with the social optimum, except for those situations where, under both monopoly and social planning, either the equilibrium is driven by the Ramsey golden rule or consumers’ reservation price is sufficiently high to induce the profit-seeking firm to serve all of them.

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Authors and Affiliations

  1. Department of Economics, University of Bologna, Strada Maggiore 45, 40125, Bologna, Italy

    L. Lambertini

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  1. L. Lambertini
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Correspondence to L. Lambertini.

Additional information

Translated from Sovremennaya Matematika i Ee Prilozheniya (Contemporary Mathematics and Its Applications), Vol. 61, Optimal Control, 2008.

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Lambertini, L. Capital accumulation for production in a dynamic spatial monopoly. J Math Sci 161, 226–234 (2009). https://doi.org/10.1007/s10958-009-9548-2

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  • DOI: https://doi.org/10.1007/s10958-009-9548-2

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