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Second-best optimality of advertising when monopoly is sanctioned

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Author Info

  • Just, Richard E.
  • Pope, Rulon D.

Abstract

Monopoly pricing is sanctioned by government in a variety of cases (e.g., patent policy). We derive necessary and sufficient conditions on preferences determining when monopolists choose socially optimal, excessive, or inadequate advertising conditional on monopoly pricing behavior. We then derive the behavioral implications of these conditions in an empirically tractable framework that is estimable with typical observable data.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 64 (2012)
Issue (Month): 6 ()
Pages: 393-398

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Handle: RePEc:eee:jebusi:v:64:y:2012:i:6:p:393-398

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Web page: http://www.elsevier.com/locate/jeconbus

Related research

Keywords: Advertising; Excessive advertising; Monopoly pricing; Optimal advertising; Social optimality;

References

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  1. Kyle Bagwell, 2005. "The Economic Analysis of Advertising," Discussion Papers 0506-01, Columbia University, Department of Economics.
  2. Rebecca Henderson & Adam B. Jaffe & Manuel Trajtenberg, 1998. "Universities As A Source Of Commercial Technology: A Detailed Analysis Of University Patenting, 1965-1988," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 119-127, February.
  3. Nichols, Len M, 1985. "Advertising and Economic Welfare," American Economic Review, American Economic Association, vol. 75(1), pages 213-18, March.
  4. Adam B. Jaffe, 1999. "The U.S. Patent System in Transition: Policy Innovation and the Innovation Process," NBER Working Papers 7280, National Bureau of Economic Research, Inc.
  5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
  6. Becker, Gary S & Murphy, Kevin M, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 941-64, November.
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