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Multiplant Monopoly in a Spatial Market

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  • Michael L. Katz

Abstract

This article analyzes the behavior of a multiplant monopolist in a spatial market. After demonstrating that the profit maximizer may establish an excessive or insufficient number of plants, the article derives criteria by which to determine the direction of this distortion. The distortion arises when consumer surplus is a function of the number of plants (holding the level of output fixed) and, consequently, the private and social benefits from changes in plant density diverge. The article also examines monopolist's choice of output level. An example is presented in which the profit maximizer produces more output than would a welfare maximizer.

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Bibliographic Info

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 11 (1980)
Issue (Month): 2 (Autumn)
Pages: 519-535

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Handle: RePEc:rje:bellje:v:11:y:1980:i:autumn:p:519-535

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Cited by:
  1. Farrell, Joseph & Gilbert, Richard J. & Katz, Michael L., 2002. "Market Structure, Organizational Structure, and R&D Diversity," Department of Economics, Working Paper Series qt2pn5t5nj, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Hermalin, Benjamin E & Katz, Michael L, 2006. "The Economics of Product-Line Restrictions With an Application to the Network Neutrality Debate," Competition Policy Center, Working Paper Series qt81r3b7xs, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
  3. Rey, Patrick & Salant, David, 2008. "Abuse of Dominance and Licensing of Intellectual Property," MPRA Paper 9454, University Library of Munich, Germany.
  4. Christian Roessler, 2006. "Public Good Menus and Feature Complementarity," Department of Economics - Working Papers Series 962, The University of Melbourne.
  5. repec:reg:wpaper:541 is not listed on IDEAS

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