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Monopoly innovation and welfare effects

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  • Yao, Shuntian
  • Gan, Lydia

Abstract

In this paper we study the welfare effect of a monopoly innovation. Unlike many partial equilibrium models carried out in previous studies, general equilibrium models are constructed and analyzed in greater detail. We discover that technical innovation carried out by a monopolist could significantly increase the social welfare. We conclude that, in general, the criticism against monopoly innovation based on its increased deadweight loss is less accurate than previously postulated by many studies.

Suggested Citation

  • Yao, Shuntian & Gan, Lydia, 2010. "Monopoly innovation and welfare effects," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 4, pages 1-21.
    • Handle: RePEc:zbw:ifweej:201027
    DOI: 10.5018/economics-ejournal.ja.2010-27
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    References listed on IDEAS

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    1. Jenny, Frederic & Weber, Andre-Paul, 1983. "Aggregate Welfare Loss Due to Monopoly Power in the French Economy: Some Tentative Estimates," Journal of Industrial Economics, Wiley Blackwell, vol. 32(2), pages 113-130, December.
    2. Hill, Martyn & Waterson, Michael, 1983. "Labor-managed Cournot oligopoly and industry output," Journal of Comparative Economics, Elsevier, vol. 7(1), pages 43-51, March.
    3. Flavio Delbono & Vincenzo Denicolo, 1991. "Incentives to Innovate in a Cournot Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(3), pages 951-961.
    4. William Fellner, 1951. "The Influence of Market Structure on Technological Progress," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 65(4), pages 556-577.
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    More about this item

    Keywords

    Monopoly; technical innovation; welfare effects; general equilibrium;
    All these keywords.

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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