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Monopoly Persistence under the Threat of Supply Function Competition

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  • Saglam, Ismail

Abstract

Can a monopoly persist by expanding its operation to a new market after strategically bidding for an exclusive license under the threat of supply function competition with a potential entrant? The answer may be yes or no depending on how the monopolist's existing product and the new product are related. The monopolist can win the bidding for the new market and thus expand its operation if the marginal cost (to produce a unit output) is sufficiently low with respect to the degree of product differentiation, while its likelihood of winning is higher if the two products are substitutes than if they are complements.

Suggested Citation

  • Saglam, Ismail, 2022. "Monopoly Persistence under the Threat of Supply Function Competition," MPRA Paper 111829, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:111829
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    File URL: https://mpra.ub.uni-muenchen.de/111829/1/MPRA_paper_111829.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Monopoly persistence; supply function competition; strategic bidding.;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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