Spatial Monopoly Pricing in a Stochastic Environment
AbstractThis paper reexamines the welfare implications of three pricing regimes (mill, uniform and discriminatory) for a monopoly in a stochastic environment. It con-siders a risk-averse monopolist faces two markets with stochastic and linear demands. The monopolist is assumed to commit to an irreversible price in each market before the uncertainty is resolved. Several unconventional results are shown to be triggered by the presence of demand uncertainty. The reason for the reversal of orthodox intuition is the asymmetry in the risk chacteristics of the markets and the willingness of the monopolist to trade increased level of expected pro ts for reduced risk.
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Bibliographic InfoPaper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 05-A004.
Length: 23 pages
Date of creation: May 2005
Date of revision:
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
More information through EDIRC
spatial pricing; monopoly; demand uncertainty;
Find related papers by JEL classification:
- D20 - Microeconomics - - Production and Organizations - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
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