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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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:
Contact details of provider:
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
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Beckmann, Martin J. & Ingene, Charles A., 1976. "The profit equivalence of mill and uniform pricing policies," Regional Science and Urban Economics, Elsevier, vol. 6(3), pages 327-329, September.
- Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-62, December.
- Mathur, Vijay K., 1983. "Location theory of the firm under price uncertainty," Regional Science and Urban Economics, Elsevier, vol. 13(3), pages 411-428, August.
- Greenhut, M L & Ohta, H, 1972. "Monopoly Output Under Alternative Spatial Pricing Techniques," American Economic Review, American Economic Association, vol. 62(4), pages 705-13, September.
- Martin J. Beckmann, 1976. "Spatial Price Policies Revisited," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 619-630, Autumn.
- ANDERSON, Simon P. & de PALMA, André & THISSE, Jacques-François, .
"Spatial price policies reconsidered,"
CORE Discussion Papers RP
-838, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Holahan, William L, 1975. "The Welfare Effects of Spatial Price Discrimination," American Economic Review, American Economic Association, vol. 65(3), pages 498-503, June.
- Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521315647, December.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Schmalensee, Richard., 1980.
"Output and welfare implications of monopolistic third-degree price discrimination,"
1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March.
- Hsu, Song-ken & Mai, Chao-cheng, 1984. "Production location and random input price," Regional Science and Urban Economics, Elsevier, vol. 14(1), pages 45-62, February.
- Lin-Ti Tan & Song-Ken Hsu, 2000. "Production location under technology uncertainty," Environment and Planning A, Pion Ltd, London, vol. 32(3), pages 445-454, March.
- Hwang, Hong & Mai, Chao-cheng, 1990. "Effects of Spatial Price Discrimination on Output, Welfare, and Location," American Economic Review, American Economic Association, vol. 80(3), pages 567-75, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (HsiaoyunLiu).
If references are entirely missing, you can add them using this form.