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Second-best optimality of advertising when monopoly is sanctioned


  • Just, Richard E.
  • Pope, Rulon D.


Monopoly pricing is sanctioned by government in a variety of cases (e.g., patent policy). We derive necessary and sufficient conditions on preferences determining when monopolists choose socially optimal, excessive, or inadequate advertising conditional on monopoly pricing behavior. We then derive the behavioral implications of these conditions in an empirically tractable framework that is estimable with typical observable data.

Suggested Citation

  • Just, Richard E. & Pope, Rulon D., 2012. "Second-best optimality of advertising when monopoly is sanctioned," Journal of Economics and Business, Elsevier, vol. 64(6), pages 393-398.
  • Handle: RePEc:eee:jebusi:v:64:y:2012:i:6:p:393-398 DOI: 10.1016/j.jeconbus.2012.08.001

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    References listed on IDEAS

    1. Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 941-964.
    2. Nichols, Len M, 1985. "Advertising and Economic Welfare," American Economic Review, American Economic Association, vol. 75(1), pages 213-218, March.
    3. Rebecca Henderson & Adam B. Jaffe & Manuel Trajtenberg, 1998. "Universities As A Source Of Commercial Technology: A Detailed Analysis Of University Patenting, 1965-1988," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 119-127, February.
    4. Jaffe, Adam B., 2000. "The U.S. patent system in transition: policy innovation and the innovation process," Research Policy, Elsevier, vol. 29(4-5), pages 531-557, April.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, July.
    6. Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
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