Price and quantity setting behaviors of a monopolist facing uncertain product demand
Purpose - This paper aims at theoretical exploration of price and quantity setting behaviors of a monopolist encountering uncertain product demand within the mean-risk frameworks. In the microeconomic literature, the relationships between price and quantity have been traditionally studied using the expected utility approach. This paper moves away from the traditional assumptions and compares various types of risk-return approaches and explains why most of the monopoly firms follow pricing strategy instead of quantity setting strategy. Design/methodology/approach - Price setting behavior and quantity setting behavior monopoly firms were examined with endogenous target value and comparative statics were used. Findings - Comparison of various approaches reveals that risk-averse customers might decrease purchases because of the price uncertainty or shift to other suppliers, which may explain why monopoly firms prefer their power over price setting rather than quantity setting. Research limitations/implications - The present study has introduced some testable propositions by comparing different behavioral models of price and quantity setting behaviors of a monopolist facing uncertain product demand. Practical implications - This study contributes to understanding of firm's behavior in the face of uncertainty. Originality/value - The conceptual nature of the paper makes the paper original in its contribution to the existing literature of the theory of firm.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 25 (2008)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=sef Email:
When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:25:y:2008:i:3:p:175-195. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.