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Monopoly Markets in Public Goods: the Case of the Uniform All-or-None Price

Author

Listed:
  • Geoffrey Brennan

    (George Mason University)

  • Dwight Lee

    (George Mason University)

  • Cliff Walsh

    (University of Adelaide, Australia)

Abstract

This article explores the provision of a price-excludable public good under conditions of monopoly, in which the monopolist sets a uniform all-or-none price-output package to all consumers. The reasons for interest in this particular monopoly model are twofold First, many public goods are amenable to exclusion on an all-or-none basis. Second, the model does not presume the monopolist to have any information beyond that normally assumed for sellers in private goods markets. The profit-maximizing outcome under these conditions is developed and several striking comparative static results derived. The monopoly outcome is compared with the outcome under the most closely analogous perfectly competitive model (Oakland, 1974). It is shown that, under certain conditions, the monopoly result is superior to the competitive outcome in a welfare sense and indeed that optimality can emerge under monopoly in conditions where it would not under competition. The possibility that the monopolist might oversupply the public good is also explored.

Suggested Citation

  • Geoffrey Brennan & Dwight Lee & Cliff Walsh, 1983. "Monopoly Markets in Public Goods: the Case of the Uniform All-or-None Price," Public Finance Review, , vol. 11(4), pages 465-490, October.
    • Handle: RePEc:sae:pubfin:v:11:y:1983:i:4:p:465-490
    DOI: 10.1177/109114218301100404
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    References listed on IDEAS

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    1. Ganguly, Subrata K, 1969. "The Perfectly Competitive Production of Collective Goods: Comment," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 478-479, November.
    2. Owen, Bruce M, 1969. "The Perfectly Competitive Production of Collective Goods: Comment," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 475-476, November.
    3. Oakland, William H, 1974. "Public Goods, Perfect Competition, and Underproduction," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 927-939, Sept./Oct.
    4. Richard D. Auster, 1977. "Private Markets in Public Goods (or Qualities)," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 91(3), pages 419-430.
    5. Burns, Michael E & Walsh, Cliff, 1981. "Market Provision of Price-excludable Public Goods: A General Analysis," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 166-191, February.
    6. Brennan, Geoffrey & Walsh, Cliff, 1981. "A Monopoly Model of Public Goods Provision: The Uniform Pricing Case," American Economic Review, American Economic Association, vol. 71(1), pages 196-206, March.
    7. Lee, Dwight R, 1977. "Discrimination and Efficiency in the Pricing of Public Goods," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 403-420, October.
    8. Rodgers, James D, 1969. "The Perfectly Competitive Production of Collective Goods: Comment," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 476-478, November.
    9. Demsetz, Harold, 1970. "The Private Production of Public Goods," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 293-306, October.
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    Cited by:

    1. Richter, Wolfram F. & Schneider, Kerstin, 1999. "Competition for stars and audiences: an analysis of alternative institutional settings," European Journal of Political Economy, Elsevier, vol. 15(1), pages 101-121, March.

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