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Monopoly Profit Maximization: Success and Economic Principles

Author

Listed:
  • Korbinian von Blanckenburg

    () (Hochschule Ostwestfalen-Lippe, Germany)

  • Milena Neubert

    () (Johannes Gutenberg-Universitaet Mainz, Germany)

Abstract

This paper presents a classroom experiment on pricing strategies available to monopolists. Each student makes production decisions as a monopolist during the experiment; learning from his/her own experiences what it means to be a price searcher. Full information is provided on cost conditions, while the demand function remains unknown to the participants. Given a sufficient number of periods, students will be able to maximise their profits only by applying a trial-and-error strategy. However, one of the objectives of the experiment is to demonstrate to students that search strategies based on economic principles are more efficient.

Suggested Citation

  • Korbinian von Blanckenburg & Milena Neubert, 2014. "Monopoly Profit Maximization: Success and Economic Principles," Working Papers 1406, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 25 Nov 2014.
  • Handle: RePEc:jgu:wpaper:1406
    as

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    File URL: http://www.macro.economics.uni-mainz.de/RePEc/pdf/Discussion_Paper_1406.pdf
    File Function: First version, 2014
    Download Restriction: no

    References listed on IDEAS

    as
    1. Till Requate & Israel Waichman, 2011. "“A profit table or a profit calculator?” A note on the design of Cournot oligopoly experiments," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 36-46, March.
    2. Robert J. Oxoby, 2001. "A Monopoly Classroom Experiment," The Journal of Economic Education, Taylor & Francis Journals, vol. 32(2), pages 160-168, January.
    3. Chee-Yee Chong & David Cheng & David Cheng, 1975. "Multistage Pricing under Uncertain Demand," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 4, number 2, pages 311-323 National Bureau of Economic Research, Inc.
    4. Elie Appelbaum & Chin Lim, 1982. "Monopoly versus Competition under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 15(2), pages 355-363, May.
    5. Ivo Bischoff & Björn Frank, 2011. "Good news for experimenters: Subjects are hard to influence by instructorsʹ cues," Economics Bulletin, AccessEcon, vol. 31(4), pages 3221-3225.
    6. Nelson, Robert G. & Beil, Richard O., Jr., 1994. "Pricing Strategy Under Monopoly Conditions: An Experiment For The Classroom," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 0(Number 1), pages 1-12, July.
    7. Nelson, Robert G. & Beil, Richard O., 1994. "Pricing Strategy Under Monopoly Conditions: An Experiment for the Classroom," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(01), pages 287-298, July.
    8. Mark Dickie, 2006. "Do Classroom Experiments Increase Learning in Introductory Microeconomics?," The Journal of Economic Education, Taylor & Francis Journals, vol. 37(3), pages 267-288, July.
    9. Daniel Zizzo, 2010. "Experimenter demand effects in economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 75-98, March.
    10. Yvonne Durham & Thomas Mckinnon & Craig Schulman, 2007. "Classroom Experiments: Not Just Fun And Games," Economic Inquiry, Western Economic Association International, vol. 45(1), pages 162-178, January.
    11. Meyer, Robert A, 1975. "Monopoly Pricing and Capacity Choice under Uncertainty," American Economic Review, American Economic Association, vol. 65(3), pages 326-337, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • A20 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - General
    • A23 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Graduate
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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