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The Welfare Effects of Monopoly Innovation

Author

Listed:
  • Shuntian Yao

    (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore)

  • Lydia L. Gan

    (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore)

Abstract

In this paper we study the welfare effect of a monopoly innovation. Unlike many partial equilibrium models carried out in previous studies, general equilibrium models are constructed and analyzed in greater details. We discover that, technical innovation carried out by a monopolist could significantly increase the social welfare. We conclude that, in general, the criticism against monopoly innovation based on its increased dead weight loss is less accurate as previously postulated by many studies.

Suggested Citation

  • Shuntian Yao & Lydia L. Gan, 2006. "The Welfare Effects of Monopoly Innovation," Economic Growth Centre Working Paper Series 0609, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:0609
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    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2006/2006-09.pdf
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    References listed on IDEAS

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    7. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
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    14. Michael Reksulak & William F. Shughart & Robert D. Tollison, 2008. "Innovation and the opportunity cost of monopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(8), pages 619-627.
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    19. Neary, Hugh M., 1984. ""Labor-managed cournot oligopoly and industry output": A comment," Journal of Comparative Economics, Elsevier, vol. 8(3), pages 322-327, September.
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    More about this item

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General

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