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Quasi‐linear Utility and Two‐Market Monopoly

Author

Listed:
  • Layson, Stephen

    (University of North Carolina at Greensboro, Department of Economics)

Abstract

Given the ubiquitous assumption of quasi‐linear utility in economic policy articles, this paper presents an overdue clarification of the implications of quasi‐linear utility for two‐market monopoly. The paper begins by deriving the demands facing a two‐market monopoly from a representative consumer and then derives expressions for the profit margins expressed solely in terms of the own and cross price elasticities of demand. The paper also analyzes the implications of quasi‐linear utility for other issues in two‐market monopoly: pricing below marginal cost in a market, third‐degree price discrimination when the monopoly products are substitutes and pricing in the inelastic region of demands.

Suggested Citation

  • Layson, Stephen, 2010. "Quasi‐linear Utility and Two‐Market Monopoly," UNCG Economics Working Papers 10-6, University of North Carolina at Greensboro, Department of Economics.
    • Handle: RePEc:ris:uncgec:2010_006
    as

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    References listed on IDEAS

    as
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    3. Varian, Hal R., 1978. "A note on locally constant income elasticities," Economics Letters, Elsevier, vol. 1(1), pages 5-9.
    4. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    5. Willig, Robert D., 1976. "Integrability implications for locally constant demand elasticities," Journal of Economic Theory, Elsevier, vol. 12(3), pages 391-401, June.
    6. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 2, number 2.
    7. R. Schmalensee & R. Willig (ed.), 1989. "Handbook of Industrial Organization," Handbook of Industrial Organization, Elsevier, edition 1, volume 1, number 1.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Quasi‐linear Utility; Multiproduct Monopoly; Third‐Degree Price Discrimination;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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