Spatial Monopoly Pricing in a Stochastic Environment
This paper reexamines the welfare implications of three pricing regimes (mill, uniform and discriminatory) for a monopoly in a stochastic environment. It con-siders a risk-averse monopolist faces two markets with stochastic and linear demands. The monopolist is assumed to commit to an irreversible price in each market before the uncertainty is resolved. Several unconventional results are shown to be triggered by the presence of demand uncertainty. The reason for the reversal of orthodox intuition is the asymmetry in the risk chacteristics of the markets and the willingness of the monopolist to trade increased level of expected pro ts for reduced risk.
|Date of creation:||May 2005|
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
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"Output and welfare implications of monopolistic third-degree price discrimination,"
1095-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
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"Spatial price policies reconsidered,"
CORE Discussion Papers RP
838, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Hsu, Song-ken & Mai, Chao-cheng, 1984. "Production location and random input price," Regional Science and Urban Economics, Elsevier, vol. 14(1), pages 45-62, February.
- Beckmann, Martin J. & Ingene, Charles A., 1976. "The profit equivalence of mill and uniform pricing policies," Regional Science and Urban Economics, Elsevier, vol. 6(3), pages 327-329, September.
- Schwartz, Marius, 1990. "Third-Degree Price Discrimination and Output: Generalizing a Welfare Result," American Economic Review, American Economic Association, vol. 80(5), pages 1259-62, December.
- Martin J. Beckmann, 1976. "Spatial Price Policies Revisited," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 619-630, Autumn.
- Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September.
- Holahan, William L, 1975. "The Welfare Effects of Spatial Price Discrimination," American Economic Review, American Economic Association, vol. 65(3), pages 498-503, June.
- Greenhut, M L & Ohta, H, 1972. "Monopoly Output Under Alternative Spatial Pricing Techniques," American Economic Review, American Economic Association, vol. 62(4), pages 705-13, September.
- Greenhut,Melvin L. & Norman,George & Hung,Chao-Shun, 1987. "The Economics of Imperfect Competition," Cambridge Books, Cambridge University Press, number 9780521305525, December.
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