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Monopoly innovation and welfare effects

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Listed:
  • Yao, Shuntian
  • Gan, Lydia

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 with non-price-taking behavior are constructed and analyzed in greater detail. 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 deadweight loss is less accurate than previously postulated by many studies.

Suggested Citation

  • Yao, Shuntian & Gan, Lydia, 2010. "Monopoly innovation and welfare effects," Economics Discussion Papers 2010-10, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwedp:201010
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    References listed on IDEAS

    as
    1. Jenny, Frederic & Weber, Andre-Paul, 1983. "Aggregate Welfare Loss Due to Monopoly Power in the French Economy: Some Tentative Estimates," Journal of Industrial Economics, Wiley Blackwell, vol. 32(2), pages 113-130, December.
    2. Kay, J. A., 1983. "A general equilibrium approach to the measurement of monopoly welfare loss," International Journal of Industrial Organization, Elsevier, vol. 1(4), pages 317-331, December.
    3. Flavio Delbono & Vincenzo Denicolo, 1991. "Incentives to Innovate in a Cournot Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 951-961.
    4. Hansen, Claus Thustrup, 1999. "Second-best antitrust in general equilibrium: a special case," Economics Letters, Elsevier, vol. 63(2), pages 193-199, May.
    5. Littlechild, S C, 1981. "Misleading Calculations of the Social Costs of Monopoly Power," Economic Journal, Royal Economic Society, vol. 91(362), pages 348-363, June.
    6. David Schwartzman, 1960. "The Burden of Monopoly," Journal of Political Economy, University of Chicago Press, vol. 68, pages 627-627.
    7. Yoon-Ho Alex Lee & Donald J. Brown, 2005. "Competition, Consumer Welfare, and the Social Cost of Monopoly," Cowles Foundation Discussion Papers 1528, Cowles Foundation for Research in Economics, Yale University.
    8. Williamson, Oliver E, 1969. "Economies as an Antitrust Defense: Reply," American Economic Review, American Economic Association, vol. 59(5), pages 954-959, December.
    9. Hill, Martyn & Waterson, Michael, 1983. "Labor-managed Cournot oligopoly and industry output," Journal of Comparative Economics, Elsevier, vol. 7(1), pages 43-51, March.
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    12. 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.
    13. Williamson, Oliver E, 1969. "Allocative Efficiency and the Limits of Antitrust," American Economic Review, American Economic Association, vol. 59(2), pages 105-118, May.
    14. Bergson, Abram, 1973. "On Monopoly Welfare Losses," American Economic Review, American Economic Association, vol. 63(5), pages 853-870, December.
    15. Geroski, P A, 1990. "Innovation, Technological Opportunity, and Market Structure," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 586-602, July.
    16. 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.
    17. Neary, Hugh M., 1992. "Some general equilibrium aspects of a labor-managed economy with monopoly elements," Journal of Comparative Economics, Elsevier, vol. 16(4), pages 633-654, December.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Static innovation
      by Economic Logician in Economic Logic on 2010-03-29 19:08:00

    More about this item

    Keywords

    Monopoly; social welfare; technical innovation; general equilibrium;

    JEL classification:

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

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