IDEAS home Printed from
   My bibliography  Save this paper



  • Kempe, Wolfram


This is the first chapter of a graduate text entitled Topics in Microeconomics. It covers the basics of monopoly theory. Most of the material is kept at an intermediate level to serve as a bridge between the intermediate level training and the graduate level focus of the book. However, some sections, identified with a *, are at an advanced level. The Chapter begins with the simple economics of Cournot monopoly, adding the quality dimension, the assessment of the welfare loss of monopoly in the face of rent seeking behavior, and the dynamics of pricing and inventory when demand is subject to unpredictable fluctuations. Turning to price discrimination, the distinction between first-, second-, and third-degree price discrimination is introduced. The incomplete information theory of second-degree price discrimination is worked out, first for two and then for a continuum of customer types. Next, it is shown how the frequently observed intertemporal price discrimination gives rise to a time consistency problem (durable goods monopoly), and how the basic theory of third-degree price discrimination needs to be modified accordingly. The Chapter closes with the noncooperative bargaining theory of bilateral monopoly and suggests a further marriage of monopoly and bargaining theories. The regulation of monopoly is covered in the separate Chapter on Regulation of Monopoly which was already circulated as a Discussion Paper.

Suggested Citation

  • Kempe, Wolfram, 1996. "Monopoly," SFB 373 Discussion Papers 1997,4, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  • Handle: RePEc:zbw:sfb373:19974

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. John Conlisk & Eitan Gerstner & Joel Sobel, 1984. "Cyclic Pricing by a Durable Goods Monopolist," The Quarterly Journal of Economics, Oxford University Press, vol. 99(3), pages 489-505.
    2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    3. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, January.
    4. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
    5. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
    6. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
    7. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
    8. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    9. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
    10. Patricia B. Reagan, 1982. "Inventory and Price Behaviour," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 137-142.
    11. Nancy L. Stokey, 1979. "Intertemporal Price Discrimination," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 355-371.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:sfb373:19974. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.