Chapter 15
Monopoly
If you own a personal computer, it probably uses some version of Window, the operating system sold by the Microsoft Corporation. When Microsoft first designed Windows many years ago, it applied for and received a copyright from the government. The copyright gives Microsoft the exclusive right to make and sell copies of the Windows operating system. So if a person wants to buy a copy of Windows, he or she has little choice but to give Microsoft the approximately $50 that the firm has decided to charge for its product. Microsoft is said to have a monopoly in the market for Windows. (Mankiw, p313.)
While a competitive firm is a price taker, a monopoly firm is a price maker.
A firm is considered a monopoly if…
It is the sole seller of its product.
Its product does not have a close substitutes.
The fundamental cause of monopoly is barriers to entry. A monopoly remains the only seller in its market because other firms cannot enter the market and compete with it.
Barriers to entry have three sources:
A key resource is owned by a single firm.
The government gives a single firm the exclusive right to produce some good.
Costs of production make a single producer more efficient than a large number of producers.
Why monopolies Arise
Although exclusive ownership of a key resource is potential source of monopoly, in practice monopolies rarely arise for this reason. Actual economies are large, and resources are owned by many people. Indeed, because many goods are traded internationally, the natural scope of their markets is often worldwide. There are, therefore, few examples of firms that own a resource for which there are no close substitutes.
Monopoly Resources
A classic example of ownership of a key resource is DeBeers, the South African diamond company. DeBeers controls about 80% of the world’s production of diamonds. Although the firm’s share of the market is not 100%, it is large enough to exert substantial influence over the market price of diamonds.
How much market power does DeBeers have? The answer depends in part on whether there are close substitutes for its product. If people view emeralds, rubies, and sapphires as good substitutes for diamonds, then DeBeers has relatively little market power. In this case, any attempt by DeBeers to raise the price of diamonds would cause people to switch to other gemstones. But if people view these other stones as very different from diamonds, then DeBeers can exert substantial influence over the price of its product.
Case study: The DeBeers diamond Monopoly
DeBeers pays for large amounts of advertising. At first, this decision might seem surprising. If a monopoly is the sole seller of its product, why does it need to advertise? One goal of the DeBeers ads is to differentiated diamonds from other gems in the minds of consumers. When their slogan tells you that “a diamond is forever,” you are meant to think that the same is not true of emeralds, rubies, and sapphires. If the ads are successful, consumers will view diamonds as unique, rather than as one among many gemstones, and this perception will give DeBeers greater market power.
Case study: The DeBeers diamond Monopoly
In many cases, monopolies arise because the government has given one person or firm the exclusive right to sell some good or service. Sometimes the monopoly arises from the sheer political clout of the would-be monopolist. Kings, for example, once granted exclusive business licenses to their friends and allies.
Patent and copyright laws are two important examples of how government creates a monopoly to serve the public interest. When a pharmaceutical company discovers a new drug, it can apply to the government for a patent. If the government deems the drug to be truly original, it approves the patent, which gives the company the exclusive right to manufacture and sell the drug for 20 years. Similarly, a novel of an novelist.
Government-Created Monopolies
Quantity of Output
Cost
O
Figure 15-1. Economies of Scale as a Cause of Monopoly
When a firm’s average-total-cost curve continually declines, the firm has what is called a natural monopoly. In this case, when production is divided among more firms, each firm produces less, and average total cost rises. As a result, a single firm can produce any given amount at the smallest cost.
Average total cost
An industry is a natural monopoly when a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.
An example of a natural monopoly is the distribution of water. To provide water to residents of a town, a firm must build a network of pipes throughout the town. If two or more firms were to compete in the provision of this service, each firm would have to pay the fixed cost of building a network. Thus, the average total cost of water is lowest if a single firm serves the entire market.
Natural Monopolies
Other examples of natural monopolies: some goods in the economy are excludable but not rival. An example is a bridge used so infrequently that it is never congested. (1)The bridge is excludable because a toll collector can prevent someone from using it. (2)The bridge is not rival because use of the bridge by one person does not diminish the ability of others to use it. Because there is a fixed cost of building the bridge and a negligible marginal cost of additional users, the average total cost of a trip across the bridge falls as the number of trips rises. Hence, the bridge is a natural monopoly.
(Mankiw, Principles of Economics(2004),chapter15, p317.)
Natural Monopolies
Monopoly versus Competition
Monopoly
Is the sole producer
Faces a downward-sloping demand curve
Is a price maker
Reduces price to increase sales
Competitive Firm
Is one of many producers
Paces a horizontal demand curve
Is a price taker
Sells as much or as little at same price
How Monopolies Make Production and Pricing Decisions
advertising and service promotion
Considerable
Franchise monopolies (electricity,water, gas, telephone);
Microsoft windows;
patent drugs
Single producer; product without close substitutes
Monopoly
Cars; Word-processing software;
household appliances;
Few producers; Products are differentiated
Steel; chemicals;
aircraft; cement;oil
(esp in manufacturing, transportation and communications sectors)
Few producers; little or no difference in product
oligopoly
Advertising and quality rivalry; administered prices
some
retail trade(pizzas, beer );
retail gasoline market;
personal computers
Many producers;
Many real or perceived differences in products
Monopolistic competition
Market exchange or auction
None
Financial markets and agricultural products
Many producers; Identical products
Perfect competition
Methods of marketing
Firm’s degree of control over price
Part of economy where prevalent
Number of producers and degree of product differentiation
Structure
Figure 2 Demand Curves for Competitive and Monopoly Firms
Copyright © 2004 South-Western
Quantity of Output
Demand
(a) A Competitive Firm
’
s Demand Curve
(b) A Monopolist
’
s Demand Curve
0
Price
Quantity of Output
0
Price
Demand
Total Revenue
P×Q = TR
Average Revenue
TR/Q = AR = P
Marginal Revenue
△TR/△Q = MR
A Monopoly’s Revenue
A Monopoly’s Marginal Revenue
A monopolist’s marginal revenue is always less than the price of its good.
The demand curve is downward sloping.
When a monopoly drops the price to sell one more unit, the revenue received from previously sold units also decreases.
A Monopoly’s Revenue
Marginal Revenue for monopolists is very different from marginal revenue for competitive firms. When a monopoly increases the amount it sells, it has two effects on total revenue (P×Q).
The output effect –- more output is sold , so Q is higher.
The price effect –- price falls, so P is lower.
A Monopoly’s Revenue
Because a competitive firm can sell all it wants at the market price, there is no price effect. When it increases production by 1 unit, it receives the market price for that unit, and it does not receive any less for the units it was already selling. That is, because the competitive firm is a price taker, its marginal revenue equals the price of its good.
By contrast, when a monopoly increases production by 1 unit, it must reduce the price it charges for every unit it sells, and this cut in price reduces revenue on the units it was already selling. As a result, a monopoly’s marginal revenue is less than its price.
A Monopoly’s Revenue
The Monopolist Maximizing Profits
We begin by studying the monopolist’s profit-maximization problem. Let us use p(y) to denote the market inverse demand curve and c(y) to denote the cost function. Let r(y) =p(y)y denote the revenue function of monopolist. The monopolist’s profit-maximization problem then takes the form
Max r(y) – c(y)
The optimality condition for this problem is straightforward: at the optimal choice of output we must have marginal revenue equal to marginal cost.
In terms of algebra, we can write the optimization condition as
Maximizing Profits
In the case of a monopolist, the marginal revenue term is slightly more complicated. If the monopolist decides to increase its output by y, there are two effects on revenues. First it sells more output and receives a revenue of py from that. But second, the monopolist pushes the price down by p and it gets this lower price on all the output it has been selling.
Thus the total effect on revenues of changing output by y will be
r = p y + y p
So that the change in revenue divided by the change in output----the marginal revenue----is
Maximizing Profits
We can also express marginal revenue in terms of elasticity via the formula
And write the “marginal revenue equals marginal costs” optimality condition as
Since elasticity is naturally negative, we could also write this expression as
Maximizing Profits
From these equations it is easy to see the connection with the competitive case: in the competitive case, the firm faces a flat demand curve----an infinitely elastic demand curve. This means that 1/ |є|= 1/ = 0, so the appropriate version of this equation for a competitive firm is simply price equals marginal cost.
Maximizing Profits
Note that a monopolist will never choose to operate where the demand curve is inelastic. For if |є| < 1, then 1/|є| >1, and the marginal revenue is negative, so it can’t possibly equal marginal cost. The meaning of this becomes clear when we think of what is implied by an inelastic demand curve; if |є| < 1, then reducing output will increase revenues, and reducing output must reduce total cost, so profits will necessarily increase. Thus any point where |є| < 1 cannot be a profit maximum for a monopolist, since it could increase its profits by producing less output. It follows that a point that yields maximum profits can only occur where |є| 1.
(Hal R. Varian, Intermediate Microeconomics, sixth edition, p420-421.)
Figure 3 Demand and Marginal-Revenue Curves for a Monopoly
Copyright © 2004 South-Western
Quantity of Water
Price
$11
10
9
8
7
6
5
4
3
2
1
0
–1
–2
–3
–4
Demand
(average
revenue)
Marginal
revenue
1
2
3
4
5
6
7
8
pMP
MRP=MRQMPi
Figure 3 graphs the demand curve and the marginal-revenue curve of a monopoly firm. Theses two curves always start at the same point on the vertical axis because the marginal revenue of the first unit sold equals the price of the good. The monopolist’s marginal revenue is less than the price of the good. Thus, a monopoly’s marginal-revenue curve lies below its demand curve. (Mankiw, third edition, p321.)
Marginal revenue can even become negative. Marginal revenue is negative when the price effect on revenue is greater than the output effect. In this case, when the firm produces an extra unit of output, the price falls by enough to cause the firm’s total revenue to decline, even though the firm is selling more units.
A Monopoly’s Revenue
A monopoly maximizes profit by producing the quantity at which marginal revenue equals marginal cost.
It then uses the demand curve to find the price that will induce consumers to buy that quantity.
Profit Maximization
Figure 4 Profit Maximization for a Monopoly
Copyright © 2004 South-Western
Quantity
Q
Q
0
Costs and
Revenue
Demand
Average total cost
Marginal revenue
Marginal
cost
Monopoly
price
QMAX
B
1. The intersection of the
marginal-revenue curve
and the marginal-cost
curve determines the
profit-maximizing
quantity . . .
A
2. . . . and then the demand
curve shows the price
consistent with this quantity.
Comparing Monopoly and Competition
For a competitive firm, price equals marginal cost.
P = MR =MC
For a monopoly firm, price exceeds marginal cost.
P > MR = MC
Profit Maximization
Profit equals total revenue minus total costs.
Profit = TR - TC
Profit = (TR/Q - TC/Q) × Q
Profit = (P - ATC) ×Q
A Monopoly’s Profit
Figure 5 The Monopolist’s Profit
Monopoly
profit
Average
total
cost
Quantity
Monopoly
price
QMAX
0
Costs and
Revenue
Demand
Marginal cost
Marginal revenue
Average total cost
B
C
E
D
A Monopolist’s Profit
The monopolist will receive economic profits as long as price is greater than average total cost.
MR
MC
ATC
dd=AR
E
F
G
M
N
(a) Profit Maximization (Samuelson, Economics,17th, p178.)
Q
q
q
Total cost,TC
Total revenue, TR
Total profit,TP
(b) Total cost, revenue, and Profit
The monopolist will receive economic profits as long as price is greater than average total cost.
What should happen to the price of a drug when the patent runs out ? Figure 6 shows the market for a typical drug. In this figure, the marginal cost of producing the drug is constant. During the life of the patent, the monopoly firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost and charging a price well above marginal cost. But when the patent runs out, the profit from making the drug should encourage new firms to enter the market. As the market becomes more competitive, the price should fall to equal marginal cost.
Case study: Monopoly Drugs versus Generic Drugs
Figure 6 The Market for Drugs
Copyright © 2004 South-Western
Quantity
0
Costs and
Revenue
Demand
Marginal
revenue
Price
during
patent life
Monopoly
quantity
Price after
patent
expires
Marginal
cost
Competitive
quantity
Why a Monopoly Does Not have A Supply Curve?
You may have noticed that we have analyzed the price in a monopoly market using the market demand curve and the firm’s cost curves.
What happened to the supply curve? Although monopoly firms make decisions about what quantity to supply, a monopoly does not have a supply curve. A supply curve tells us the quantity that firms choose to supply at any given price. This concept makes sense when we are analyzing competitive firms, which are price takers, But a monopoly firm is a price maker, not a price taker. It is not meaningful to ask what such a firm would produce at any price because the firm sets the price at the same time it chooses the quantity to supply.
Why a Monopoly Does Not have A Supply Curve?
Indeed, the monopolist’s decision about how much to supply is impossible to separate from the demand curve it faces. The shape of the demand curve determines the shape of the marginal-revenue curve, which in turn determines the monopolist’s profit-maximizing quantity. In a competitive market, supply decisions can be analyzed without knowing the demand curve, but that is not true in a monopoly market. Therefore, we never talk about a monopoly’s supply curve.
(Source: Mankiw, Principles of Economics(2004), third edition, p323.)
垄断厂商的短期均衡
垄断厂商的短期均衡条件为：
MR＝SMC
垄断厂商在短期均衡点上可以获得最大利润，可以利润为零，也可以蒙受最小亏损。
(高鸿业,《西方经济学》(微观部分),中国人民大学出版社(),p218.)
垄断厂商的供给曲线
凡是在或多或少的程度上带有垄断因素的不完全竞争市场中，或者说，凡是在单个厂商对市场价格具有一定的控制力量，相应地，单个厂商的需求曲线向右下方倾斜的市场中，是不存在具有规律性的厂商和行业的短期和长期供给曲线的。
(高鸿业,《西方经济学》(微观部分),中国人民大学出版社(),p219.)
E1
E2
P*
MR1
d1=AR
d2
MR2
Q1
Q2
Q
P
(a) 同一个价格水平
对应几个不同的产量水平
Figure 垄断厂商的产量和价格
Source:高鸿业《西方经济学》中国人民大学出版社(), p219.
P2
d1=AR
d2
Q*
Q
P
( b) 一个产量水平
对应几个不同的价格水平
P1
MC1
MC2
E1
E2
MC1
MC2
MR1
MR2
垄断厂商的长期均衡
垄断厂商在长期内可以调整全部生产要素的投入量即生产规模，从而实现最大利润。
垄断厂商的长期均衡条件为：
MR＝LMC＝SMC
垄断厂商在长期均衡点上一般可获得利润。(高鸿业,《西方经济学》(微观部分),中国人民大学出版社(),p219-221.)
垄断的福利分析
完全竞争时的产量Q* 是社会有效率的产量(生产者剩余和消费者剩余之和最大的产量，需求曲线和边际成本曲线的交点--图中E点确定的产量). 垄断厂商的产量Q' 要小于完全竞争时的产量Q* (社会有效率的产量)。与完全竞争相比，垄断价格高而产量低；消费者剩余减少(ΔP*EG>ΔP'AG)，生产者剩余增加；总剩余减少，垄断造成了无谓损失(图中ΔABE)
P
dd=AR
MR
MC
P'
Q'
E
B
P*
Q*
F
A
Quantity
G
The Welfare Cost of Monopoly
In contrast to a competitive firm, the monopoly charges a price above the marginal cost.
From the standpoint of consumers, this high price makes consumers undesirable.
However, from the standpoint of the ownership of the firm, the high price makes monopoly very desirable.
Figure 7 The Efficient Level of Output
Copyright © 2004 South-Western
Quantity
0
Price
Demand
(value to buyers)
Marginal cost
Value to buyers
is greater than
cost to seller.
Value to buyers
is less than
cost to seller.
Cost
to
monopolist
Cost
to
monopolist
Value
to
buyers
Value
to
buyers
Efficient
quantity
The Deadweight Loss
Because a monopoly sets its price above marginal cost, it places a wedge between the consumer’s willingness to pay and the producer’s cost.
This wedge causes the quantity sold to fall short of the social optimum.
Figure 8 The Inefficiency of Monopoly
Copyright © 2004 South-Western
Quantity
0
Price
Deadweight
loss
Demand
Marginal
revenue
Marginal cost
Efficient
quantity
Monopoly
price
Monopoly
quantity
The Deadweight Loss
The Inefficiency of Monopoly
The monopolist produces less than the socially efficient quantity of output.
The Deadweight Loss
The deadweight loss caused by a monopoly is similar to the deadweight loss caused by a tax.
The difference between the two cases is that the government gets the revenue from a tax, whereas a private firm gets the monopoly profit.
Public Policy Toward Monopolies
Government responds to the problem of monopoly in one of four ways.
Making monopolized industries more competitive.
Regulating the behavior of monopolies.
Turning some private monopolies into public enterprises.
Doing nothing at all.
Increasing Competition with Antitrust Laws
Antitrust laws are a collection of statutes aimed at curbing monopoly power.
Antitrust laws give government various ways to promote competition.
They allow government to prevent mergers. such as hypothetical merger between Coca-cola and PepsiCo.
They also allow government to break up companies. For example, in 1984 the gov. split up AT&T, the large telecommunications company, into eight smaller companies.
Finally, The antitrust laws prevent companies from coordinating their activities in ways that make markets less competitive.
Increasing Competition with Antitrust Laws
Two Important Antitrust Laws
Sherman Antitrust Act (1890)
Reduced the market power of the large and powerful “trusts” of that time period.
Clayton Act (1914)
Strengthened the government’s powers and authorized private lawsuits.
Regulation
Government may regulate the prices that the monopoly charges.
The allocation of resources will be efficient if price is set to equal marginal cost.
Figure 9 Marginal-Cost Pricing for a Natural Monopoly
Copyright © 2004 South-Western
Loss
Quantity
0
Price
Demand
Average total cost
Regulated
price
Marginal cost
Average total
cost
输电
价格
输电
数量
MR
dd
MC
AC
QMC
QAC
QMR=MC
PMR=MC
PAC
PMC
A
B
C(regulated price)
D
E(ideal price)
F(monopoly price)
O
图1.垄断条件下输电价格(陈忠斌)
G
M
N
假设某区域新建电网具有垄断性质。（1）在建成初期，如果电网企业追求利润最大化价格(MR=MC，价格为PMC=MR)，电网企业可获得面积ABFPMC=MR的利润。社会福利损失为面积MEF.
（2）如果采用边际成本定价( P =MC，价格为PMC)，该电网将承担面积GDEPMC的亏损。
（3）如采用平均成本定价(P =AC，价格为PAC)，电网企业可做到收支平衡。但会有面积为NEC的社会福利损失.
Regulation
There are, however, two practical problems with marginal-cost as a regulatory system. The first is illustrated in Figure 9. Natural monopolies, by definition, have declining average total cost. When average total cost is declining, marginal cost is less than average total cost. If regulators are to set price equal to marginal cost, that price will be less than the firm’s average total cost, and the firm will lose money. Instead of charging such a low price, the monopoly firm would just exit the industry.
Regulation
Regulators can respond to this problem in various ways, none of which is perfect. One way is to subsidize the monopolist. In essence, the government picks up the losses inherent in marginal-cost pricing. Yet to pay for the subsidy, the government needs to raise money through taxation, which involves its own deadweight losses. Alternatively, the regulators can allow the monopolist to charge a price higher than marginal cost. If the regulated price equals average total cost, the monopolist earns exactly zero economic profit. Yet average-cost pricing leads to deadweight losses, because the monopolist’s price no longer reflects the marginal cost of producing the good. In essence, average-cost pricing is like a tax on the good the monopolist is selling.
Regulation
The second problem with marginal-cost pricing as a regulatory system is that it gives the monopolist no incentive to reduce costs. Each firm in a competitive market tries to reduce its costs because lower costs mean higher profits. But if a regulated monopolist knows that regulators will reduce prices whenever costs fall, the monopolist will not benefit from lower costs. In practice, regulators deal with this problem by allowing monopolists to keep some of the benefits from lower costs in the form of higher profit, a practice that requires some departure from marginal-cost pricing.
The third policy used by the government to deal with monopoly is public ownership. That is, rather than regulating a natural monopoly that is run by a private firm, the government can run the monopoly itself. This solution is common in many European countries, where the government owns and operates utilities such as the telephone, water, and electric companies. In the United States, the government runs the Postal Service. The delivery of ordinary First Class mail is often thought to be a natural monopoly.
Public Ownership公有制
Economists usually prefer private to public ownership of natural monopolies. The key issue is how the ownership of the firm affects the costs of production. Private owners have an incentive to minimize costs as long as they reap part of the benefit in the form of higher profit. If the firm’s managers are doing a bad job of keeping costs down, the firm’s owners will fire them. By contrast, if the government bureaucrats who run a monopoly do a bad job, the losers are the customers and taxpayers, whose only recourse is the political system. The bureaucrats may become a special-interest group and attempt to block cost-reducing reforms.(Mankiw, Principles of Economics, third edition, p331)
Public Ownership
Government can do nothing at all if the market failure is deemed small compared to the imperfections of public polices.
. Doing Nothing
Price Discrimination is the business practice of selling the same good at different prices to different customers, even though the costs for producing for the two customers are the same.
Price Discrimination
Price discrimination is not possible when a good is sold in a competitive market since there are many firms all selling at the market price. In order to price discriminate, the firm must have some market power.
Perfect Price Discrimination
Perfect price discrimination refers to the situation when the monopolist knows exactly the willingness to pay of each customer and can charge each customer a different price.
Price Discrimination
Types of Price Discrimination
1st-degree: Each output unit is sold at a different price. Prices may differ across buyers.
2nd-degree: The price paid by a buyer can vary with the quantity demanded by the buyer. But all customers face the same price schedule. . bulk-buying discounts.
3rd-degree: Price paid by buyers in a given group is the same for all units purchased. But price may differ across buyer groups. ., senior citizen and student discounts vs. no discounts for middle-aged persons.
Price Discrimination
根据价格差别的程度，可把价格歧视区分为三个等级：一级价格歧视，又称完全价格歧视，就是每一单位产品都有不同的价格，即假定垄断者知道每一个消费者对任何数量的产品所要支付的最大货币量，并以此决定其价格，所确定的价正好等于对产品的需求价格，因而获得每个消费者的全部消费剩余。这是一种极端的情况，现实中很少发生。
二级价格歧视，即垄断厂商了解消费者的需求曲线，把这种需求曲线分为不同段，根据不同购买量，确定不同价格，垄断者获得一部分而不是全部买主的消费剩余。公用事业中的差别价格就是典型的二级价格歧视。
三级价格歧视是指垄断厂商对不同市场的不同消费者实行不同的价格，在实行高价格的市场上获得超额利润。
Two important effects of price discrimination :
It can increases the monopolist’s profits.
It can reduce deadweight loss.
Price Discrimination
Figure 10 Welfare with and without Price Discrimination
Copyright © 2004 South-Western
Profit
(a) Monopolist with Single Price
Price
0
Quantity
Deadweight
loss
Demand
Marginal
revenue
Consumer
surplus
Quantity sold
Monopoly
price
Marginal cost
Figure 10 Welfare with and without Price Discrimination
Copyright © 2004 South-Western
Profit
(b) Monopolist with Perfect Price Discrimination
Price
0
Quantity
Demand
Marginal cost
Quantity sold
Examples of Price Discrimination:
Movie tickets: Many movie theaters charge a lower price for children and senior citizens than for other patrons. This fact is easily explained if movie theaters have some local monopoly power and if children and senior citizens have a lower willingness to pay for a ticket. In this case, movie theaters raise their profit by price discriminating.
Airline prices
Discount coupons
Financial aid
Quantity discounts
Price Discrimination
The monopolist price-discriminates over time: He first charges a high price and sells only to the consumers who are most eager to buy the good. He then cuts his price to reach a slightly less eager clientele, and so on. This type of intertemporal discrimination behavior is often encountered in practice. For instance, books are often introduced in hardcover and then published in paperback form a few months or years later. It is well known that the production-cost difference between a hardcover and a paperback is fairly small. Thus, most of the price differential can be explained by the intertemporal-discrimination model. Another example is the first-run movie feature that is shown later on television, as a home video, on airlines, or at second-run movie houses. (Jean Tirole, The Theory of Industrial Organization, p73.)
Figure 三级价格歧视
Mathematics of Price Discrimination
Using elasticities P( 1 + 1/ ED ) = MC
In two regions:
P1( 1 + 1/ E1 ) = P2( 1 + 1/ E2 ) = MC
or: P1/ P2 = ( 1 + 1/ E2 )/( 1 + 1/ E1 )
If the elasticities in region 1 and region 2 are and respectively, then P1/ P2 = (1+1/ ) /(1+1/ ) = 3.
Hence, P1 = 3P2.
The price is three times higher in region 1, which less elastic.
How prevalent are the problems of monopolies?
Monopolies are common
Most firms have some control over their prices because of differentiated products.
Firms with substantial monopoly power are rare.
Few goods are truly unique.
Conclusion: The prevalence of Monopoly
Summary
A monopoly is a firm that is the sole seller in its market.
It faces a downward-sloping demand curve for its product.
A monopoly’s marginal revenue is always below the price of its good.
Summary
Like a competitive firm, a monopoly maximizes profit by producing the quantity at which marginal cost and marginal revenue are equal.
Unlike a competitive firm, its price exceeds its marginal revenue, so its price exceeds marginal cost.
Summary
A monopolist’s profit-maximizing level of output is below the level that maximizes the sum of consumer and producer surplus.
A monopoly causes deadweight losses similar to the deadweight losses caused by taxes.
Summary
Policymakers can respond to the inefficiencies of monopoly behavior with antitrust laws regulation of prices, or by turning the monopoly into a government-run enterprise.
If the market failure is deemed small, policymakers may decide to do nothing at all.
Summary
Monopolist’s can raise their profit by charging different prices to different buyers based on their willingness to pay.
Price discrimination can raise economic welfare and lessen deadweight losses.
(Mankiw,.)
什么是垄断？垄断产生的原因有哪些？
垄断厂商实现利润最大化的均衡条件是什么？
政策制订者如何对政府的决策作出反应？
Mankiw, Principles of Economics, Chapter 15. Exercise and Answer
Mankiw-chapter15-question4. Suppose the Clean Springs Water Company has a monopoly on bottled water sales in California. If the price of tap water increases, what is the levels of output, price, and profit? Explain in words and with a graph.
P
AR= dd
MC'
P'
Q'
E
E'
P
Q
Quantity
Price of tap water increases
MC
ATC
MR
ATC'
M
B
A
C
L
N
SABCP =Initial profit
SLMNP' =Profit after price increased
Obviously, SABCP > SLMNP'
Mankiw,Principles of Economics(2004), third edition, p342.
15-5. A small town is served by many competing supermarkets, which have constant marginal cost.
Using a diagram of the market for groceries, show the consumer surplus, producer surplus, and total surplus.
Now suppose that the independent supermarkets combine into one chain. Using a new diagram, show the new consumer surplus, producer surplus, and total surplus. Relative to the competitive market, what is the transfer from consumers to producers? What is the deadweight loss?
P
AR=dd
B
Quantity
0
15-5-a
P=MC = Supply
Consumer surplus = S△ABC
A
C
Producer surplus = 0
Total surplus = consumer surplus
P
AR=dd
MR
MC
E
F
Quantity
H
15-5-b
A
S△BCE =deadweight loss
S△ABG =consumer surplus
G
D
S□BEFG =producer surplus
ATC
M
N
C
B
S□BMNG = producer profit
Q
Mankiw,Principles of Economics(2004), third edition, Chapter15-problem 9, p343.
15-9. The Placebo Drug Company holds a patent on one of its discoveries.
Assuming that the production of the drug involves rising marginal cost, draw a diagram to illustrate Placebo’s profit-maximizing price and quantity. Also show Placebo’s profits.
Now suppose that the government imposes a tax on each bottle of the drug produced. On a new diagram, illustrate Placebo’s new price and quantity. How does each compare to your answer in part (a)?
Although it is not easy to see in your diagrams, the tax reduces Placebo’s profit. Explain why this must be true.
Instead of the tax per bottle, suppose that the government imposes a tax on Placebo of $10,000 regardless of how many bottles are produced. How does this tax affect Placebo’s produced. How does this tax affect Placebo’s price, quantity, and profits? Explain.
P
AR=dd
MR
MC
Quantity
A
P
Q
E
ATC
B
M
N
L
Mankiw, chapter15-question 9-a.
Placebo’s profits = SPLMN
P
AR=dd
MR
MC
P2
E'
Quantity
A
P1
Q2
Q1
E
MC+Tax
ATC
Tax
B
M
N
D
C
ATC'
L
Mankiw, chapter15-problem9-b.
Price goes up: P1 P2
Quantity decreases: Q1 Q2
Profit reduces: SLMNP1 SBCDP2
P
AR=dd
MR
MC
Quantity
A
P
Q
E
ATC
Tax
M
N
D
C
ATC'
L
Mankiw, chapter15-problem9-d.
Price keeps constant: P1
Quantity is constant: Q1
Profit reduces: SLMNP SLCDP
15-10. Larry, Curly, and Moe run the only saloon in town. Larry wants to sell as many drinks as possible without losing money. Curly wants the saloon to bring in as much revenue as possible. Moe wants to make the largest possible profits. Using a single diagram of the saloon’s demand curve and its cost curves, show the price and quantity combinations favored by each of the three partners. Explain.
P
AR=dd
MR
MC
Quantity
A
B(Larry)
ATC
A(Moe)
E
C(Curly)
PLarry
PCurly
PMoe
qLarry
qCurly
qMoe
Mankiw, chapter 15-13. Explain why a monopolist will always produce a quantity at which the demand curve is elastic.(Hint: If demand is inelastic and the firm raises its price, what happens to total revenue and total costs?)
AR=dd
MR
Total Revenue
Price
Quantity
Quantity
O
O
Edemand =1
Edemand >1
Edemand <1
MR
MC
dd=AR
E
F
G
M
N
Q
q
q
Total revenue,TR
Total profit, TP
ATC
Total cost, TC
2. 根据右图中线性需求曲线 d 和
相应的边际收益曲线MR，试求：
（1）A点所对应的MR值；
（2）B点所对应的MR值。
解答：（1）根据需求的价格点弹性的
几何意义，可得A点的需求的价格弹性
为：
或者
再根据公式 ，则A点的MR值为：
5
10
15
0
1
2
3
MR
B
A
d（AR）
Q
P
（2）与（1）相类似，根据需求的价格点弹性的几何意义，可得B点的需求的价格弹性为：
或者
再根据公式 ，则B点的MR值为：
5. 已知某垄断厂商的成本函数为 ，反需求函数为 。求:
（1）该厂商实现利润最大化的产量、价格、收益和利润；
（2）该厂商实现收益最大化的产量、价格、收益和利润。
解答：（1）由题意可得：
且 （因为当需求函数为线性时，MR函数与P函数的纵截距相同，而MR函数的斜率的绝对值是P函数的斜率的绝对值的2倍）。
于是，根据利润最大化的原则 MR = MC 有：
解得 Q =
以Q = 代入反需求函数 ，得：
以 Q = 和 P=7 代入利润等式，有：
所以，当该垄断厂商实现利润最大化时，其产量 Q=，价格P = 7，收益TR=，利润π= 。
（2） 由已知条件可得总收益函数为：
令 ，即有：
解得 Q = 10
且
所以，当 Q = 10 ，TR值达最大值。
以 Q = 10 代入反需求函数 ，得：
以 Q = 10 代入利润等式，有：
所以，当该垄断厂商实现收益最大化时，其产量 Q=10，价格P = 4，收益TR=40，利润π= -52，既该厂商的亏损量为52。
6. 已知某垄断厂商的反需求函数为 ，成本函数为 ，其中，A表示厂商的广告支出。
求：该厂商实现利润最大化的Q、P和A的值。
解答：（1）由题意可得以下的利润等式：
将以上利润函数π(Q,A)分别对Q、A求偏导数，构成利润最大化的一阶条件如下：
（1）
（2）
求以上方程组的解：
由（2）得 ，代入（1）得：
以 Q =10，A=100 代入反需求函数，得：
所以，该垄断厂商实现利润最大化时的产量 Q = 10，价格 P=100，广告支出 A=100。
7. 已知某垄断厂商利用一个工厂生产一种产品，其产品在两个分割的市场上出售，他的成本函数为 ，两个市场的需求函数为 。求：
（1）当该厂商实行三阶价格歧视时，他追求利润最大化前提下的两市场各自的销售量、价格以及厂商的总利润。
（2）当该厂商在两个市场实行统一的价格时，他追求利润最大化前提下的销售量、价格以及厂商的总利润。
（3）比较（1）和（2）的结果。
解答：（1）由第一个市场的需求函数
同理：由第二个市场的需求函数
可知，该市场的反需求函数为
边际收益函数为
而且，市场需求函数
且 市场反需求函数为
P=64-2Q
市场的边际收益函数为
MR=64-4Q
此外，厂商生产的边际成本函数
该厂商实行三级价格歧视利润最大化的原则可以写为
于是：
关于第一个市场：
根据 ，有：
即
关于第二个市场：
根据 ，有
即
由以上关于Q1、Q2的两个方程可得，厂商在两个市场的销售量分别为Q1=，Q2=。将产量代入反需求函数，可得两个市场的价格分别为P1=84，P2=49。
在实行三级价格歧视的时候，厂商的总利润为：
（2）当该厂商在两个市场上实行统一的价格时，根据利润最大化的原则即该统一市场的 MR=MC 有：
解得 Q=4
以Q=4代入市场反需求函数P=64-2Q，得：
P=56
于是，厂商的利润为：
所以，当该厂商在两个市场实行统一的价格时，他追求利润最大化的销售量为Q=4，价格为P=56，总的利润为π= 48。
（3）比较以上（1）和（2）的结果，可以清楚地看到，将该垄断厂商实行三级价格歧视和在两个市场实行统一定价的两种作法相比较，他在两个市场制定不同的价格实行三级价格歧视时所获得的利润大于在两个市场实行统一定价时所获得的利润（因为146>48）。这一结果表明进行三级价格歧视要比不这样做更为有利可图。
8. 已知某垄断竞争厂商的长期成本函数为
如果该产品的生产集团内的所有厂商都按相同的比例调整价格，那么，每个厂商的份额需求曲线（或实际需求曲线）为P=。求：
（1）该厂商长期均衡时的产量与价格。
（2）该厂商长期均衡时主观需求曲线上的需求的价格点弹性值（保留整数部分）。
（3）如果该厂商的主观需求曲线是线性的，推导该厂商长期均衡时的主观需求函数。
解答：（1）由题意可得：
且已知与份额需求D曲线相对应的反需求函数为
由于在垄断竞争厂商利润最大化的长期均衡时，D曲线与LAC曲线相切（因为π=0），即有LAC=P，于是有：
解得 Q=200（舍去了负值）
以Q=200代入份额需求曲线，得：
所以，该垄断竞争厂商实现利润最大化长期均衡时的产量Q=200，价格P=138。
（2）由Q=200代入长期边际成本LMC函数，得：
因为厂商实现长期利润最大化时必有 MR=LMC，
所以，亦有 MR=116。
再根据公式 ，得：
解得
所以，厂商长期均衡时主观需求d曲线上的需求的价格点弹性 。
（3）令该厂商的线性的主观需求d曲线的函数形式为
其中，A表示该线性需求D曲线的纵截距，-B表示斜率。
下面，分别求A值和B值。
根据线性需求曲线的点弹性的几何意义，可以有：
其中，P表示线性需求d曲线上某一点所对应的价格水平。
于是，在该厂商实现长期均衡时，由 得：
解得
此外，根据几何意义，在该厂商实现长期均衡时，线性主观需求D曲线的斜率的绝对值可以表示为：
于是，该垄断竞争厂商实现长期均衡时的线性主观需求函数为：
或
13.试述垄断市场、垄断竞争市场和寡头市场都不存在具有规律性的厂商的供给曲线的原因？
解答：
(1) 供给曲线是一条反映商品的价格和供给数量之间相互关系的曲线，它是向右上方倾斜的。即供给曲线所对应的供给函数QS = f(P)的斜率为正。因此，很清楚，供给曲线或供给函数体现了价格与供给量之间一一对应的关系，即商品的一个价格水平只能对应一个供给量，或者说，一个价格水平只能对应一个能够带来利润最大化的最优产量。
(2) 在完全竞争厂商的短期均衡分析中，我们之所以能够推导出厂商的供给曲线，其原因在于每一个价格水平只对应一个利润最大化的最优产量。之所以如此，是因为完全竞争厂商所面临的需求曲线是一条水平线。
(3) 在非完全竞争市场上，包括垄断市场、寡头市场和垄断竞争市场，由于单个厂商对市场有或多或少的垄断力量，所以，单个厂商所面临的需求曲线是向右下方倾斜的，只是倾斜程度有所不同而已。也正因为如此，在商品的一个价格水平上可能会对应几个不同的供给量，或者，在商品的一个供给量上可能会对应几个不同的价格水平。也正是从这个意义上讲，在所有的非完全竞争市场上，单个厂商都不存在价格和供给量之间为一一对应关系的这种具有规律性的供给曲线。
(4) 最后需要指出，虽然，在非完全竞争市场上单个厂商不存在供给曲线，但我们仍然可以说，在某一个价格水平上某厂商提供了多少产量，以实现利润最大化的目标。只不过在这种情况下，所有的价格及其相对应的产量之间的关系无法构成一条光滑连续的、且斜率为正的供给曲线而已。
