Capacity expansion and dynamic monopoly pricing

We consider a monopoly producing a good whose demand grows over time. Whatever the price policy which is adopted, the monopolist invests in order to meet the resulting demand growth. She can only invest in indivisible factory units. We identify the optimal price policy, and the ensuing optimal sequence of investment time points the monopoly selects through time. We show that this sequence satisfies the constant cycle property observed under capacity expansion for an exogenous increase in demand (Manne, 1961).

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Dynamic monopoly pricing with network externalities

International Journal of Industrial Organization ◽

10.1016/0167-7187(95)01000-9 ◽

1996 ◽

Vol 14 (6) ◽

pp. 837-855 ◽

Cited By ~ 64

Author(s):

Bernard Bensaid ◽

Jean-Philippe Lesne

Keyword(s):

Network Externalities ◽

Monopoly Pricing ◽

Dynamic Monopoly

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Storable Good Monopoly: The Role of Commitment

The American Economic Review ◽

10.1257/aer.96.5.1706 ◽

2006 ◽

Vol 96 (5) ◽

pp. 1706-1719 ◽

Cited By ~ 38

Author(s):

Paolo Dudine ◽

Igal Hendel ◽

Alessandro Lizzeri

Keyword(s):

Social Welfare ◽

Monopoly Pricing ◽

Dynamic Monopoly ◽

Coase Conjecture ◽

Demand Changes ◽

Changes Over Time ◽

Over Time

We study dynamic monopoly pricing of storable goods in an environment where demand changes over time. The literature on durables has focused on incentives to delay purchases. Our analysis focuses on a different intertemporal demand incentive. The key force on the consumer side is advance purchases or stockpiling. In the case of storable goods, the stockpiling motive has recently been documented empirically. We show that, in this environment, if the monopolist cannot commit, then prices are higher in all periods, and social welfare is lower, than in the case in which the monopolist can commit. This is in contrast with the analysis in the literature on the Coase conjecture.

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Public Investment Criteria: Benefit-Cost Analysis for Planned Economic Growth by Stephen A. Marglin. London: George Allen & Unwin Ltd., 1967. pp.103. 22s. 6d.********** Investments for Capacity Expansion: Size, Location and Time-Phasing edited by Alan S. Manne. London: George Allen & Unwin Ltd., 1967. pp.239. 45s.Investments for Capacity Expansion: Size, Location and Time-Phasing edited by Alan S. Manne. London: George Allen & Unwin Ltd., 1967. pp.239. 45s.

The Pakistan Development Review ◽

10.30541/v7i3pp.416-420 ◽

1967 ◽

Vol 7 (3) ◽

pp. 416-420

Author(s):

Arthur MacEwan

Keyword(s):

Cost Benefit Analysis ◽

Public Investment ◽

Cost Benefit ◽

Capacity Expansion ◽

Point Of View ◽

Systematic Analysis ◽

Benefit Cost Analysis ◽

The Government ◽

The Many ◽

Benefit Cost

These books are numbers 4 and 5, respectively, in the series "Studies in the Economic Development of India". The two books are interesting complements to one another, both being concerned with the analysis of projects within national plan formulation. However, they treat different sorts of problems and do so on very different levels. Marglin's Public Investment Criteria is a short treatise on the problems of cost-benefit analysis in an Indian type economy, i.e., a mixed economy in which the government accepts a large planning responsibility. The book, which is wholely theoretical, explains the many criteria needed for evaluation of projects. The work is aimed at beginning students and government officials with some training in economics. It is a clear and interesting "introduction to the special branch of economics that concerns itself with systematic analysis of investment alternatives from the point of view of a government".

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