Monopoly as a ‘culture-history fact’: Knight, Menger, and the role of institutions

Frank Knight's theory of monopoly price has received relatively little attention in the literature on Risk, Uncertainty and Profit. We argue that Knight accepted and refined the monopoly price theory of Carl Menger and his followers. Knight highlights the difference between monopoly as an inevitable outcome of departures from perfect competition, and monopoly as a contingent or ‘culture-history fact’. In the latter case, coercive institutional barriers to potential competition shape the choice set of consumers and producers, and provide a crucial method for identifying monopoly gains. There are three benefits to this account of Knight's contributions: it rehabilitates the focus on the institutional determinants of monopoly price, as opposed to the mainstream emphasis on market frictions and imperfections; it opens the way for a Mengerian monopoly price theory that seriously engages the study of institutions; and it adds new evidence and nuance to ongoing debates about Knight's place in economics.

Análisis de la regulación sectorial de telecomunicaciones desde la perspectiva de la Escuela Económica Austriaca

Telecommunication services have been provided under a legal monopoly for the most part of its history. In 1998, market liberalisation was completed both in European Union and in Spain. This was accomplished under a legal framework which imposes asymmetric obligations to the incumbent operator, due to its past as monopolist. From that moment, regulatory pressure on market players has increased as the legal framework has evolved. These phenomena can be explained by the theory of price control, due to Ludwig Von Mises; the same theory may preview the future of the sector, if this tendency of regulation is continued. Key words: Regulation, asymmetric obligations, markets, monopoly, price controls. JEL Codes: B53, K23, L43, L51, L96. Resumen: Los servicios de telecomunicaciones se han prestado bajo un monopolio legal durante prácticamente toda su historia. En 1998, se com-pletó la liberalización del mercado tanto en la Unión Europea como en España. Esto se hizo bajo una normativa que impone obligaciones asimétricas al operador histórico del mercado, debido a su pasado monopolista. Desde entonces, la presión regulatoria sobre los agentes presentes en el sector ha crecido conforme ha evolucionado el marco normativo. Estos fenómenos se explican a partir de la teoría de control de precios, de Ludwig Von Mises, por lo que la misma también permite predecir el futuro que espera al sector de seguirse esta línea de regulación. Palabras clave: Regulación, obligaciones asimétricas, mercados, monopolio, control de precios. Códigos JEL: B53, K23, L43, L51, L96.

Optimal Monopoly Mechanisms with Demand Uncertainty

This paper analyzes a monopoly firm’s profit-maximizing mechanism in the following context. There is a continuum of consumers with a unit demand for a good. The distribution of the consumers’ valuations is given by one of two possible demand distributions/states. The consumers are uncertain about the demand state, and they update their beliefs after observing their own valuation for the good. The firm is uncertain about the demand state but infers it from the consumers’ reported valuations. The firm’s problem is to maximize profits by choosing an optimal mechanism among the class of anonymous, deterministic, direct revelation mechanisms that satisfy interim incentive compatibility and ex post individual rationality. We show that, under certain sufficient conditions, the firm’s optimal mechanism is to set the monopoly price in each demand state. Under these conditions, Segal’s optimal ex post mechanism is robust to relaxing ex post incentive compatibility to interim incentive compatibility.

Are Tax-Free Wine Prices Attractive for Consumers? Empirical Evidence from Norway

Wine is highly taxed in Norway, but there is a Norwegian island, Svalbard, with no taxes at all. For the purpose of comparing wine prices, with a focus on tax-free prices, we have collected a data set with identical wines from the two parts of Norway. At the retail level wines are only sold at state monopoly shops in mainland Norway and information from these allows a calculation of the before-tax prices in the country. The prices at the tax-free shop on Svalbard are significantly higher than the pre-tax prices and thus some monopoly price setting is taking place in the tax-free shop. Like in the present case duty-free shops often attract consumers with ‘tax-free’ prices, but some surplus is still extracted from the customers due to a monopoly behavior.

An Asymmetric Duopoly Model of Price Framing

This note considers an asymmetric duopoly model of price-frame competition in homogeneous product markets. The firms choose simultaneously prices and price formats, and frame differentiation limits price comparability leading to consumer confusion. Here, one firm is more salient than its rival and attracts a larger share of confused consumers. In duopoly equilibrium, the firms randomize on both prices and frames, make strictly positive profits, and pricing is frame-independent. However, the prominent firm sets a higher average price and charges the monopoly price with positive probability. Higher prominence boosts expected profit for both the industry and the salient firm but may harm the rival’s expected profit.

Die Grenze der Werttheorie

Not only Marx found the “theory of the ground rent” a hard nut to crack. The political- economic and urban sociological debates also find it a challenge - or simply assume that the ground rent is a monopoly price without giving an account of what this means for Marx’s project of critique of political economy. The so-called differential pension is still unproblematic and goes back to David Ricardo. On the other hand, the so-called absolute rent, with which Marx wanted to theoretically distance himself from Ricardo, is problematic and untenable. The article discusses three essential points of criticism of the concept and what it means conceptually and politically for Marxian value theory when it reaches its limits on the topic of the absolute rent.