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Monopoly with differentiated final goods and heterogeneous markets
- Publication Year :
- 2020
-
Abstract
- This work attempts to characterise the dynamic properties of a nonlinear model in which a monopolist produces a fixed amount of an intermediate good. The firm employs this good in producing two vertically differentiated final commodities, sold in two distinct markets. Consumers’ preferences are described by quasi-linear and quadratic utility functions respectively yielding isoelastic and linear demand functions. In addition, we assume that the monopolist adopts a gradient adjustment rule based on profit variation to adjust its choice about the amount of intermediate good to employ in the production of each final good. Two alternative scenarios emerge: in the first, there exists coexistence of two markets; in the second, the monopolist specialises on the production of a single final good. The dynamics show that the elasticities of market demands play an ambiguous role in affecting the stability of the equilibrium, whereas the speed of adjustment unambiguously destabilises the system. Moreover, the article investigates the role of the productive capacity and the gap in marginal costs in defining the different scenarios. In particular, economic dynamics may be chaotic and/or multiple attractors may appear.
- Subjects :
- Marginal cost
Monopoly dynamic
Monopoly dynamics
General Mathematics
Productive capacity
Chaotic
General Physics and Astronomy
Intermediate good
01 natural sciences
Profit (economics)
Chao
010305 fluids & plasmas
Microeconomics
0103 physical sciences
Economics
Differentiated final good
Differentiated final goods
010301 acoustics
Multiple equilibria
Applied Mathematics
Statistical and Nonlinear Physics
Rule-based system
Final good
Chaos
Monopoly
Subjects
Details
- Language :
- English
- Database :
- OpenAIRE
- Accession number :
- edsair.doi.dedup.....01f93c7e3633037bc640912705ccd8df