Foundation of Dynamic Monopoly and the Coase Conjecture.
STANFORD UNIV CA INST FOR MATHEMATICAL STUDIES IN THE SOCIAL SCIENCES
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A dynamic theory of monopoly must take into account the fact that a monopolist cannot normally sign contracts to guarantee that the future prices of his output will be above some minimal level. Thus, in a dynamic theory the time path of prices will generally not be the one which, if a commitment to future prices were possible, would bring forth demands that maximize the discounted stream of revenues minus costs. A dynamic theory of monopoly is an equilibrium theory, and it seems natural that an equilibrium perspective is necessary for analyzing the problem. A major result of this paper is to affirm a conjecture of Coase 1972 that states that the market will open at a price close to zero. In summary, without repeat purchases monopoly rents must depend substantially on a monopolists ability to commit to prices or quantities offered in the future. A second purpose of the paper is to extend Rubinsteins analysis of the bilateral monopoly bargaining problem with alternating offers to the case that a seller makes repeated offers to many consumers.
- Economics and Cost Analysis
- Numerical Mathematics