Economics Dictionary of ArgumentsHome
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| Monopoly price: A monopoly price in economics is the price set by a monopolist, a sole producer in a market, to maximize profit. Unlike competitive markets, the monopolist can restrict output to create scarcity, raising prices above marginal cost. This leads to higher profits but can result in reduced consumer welfare and allocative inefficiency. See also monopolies, competition, marginal costs. See also Monopolies, Oligopolies, Cartels, Markets, Price._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Dictionary of Arguments. | |||
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Ludwig von Mises on Monopoly Price - Dictionary of Arguments
Rothbard III 671 Monopoly Price/Mises/Rothbard: A succinct definition of monopoly price has been supplied by Mises:“ If conditions are such that the monopolist can secure higher net proceeds by selling a smaller quantity of his product at a higher price than by selling a greater quantity of his supply at a Iower price, there emerges a monopoly price higher than the potential market price would have been in the absence of monopoly.“(1) Rothbard: The monopoly price doctrine may be summed up as follows: A certain quantity of a good, when produced and sold, yields a competitive price on the market. A monopolist or a cartel of firms can, if the demand curve is inelastic at the competitive-price point, restrict sales and raise the price, to arrive at the point of maximum returns. >Elasticity. Rothbard III 672 If, on the other hand, the demand curve as it presents itselfto the monopolist or cartel is elastic at the competitive-price point, the monopolist will not restrict sales to attain a higher price. >Monopolies. Mises: As a result, as Mises points out, there is no need to be concerned with the "monopolist"(…) whether or not he is the sole producer of a commodity is unimportant and irrelevant for catallactic problems. It becomes important only if the configuration of his demand curve enables him to restrict sales and achieve a higher income at a monopoly price.(2) If he learns about the inelastic demand curve after he has erroneously produced too great a stock, he must destroy or withhold part of his stock; after that, he restricts production of the commodity to the most remunerative level. Rothbard III 674 Inelasticity/Rothbard: The inelastic demand curve, giving rise to an opportunity to monopolize, may present itself either to a single monopolist of a given product or to "an industry as a whole" when organized into a cartel of the different producers. In the latter case, the demand curve, as it presents itselfto eachfirm, is elastic. At the competitive price, if one firm raises its price, the customers preponderantly shift to purchasing from its competitors. On the other hand, if the firms are cartelized, in many cases the lesser range of substitution by consumers would render the demand curve, as presented to the cartel, inelastic. This condition serves as the impetus to the formation of (…) cartels (…). >Cartels/Rothbard, >Monopoly price/Rothbard. 1. Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. p. 278. 2. Thus: The mere existence of monopoly does not mean anything. The publisher of a copyright book is a monopolist. But he may not be able to sell a single copy, no matter how low the price he asks. Not every price at which a monopolist sells a monopolized commodity is a monopoly price. Monopoly prices are only prices at which it is more advantageous for the monopolist to restrict the total amount to be sold than to expand sales to the limit which a competitive market would allow. (Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. p. 356)_____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. "Vs" indicates differences in content, not necessarily the chronological progression of a controversy. If a German edition is specified, the page numbers refer to this edition. |
EconMises I Ludwig von Mises Die Gemeinwirtschaft Jena 1922 Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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