Monopoly profit lower than oligopoly due to risk aversion
Date
30/06/2023Metadata
Show full item recordAbstract
The industry profit is usually maximized under monopoly and falls with the number of firms in a Cournot oligopoly. However, demand uncertainty and risk aversion reduce firms' outputs, thus raising oligopoly profits and reducing monopoly one. Given a liner demand and costs and a mean-variance utility, we obtain the necessary and sufficient condition for a monopoly's profit and utility to be lower than an oligopoly. We also find such a condition for collusion to yield a lower profit. Finally, we provide a sufficient condition for a monopoly profit to be lower than an oligopoly given a general non-linear demand function.
Citation
Jin , J Y & Kobayashi , S 2023 , ' Monopoly profit lower than oligopoly due to risk aversion ' , Economics Bulletin , vol. 43 , no. 2 , pp. 1010-1015 . < https://www.accessecon.com/pubs/EB/default.aspx?topic=Abstract&PaperID=EB-22-00497 >
Publication
Economics Bulletin
Status
Peer reviewed
ISSN
1545-2921Type
Journal article
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