Prices and Deadweight Loss in Multi-Product Monopoly
Posted: 24 Jun 2009 Last revised: 2 Oct 2009
Date Written: June 23, 2009
The paper investigates prices and the deadweight loss in multi-product monopoly (MPM) with linear demand and constant marginal costs. We examine MPM with three commonly used demand structures: standard heterogeneous products, vertically (quality) and horizontally (spatially) differentiated products. Contrary to existing results we find that in all three cases a product's price depends only on specific characteristics of that product, independent of product interactions, the characteristics of other goods and even the number of other goods. We also show that in all three models the deadweight loss due to monopoly pricing is equal to half the total monopoly profit.
Keywords: Multi-Product Monopoly
JEL Classification: D42
Suggested Citation: Suggested Citation