Naslov
Monopolist’s mark-up and the elasticity of substitution

Autori
Vrankić, Ilko ; Krpan, Mira ; Herceg, Tomislav

Izvornik
Croatian operational research review (1848-0225) 8 (2017), 2; 377-390

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
profit maximization ; monopolist ; mark-up ; elasticity of substitution

Sažetak
This paper analyzes the mark-up of the price of a product over marginal costs for a monopolist using Appelbaum’s theoretical model. The profit maximization model of an industry that uses the monopolist’s product as its input is formulated. Our goal is to express the monopolist’s mark-up as a function of the elasticity of substitution for the respective industry and to analyze how changes in the elasticity of substitution affect the mark-up ratio. Consequently, the CES production function along with its substitution parameter is chosen. An analytical description of changes in the elasticity of substitution and its influence on the monopolist's mark-up is given. All scenarios are supplemented by geometrical illustrations, economic interpretations and numerical examples.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA