Welfare-increasing monopolization

Working paper

The conditions for monopolization to be good for social welfare are examined. Social welfare can be higher when a monopoly sells to a monopoly, with double margins, than when a competitive industry sells to a downstream Cournot oligopoly with differing efficiency levels. This requires inverse demand to be sufficiently concave, and cannot hold when demand is convex. When there are no vertical issues an efficient monopoly can yield higher social welfare than an asymmetric Cournot duopoly as long as demand is logconcave. In general greater demand concavity increases the relative importance of the benefit of redistributing output to the efficient firm.

Authors: Cowan, S

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Place of publication: Oxford
• Publication date: 2023-03-31
• DOI: 10.1111/joie.12405
• ISSN: 1471-0498
• Paper number: 1006
• Language: English
• Keywords: monopoly; Cournot oligopoly; social welfare