Optimal Product Proliferation in Monopoly: A Dynamic Analysis

Lambertini, Luca (2008) Optimal Product Proliferation in Monopoly: A Dynamic Analysis. Bologna: Dipartimento di Scienze economiche DSE, p. 24. DOI 10.6092/unibo/amsacta/4599. In: Quaderni - Working Paper DSE (648). ISSN 2282-6483.
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Abstract

The monopolist’s incentives towards product proliferation are evaluated in an optimal control model considering three alternative regimes: profit-seeking; social planning; and a hybrid case with monopoly pricing and a regulator setting product innovation to maximise welfare. In equilibtium, the profitseeking firm supplies a socially suboptimal number of varieties to reduce cannibalisation while the social planner exploits the same effect to satisfy consumers’ love for variety and decrease the market price of all products. In terms of the Schumpeter vs Arrow debate on the relationship between market structure and innovation incentives, the results obtained in this model have a definite Arrovian flavor.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Keywords
multiproduct firm, product innovation, optimal control
Subjects
ISSN
2282-6483
DOI
Deposit date
15 Feb 2016 14:02
Last modified
15 Feb 2016 14:02
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