Monopoly and competition in addictive markets

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Title: Monopoly and competition in addictive markets
Authors: Murray, Sean
Permanent link: http://hdl.handle.net/10197/1409
Date: Mar-1984
Abstract: This paper models monopoly markets on which demand is addictive as defined by Stigler and Becker; and hence dynamic. It is shown that the monopolists' equilibrium is unique and stable and the time path taken to reach it is also unique. The comparative statics and comparative dynamics of these markets are analysed. It is proved formally that the harmfully (beneficially) addictive monopolist will produce to the left (right) of the equality between marginal revenue and marginal cost, and that the latter may produce where marginal revenue is negative. The model is applied to policy problems in drug-related crime in both long and short runs under monopoly than under competition. The reverse holds true under demand-directed policies. Demand-directed polices cause less crime than supply-directed policies whether competition or monopoly obtains.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Subject LCSH: Monopolistic competition--Mathematical models
Monopolies
Demand (Economic theory)
Substance abuse--Econometric models
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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