Monopoly and Oligopoly Provision of Addictive Goods.
This article investigates monopoly and oligopoly provision of an addictive good. Consumer preferences are modeled as in Becker and Murphy (1988). Addictive goods have characteristics that create interesting strategic issues when suppliers are noncompetitive. We characterize the perfect Markov equilibrium of a market with noncompetitive supply of an addictive good and compare it with the efficient solution. Depending on particular parameter values, we find a wide variety of possible steady-state outcomes, including ones with output above the efficient level and price below marginal cost. We also find that market power can be disadvantageous.
Year of publication: |
2001
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Authors: | Driskill, Robert ; McCafferty, Stephen |
Published in: |
International Economic Review. - Department of Economics. - Vol. 42.2001, 1, p. 43-72
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Publisher: |
Department of Economics |
Saved in:
Saved in favorites
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