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- Title
An Essay on Monopoly Power and Stable Price Policy.
- Authors
Yu, S. Y.
- Abstract
This article presents a general stable price model for a profit-maximizing firm which possesses some degree of monopoly power and makes long-run decisions under the conditions of uncertainty. It has long been observed that firms with monopoly power prefer a stable price policy even under the expectation that demand will fluctuate over time. Because a different emphasis is placed on the firm's objectives and concerns, there exists a variety of explanations for the stable price phenomenon. They conclude that a price, once established, becomes inviolable. Others argue that when a firm strives to maximize long-run profit, it will equate long-run marginal revenue to long-run marginal cost, price becomes invariant with changes in short-run demand.
- Subjects
PRICING; PRICE regulation; PRICES; PROFIT maximization; PROFITABILITY; MONOPOLIES; TRADE regulation
- Publication
American Economic Review, 1979, Vol 69, Issue 1, p60
- ISSN
0002-8282
- Publication type
Article