We substitute to the plant size problem, as investigated by Chenery [Chenery, H., 1952. Overcapacity and the acceleration principle. Econometrica], a new version in which a profit-maximizing monopolist may combine its investment policy with a price policy adjusting demand upwards or downwards over time. We characterize the optimal price and investment policies. The optimal price policy determines an investment pattern either with constant increments of capacity over time, or becoming constant after a finite time. The existing capacity is either fully used at each instant between two investment dates; or the monopolist first quotes the instantaneous monopoly price and, thereafter, the price dampening instantaneous demand at the optimal installed capacity level. © 2006 Elsevier Ltd. All rights reserved.
Capacity expansion and dynamic monopoly pricing / S., Demichelis; Tarola, Ornella. - In: RESEARCH IN ECONOMICS. - ISSN 1090-9443. - 60:4(2006), pp. 169-178. [10.1016/j.rie.2006.09.003]
Capacity expansion and dynamic monopoly pricing
TAROLA, Ornella
2006
Abstract
We substitute to the plant size problem, as investigated by Chenery [Chenery, H., 1952. Overcapacity and the acceleration principle. Econometrica], a new version in which a profit-maximizing monopolist may combine its investment policy with a price policy adjusting demand upwards or downwards over time. We characterize the optimal price and investment policies. The optimal price policy determines an investment pattern either with constant increments of capacity over time, or becoming constant after a finite time. The existing capacity is either fully used at each instant between two investment dates; or the monopolist first quotes the instantaneous monopoly price and, thereafter, the price dampening instantaneous demand at the optimal installed capacity level. © 2006 Elsevier Ltd. All rights reserved.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
