Izvorni znanstveni članak
https://doi.org/10.17535/crorr.2017.0024
Monopolist’s mark-up and the elasticity of substitution
Ilko Vrankić
; Department of Economic Theory, Faculty of Economics and Business, University of Zagreb, J. F. Kennedy 6, 10 000 Zagreb, Croatia
Mira Krpan
; Department of Economic Theory, Faculty of Economics and Business, University of Zagreb, J. F. Kennedy 6, 10 000 Zagreb, Croatia
Tomislav Herceg
orcid.org/0000-0001-8869-6775
; Department of Economic Theory, Faculty of Economics and Business, University of Zagreb, J. F. Kennedy 6, 10 000 Zagreb, Croatia
Sažetak
This paper analyzes the mark-up of the price of a product over marginal costs for a monopolist using Appelbaum’s theoretical model. The profit maximization model of an industry that uses the monopolist’s product as its input is formulated. Our goal is to express the monopolist’s mark-up as a function of the elasticity of substitution for the respective industry and to analyze how changes in the elasticity of substitution affect the mark-up ratio. Consequently, the CES production function along with its substitution parameter is chosen. An analytical description of changes in the elasticity of substitution and its influence on the monopolist's mark-up is given. All scenarios are supplemented by geometrical illustrations, economic interpretations and numerical examples.
Ključne riječi
profit maximization; monopolist; mark-up; elasticity of substitution
Hrčak ID:
193537
URI
Datum izdavanja:
30.12.2017.
Posjeta: 2.590 *