A BEJTE Topics article.

Abstract

We consider a monopoly producing a good whose demand grows over time. Whatever the price policy which is adopted, the monopolist invests in order to meet the resulting demand growth. She can only invest in indivisible factory units. We identify the optimal price policy, and the ensuing optimal sequence of investment time points the monopoly selects through time. We show that this sequence satisfies the constant cycle property observed under capacity expansion for an exogenous increase in demand (Manne, 1961).

Submitted: October 11, 2005 · Accepted: July 11, 2006 · Published: December 4, 2006

Originally published in Topics in Theoretical Economics.

Recommended Citation

Tarola, Ornella (2006) "Monopoly Pricing over Time and the Timing of Investments," Topics in Theoretical Economics: Vol. 6 : Iss. 1, Article 20.
Available at: http://www.bepress.com/bejte/topics/vol6/iss1/art20