A Note on the Limits to Monopoly Pricing

The Next Generation of Austrian Economics - Essays in Honor of Joseph T. Salerno, edited by Per Bylund & David Howden, 123-136. Auburn, Alabama: Mises Institute. 2015

14 Pages Posted: 4 Aug 2015 Last revised: 20 Oct 2015

See all articles by Xavier Méra

Xavier Méra

Université catholique de l'Ouest

Date Written: 2015

Abstract

Ludwig von Mises and Murray Rothbard tended to emphasize the same requirement for a monopoly price to emerge, as far as the demand schedule for the monopolized good is concerned, in the long run and in the immediate run. This is problematic because, as this paper explains, their criterion of a seller or a cartel of sellers facing an “inelastic demand” above the “competitive price” (Mises) or the “free-market price” (Rothbard) is only required in the immediate run. This has consequences in regard to the question of the limits to monopoly pricing. The inelasticity of demand criterion of both authors left less room for monopoly prices in their theoretical constructs of a hampered market economy than there really is. If one wants to spare the bulk of consumers from the effects of factor misallocation, refraining from granting monopolistic privileges becomes even more urgent than what both authors suggested.

Keywords: monopoly price, interventionism, elasticity of demand, economies of scale, perfect competition, monopolistic competition, price theory, Austrian microeconomics

JEL Classification: B21, B29, D42, D43, L12, L13, L41, L43

Suggested Citation

Méra, Xavier, A Note on the Limits to Monopoly Pricing (2015). The Next Generation of Austrian Economics - Essays in Honor of Joseph T. Salerno, edited by Per Bylund & David Howden, 123-136. Auburn, Alabama: Mises Institute. 2015, Available at SSRN: https://ssrn.com/abstract=2638088

Xavier Méra (Contact Author)

Université catholique de l'Ouest ( email )

3 place André Leroy
Angers, 49000
France

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