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
Date Written: 2015
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: Suggested Citation