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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Cervellati, Matteo / Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier

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Monopoly Pricing over Time and the Timing of Investments

Ornella Tarola1

1University of Rome,

Citation Information: Topics in Theoretical Economics. Volume 6, Issue 1, Pages 1–17, ISSN (Online) 1534-598X, DOI: 10.2202/1534-598X.1263, December 2006

Publication History

Published Online:

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).

Keywords: planning investment; firm size; economic behavior

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