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Strategic Middlemen and the Neutralization of Monopoly Power

Published online by Cambridge University Press:  17 August 2016

Sherrill Shaffer
Sherrill Shaffer*
Affiliation:
Banking Studies Department
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Abstract

This paper shows how a monopolist can be induced to produce at the optimal output level and price, by utilizing a strategic middleman to represent to the monopolist a synthetic demand curve such that perceived marginal revenue equals true (inverse) demand. Conditions are derived for insuring the financial viability of such a middleman, and the inability of an unregulated market to enforce these conditions is discussed.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 49 , Issue 2 , June 1983 , pp. 113 - 121
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1983 

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Footnotes

(*)

Federal Reserve Bank of New York. This paper embodies the views of the author and does not represent the views or policy of the Federal Reserve System or the Federal Reserve Bank of New York. The author gratefully acknowledges helpful comments from anonymous referees.

References

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