A Zero Efficiency Loss Monopolist

Abstract

Abstract In an blamic environment, the behavior of a single seller is different from that of a pure monopolist. His ultimate objective is not to maximize profit but b please Allah. Profit is only one of his motives. Therefore, he is expected to be ready to sacrifice part of his profits for the social good if and when the social priorities so require. This brief study seeks first to formulate this problem in its deterministic setting and to derive the optimaUy necessary conditions. Second, it examines the case of a family of utilities of the Cobb-Douglas form. Introduction The tern monopoly has commonly been used in microeconomic literature to describe she market condition of a slngle seller (the only supplier) who behaves in such a way as to maximize profits. As a profit maximizer, the fm produces less and charges higher prices than would be the case under perfect competition. Such behavior by the profit maximizing firm has several adverse impacts: first, it imposes a social-welfare loss (or efficiency loss) by producing a P>MC; second, it redistributes income from consumers to shareholders of the monopolist firm; third, it misallocates resources through the restriction of output. In addition, one may thinle of social costs of resources used by a monopofist firm for the protection and utenance of its market power through nonprice competition practices, such ai defensive advertising and non-necessary prdduct differentiation. In reality , the existence of such social costs calls for government ...