monopoly_solver function

Monopoly Profit Maximization

This function numerically finds the profit-maximizing output for a monopolist with linear and non-linear cost and demand curves. For guaranteed existence of feasible solution (in which both price and output are positive), a linear demand curve might be necessary.

monopoly_solver(cost = c(0, 1, 0), demand = c(0, -1, 0), q0 = 0)

Arguments

• cost: a vector of cost curve coefficients, which must be in order: intercept of the cost function, linear term's parameter of the cost function and quadratic term's parameter of the cost function
• demand: a vector of demand curve coefficients, which must be in order: intercept of inverse demand function, linear coefficient, secon degree coefficient
• q0: Initial guess for monopolist's output. Defaults to 0. Strongly advise not to set this parameter unless you are very aware of what you're doing.

Returns

A list with market price, output, profits, markup, profitrate.

Examples

c = c(50, 3, 1)
p = c(500, -8, -1)
monopoly_solver(cost = c, demand = p)

Author(s)

Pedro Cavalcante Oliveira, Department of Economics, Fluminense Federal University pedrocolrj@gmail.com