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Market power under income polarization

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Abstract

We study the reaction of a monopolistic firm to distributive shocks which lead to income polarization. We show that the movements in the set price and in the sold quantity depend on the served market share. In particular, we identify a region of parameters where the optimal markup moves in the opposite direction of market demand: in this respect, distributive shocks can provide an explanation for countercyclical movements of the markup.

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Author notes

  1. Corrado Benassi

    Present address: Department of Economics, University of Bologna, Piazza Scaravilli 2, I-40126, Bologna, Italy

  2. Roberto Cellini

    Present address: Faculty of Economics, University of Catania, Palazzo delle Scienze, Corso Italia 55, I-95129, Catania, Italy

  3. Alessandra Chirco

    Present address: Faculty of Economics, University of Lecce, Ecotekne, I-73100, Lecce, Italy

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    1. Corrado Benassi
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    2. Roberto Cellini
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    3. Alessandra Chirco
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    Benassi, C., Cellini, R. & Chirco, A. Market power under income polarization. Journal of Economics Zeitschrift für Nationalökonomie 69, 289–298 (1999). https://doi.org/10.1007/BF01231163

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    • DOI: https://doi.org/10.1007/BF01231163

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