Monopoly

This chapter studies several variants of a model that fits a very different situation, in which the producer of a single good is the only one serving a market.

The variants differ in the type of options the producer can offer potential buyers. In the basic case, the producer can post a price per unit, and each buyer can purchase any amount of the good at that price. In other cases, the producer has other instruments like offering all consumers a set of price-quantity pairs.

In each case, every potential buyer chooses the option he most prefers. The producer predicts correctly the buyers’ responses and acts to advance her target (like maximizing profit or increasing production).