A Zero Efficiency Loss Monopolist

Abstract

AbstractIn an blamic environment, the behavior of a single seller is differentfrom that of a pure monopolist. His ultimate objective is not to maximizeprofit but b please Allah. Profit is only one of his motives. Therefore, heis expected to be ready to sacrifice part of his profits for the social goodif and when the social priorities so require. This brief study seeks first toformulate this problem in its deterministic setting and to derive the optimaUynecessary conditions. Second, it examines the case of a family of utilitiesof the Cobb-Douglas form.IntroductionThe tern monopoly has commonly been used in microeconomic literatureto describe she market condition of a slngle seller (the only supplier) whobehaves in such a way as to maximize profits. As a profit maximizer, thefm produces less and charges higher prices than would be the case underperfect competition. Such behavior by the profit maximizing firm has severaladverse impacts: first, it imposes a social-welfare loss (or efficiency loss)by producing a P>MC; second, it redistributes income from consumers toshareholders of the monopolist firm; third, it misallocates resources throughthe restriction of output. In addition, one may thinle of social costs of resourcesused by a monopofist firm for the protection and utenance of its marketpower through nonprice competition practices, such ai defensive advertisingand non-necessary prdduct differentiation.In reality , the existence of such social costs calls for government ...