Elements of Numerical Mathematical Economics with Excel

9.5. Dynamic optimization for a monopolist

The first economic application of the CoV is a classical model taken from the literature ² regarding the monopoly.

As we have seen in the section of Microeconomics in this imperfect competitive market, there is no such thing as the supply curve, like in the perfect competitive markets, but only a supply point exists. In the static environment, the optimal output depends on the specific shape of the demand curve. Through the demand curve, we read the price level at which the monopolist maximizes its profit, which is equal to total revenues minus total costs, namely π = p q − ( a q 3 + b q 2 + c ) , where p = a − b q is the demand shape at a certain time. The solution in the ...