Introducing competition to a monopoly with motivation spillover

Official URL: http://192.168.1.20/record=b1295897 (Table of Contents)

This paper examines how introduced competition effects the motivation, output and profit levels of a monopolist for an open and closed economy. We consider two firm, two country model at the beginning, where first the monopolist is analyzed and then the competition is introduced to the market. We assume motivations are increasing the efficiency and hence decreasing the marginal costs. Motivation is costly and decreasing returns to motivation is assumed. At the last part of the paper, the extension of three and four firms competing is also analyzed with the intention of analyzing the effects of further competition. It is shown in this paper that, despite the believed fact that monopolist maximizes the profits, competition may increase the profit level of the Monopolist under some assumptions. Given that these assumptions hold, the social welfare is positively effected from competition more than anticipated. Under motivational spillover, it is also shown that, at a point competition may start to decrease the social welfare.