The Specialness of Zero / Joshua S. Gans.

Format:

Book

Author/Creator:

Gans, Joshua S.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26485.

NBER working paper series no. w26485

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

A model is provided whereby a monopolist firm chooses to price its product at zero. This outcome is shown to be driven by the assumption of 'free disposal' alongside selection markets (where prices impact on a firm's costs). Free disposal creates a mass point of consumers whose utility from the product is zero. When costs are negative, the paper shows that a zero price equilibrium can emerge. The paper shows that this outcome can be socially optimal and that, while a move from monopoly to competition can result in a negative price equilibrium, this can be welfare reducing. The conclusion is that zero can be a 'special zone' with respect to policy analysis such as in antitrust.

Notes:

Print version record

November 2019.