Quasilinear Utility and Two Market Monopoly

  •  Stephen Layson    


The use of quasilinear utility functions in economic analyses is widespread. This paper presents an overdue clarification on the implications of quasilinear utility for two market monopoly. The paper begins by deriving the demands facing a two market monopoly from a representative consumer with quasilinear utility. Expressions are derived for the profit margins expressed solely in terms of the own and cross-price elasticities of demand. The paper also analyzes the implications of quasilinear utility for other issues in two market monopoly: pricing below marginal cost in a market, third-degree price discrimination when the monopoly products are substitutes and pricing in the inelastic region of demands.

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