Real option approach to monopolistic pricing in an increasing market
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    Abstract:

    The monopolist’s right of adjusting the price of its products is ignored by many lectures studying monopo2 listic pricing. The right is actually equivalent to a real option. Based on this , we apply real option approach to de2 termine the value of price2adjusting option in an increasing market . Furthermore , monopolistic pricing is studied ; the condition of firm value maximization is also given. The results show that , whether the price2adjusting option can be ignored is decided by the demand of monopolistic products ; marginal revenue is no longer equal to marginal cost except some special cases when pricing2adjusting option is considered.

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