International Journal of Business and Economics Volume 10, No. 1 April, 2011

Second-Degree Monopoly Wholesaler with Variable Ordering Costs

Uriel Spiegel

Department of Management, Bar-Ilan University, Israel and Department of Economics, University of Pennsylvania, U.S.A.

Tchai Tavor

Department of Economics, Yisrael Valley College, Israel

Abstract

Ordering costs are usually considered as fixed costs. For the case of one seller and two identical buyers, we examine ordering charges that are proportional to the number of units ordered. We find that no extra profits will be generated, neither for the producer nor for the retailers. Thus, proportional ordering costs are not economically justified.

Keywords：retailers, ordering charges, excess demand, excess supply.

JEL Classifications：C44, L12, L16, M11.

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