In this paper we study the welfare effect of a monopoly innovation. Unlike many partial equilibrium models carried out in previous studies, general equilibrium models with non-price-taking behavior are constructed and analyzed in greater detail. We discover that technical innovation carried out by a monopolist could significantly increase the social welfare. We conclude that, in general, the criticism against monopoly innovation based on its increased deadweight loss is less accurate than previously postulated by many studies.

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Anonymous - Referee Report 1

June 04, 2010 - 10:26

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Lydia Gan - Reply to Referee Report 1

June 28, 2010 - 09:11

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Lydia Gan - Revised Version

June 28, 2010 - 09:12

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Anonymous - Referee Report 2

July 12, 2010 - 10:45

Good literature review. However, even if O. Williamson is mentioned, the paper could have had more depth if it had addressed the issue of labor management and its consequences on monopolist pricing strategy. The reason why I say this is related to the subsequent remark.

I am doubtful about ...[more]

... the assumption of single input (capital k). It is unrealistic and too reductive regarding innovation especially when O. Williamson is mentioned (without being seriously analyzed). This is the major drawback of the paper according to me.

Overall, the paper has potential but the aforementioned remark has to be taken into account.

Lydia Gan - Reply to Referee Report 2

August 23, 2010 - 08:38

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Lydia Gan - Revised Version

August 23, 2010 - 08:39

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