Hans Mayer, “II. Der Monopolpreis” (1925)

Hans Mayer’s signed encyclopedia contribution examines how monopoly changes price formation and where economic theory can determine a definite price. Its six sections move from the concept of monopoly through complete and incomplete supply monopolies, socially or legally constrained monopolies, demand monopolies, and bilateral monopoly. The organizing distinction is between control over a market and freedom from economic constraints: monopoly permits deliberate regulation of supply, but neither makes prices arbitrary nor guarantees a uniquely predictable outcome. Mayer presents the theory as increasingly relevant to an economy shaped by cartels, trusts, public enterprises, and collective purchasing organizations.

Strict monopoly requires exclusive control of supply or demand by one economic agent, including an association acting as a unit. Mayer questions the conventional extension of the term to dominant firms: competition encompasses unequal market shares, whereas exclusivity admits no degrees. Monopoly and competition nevertheless share the same underlying determinants—needs, purchasing power, available resources, and sellers’ pursuit of net profit. Their different organization makes different quantities effective in the market, producing different prices even when aggregate needs and stocks remain unchanged.

The simplest model concerns a monopolist controlling an existing stock acquired without production expenditure. Here profit maximization means maximizing total revenue, not the unit price. Mayer’s numerical example selects a price of six and sales of 600 units from a stock of 1,000. Selling either more or less reduces receipts. Yet this power to choose supply is not power to choose both price and sales independently:

Preis und Menge stehen zueinander im Verhältnis funktioneller Abhängigkeit.

English translation: Price and quantity stand in a relationship of functional dependence upon one another.

Demand constrains the monopolist’s choice. Because its distribution is initially unknown, especially for new goods, the seller must discover the most profitable combination experimentally. Withholding or destroying stock can be advantageous, but Mayer rejects the assumption that monopoly invariably requires restriction. The result depends on the distribution of needs and purchasing power across successive buyer groups. As under competition, the market price corresponds to the willingness and ability to pay of the marginal purchasing group; monopoly differs because the seller can influence which group becomes marginal.

Price discrimination extends this control. A monopolist may separate buyers over time, as with expensive initial editions followed by cheaper mass editions, or distinguish uses, as with electricity tariffs. Such arrangements capture purchasing power that a uniform price would leave as consumer surplus. Their success requires enforceable market separation. Substitutes, meanwhile, limit monopoly power: buyers may value some distinctive functions of a good while obtaining its other services elsewhere.

Production monopoly adds costs to this demand analysis. The relevant maximum is now total profit rather than gross receipts. Mayer compares constant, falling, and rising unit costs: other things equal, falling costs encourage greater output and lower prices, while rising costs favor smaller output and higher prices. He connects industrial economies of scale to overheads spread across larger production volumes. Exclusive resources, secret processes, legal privileges, and transport or tariff barriers can sustain monopoly, but expanding world markets also undermine isolated monopolists and encourage international combinations.

Incomplete monopoly introduces a crucial limit to generalization:

Für die jeweilige Höhe, in der sich der Preis bei unvollständigem Angebotmonopol bildet, läßt sich eine ähnlich allgemeine Regel wie beim vollständigen Monopol nicht aufstellen, da die Voraussetzungen, unter denen unvollständige Monopole bestehen können, höchst verschiedenartig sind.

English translation: No general rule comparable to that for complete monopoly can be established for the particular price level formed under incomplete supply monopoly, since the conditions under which incomplete monopolies can exist are extremely varied.

Mayer distinguishes a dominant supplier facing small rivals from several substantial suppliers confronting one another. Transitional struggles can generate repeated undercutting, predatory prices, cartel formation, or the elimination of weaker firms, without a stable equilibrium. Durable configurations are more determinate: a dominant firm may accommodate a limited competitive fringe or price low enough to exclude higher-cost potential entrants. Thus even a sole active supplier may possess only incomplete monopoly power. His discussion of dumping similarly distinguishes protected domestic monopoly pricing from competitive export sales; the domestic injury lies in monopoly itself, not simply in cheap exports.

“Monopoloids” identify a different restriction: monopoly conditions exist, but legal intervention, public opinion, or voluntary restraint prevents full profit maximization. Mayer distinguishes revenue-raising state monopolies, which follow private monopolistic pricing principles, from public-service monopolies directed toward satisfying widespread needs. Cost-covering prices, subsidies, moderate surpluses, and socially differentiated tariffs depend on public priorities rather than a unique profit maximum.

Demand monopoly is correspondingly asymmetric:

Die Preisbildung beim Konsumentenmonopol ist aber keineswegs das genaue Gegenstück der Preisbildung beim Angebotmonopol.

English translation: Price formation under consumer monopoly is, however, by no means the exact counterpart of price formation under supply monopoly.

Consumers cannot suspend recurrent necessities as readily as sellers can withhold goods; competing producers also already face pressure toward cost prices. Producer or merchant purchasing monopolies are more consequential, particularly when combined with monopoly over the finished product. Finally, bilateral monopoly leaves the intermediate price indeterminate within economic bounds: bargaining strength determines how the surplus is divided. Conflict can lead to agreement, cartelization, or vertical integration. Mayer’s account therefore explains both monopoly pricing and its institutional limits, distinguishing optimization under specified conditions from outcomes shaped by rivalry, political purposes, and bargaining.