NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

The Specialness of Zero

Joshua S. Gans

NBER Working Paper No. 26485
Issued in November 2019
NBER Program(s):Industrial Organization, Productivity, Innovation, and Entrepreneurship

A model is provided whereby a monopolist firm chooses to price its product at zero. This outcome is shown to be driven by the assumption of ‘free disposal’ alongside selection markets (where prices impact on a firm’s costs). Free disposal creates a mass point of consumers whose utility from the product is zero. When costs are negative, the paper shows that a zero price equilibrium can emerge. The paper shows that this outcome can be socially optimal and that, while a move from monopoly to competition can result in a negative price equilibrium, this can be welfare reducing. The conclusion is that zero can be a ‘special zone’ with respect to policy analysis such as in antitrust.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w26485

 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us