A Zero Efficiency Loss Monopolist An Islamic Perspective

Abstract

Abstract
In an blamic environment, the behavior of a single seller is different
from that of a pure monopolist. His ultimate objective is not to maximize
profit but b please Allah. Profit is only one of his motives. Therefore, he
is expected to be ready to sacrifice part of his profits for the social good
if and when the social priorities so require. This brief study seeks first to
formulate this problem in its deterministic setting and to derive the optimaUy
necessary conditions. Second, it examines the case of a family of utilities
of the Cobb-Douglas form.
Introduction
The tern monopoly has commonly been used in microeconomic literature
to describe she market condition of a slngle seller (the only supplier) who
behaves in such a way as to maximize profits. As a profit maximizer, the
fm produces less and charges higher prices than would be the case under
perfect competition. Such behavior by the profit maximizing firm has several
adverse impacts: first, it imposes a social-welfare loss (or efficiency loss)
by producing a P>MC; second, it redistributes income from consumers to
shareholders of the monopolist firm; third, it misallocates resources through
the restriction of output. In addition, one may thinle of social costs of resources
used by a monopofist firm for the protection and utenance of its market
power through nonprice competition practices, such ai defensive advertising
and non-necessary prdduct differentiation.
In reality , the existence of such social costs calls for government ...