A Note on Welfare Comparisons between Monopoly and Pure Competition

Welfare economics, in its comparisons between different market structures, has leaned heavily on the concepts of consumers’ surplus and producers’ surplus. Their acceptance for this purpose has had its ups and downs. Lerner initiated the discussion in his celebrated 1934 articles1 on the welfare implications of monopoly—monopsony, and it has been carried on by a long series of authors since then.