Quasi‐linear Utility and Two‐Market Monopoly

Given the ubiquitous assumption of quasi‐linear utility in economic policy articles, this paper presents an overdue clarification of the implications of quasi‐linear utility for two‐market monopoly. The paper begins by deriving the demands facing a two‐market monopoly from a representative consumer and then derives expressions for the profit margins expressed solely in terms of the own and cross price elasticities of demand. The paper also analyzes the implications of quasi‐linear utility for other issues in two‐market monopoly: pricing below marginal cost in a market, third‐degree price discrimination when the monopoly products are substitutes and pricing in the inelastic region of demands.