This paper presented a dynamic model to find the properties of compensation plan which can induce the monopolist to modify the quantity supplied and the price charged in different states of market demand for the government. By this study, we obtain the following results: (i) the fixed compensation payment plan can not motivate the monopolist to modify his optimal solutions; (ii) the compensation plan comprises greater payment and higher absolute change rate may cause larger change (increase or decrease) in quantity supplied; (iii) for the pricing strategy, the price of the product is increasing for the decreasing compensation payment rate, but decreasing for the increasing compensation payment rate; (iv) the discount rate, the price ceiling and the cost of the product all have influences on the pricing strategy and compensation plan designing.
Relation:
International journal of information and management Sciences 8(1), pp.19-24
