Monopoly Profit Maximization: Success and Economic Principles

This paper presents a classroom experiment on pricing strategies available to monopolists. Each student makes production decisions as a monopolist during the experiment; learning from his/her own experiences what it means to be a price searcher. Full information is provided on cost conditions, while the demand function remains unknown to the participants. Given a sufficient number of periods, students will be able to maximise their profits only by applying a trial-and-error strategy. However, one of the objectives of the experiment is to demonstrate to students that search strategies based on economic principles are more efficient.