The Marginal Revolution Podcast Favorite Models: Spence on Monopolies, Harberger on Incidence, Solow on Growth
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Oct 7, 2025 Explore classic economic models with thought-provoking insights! Dive into how a monopolist's strategy influences quality, as illustrated by the New York Times’ paywall shift. Discover Harberger's take on tax incidence and the surprising impacts of corporate taxes on labor and prices. Finally, the Solow growth model sheds light on why some nations thrive while others stall, raising questions about external factors like culture and innovation. These models endure because they spark rich debates and shape our understanding, even when they’re imperfect.
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Monopoly Quality Targets The Marginal Buyer
- A monopolist chooses quality to influence the marginal buyer, not to maximize social welfare.
- That choice can raise or lower overall social value depending on how inframarginal consumers react.
Why The New York Times Shifted Its Angle
- Alex uses The New York Times' shift from ad to subscription revenue as an example of changing who the firm serves.
- He argues the paywall moved incentives from marginal readers (ads) to loyal subscribers, shifting content leftward.
Loyal Customers Drive Word‑Of‑Mouth Value
- Tyler argues firms sometimes target loyal inframarginal customers because they generate publicity and sharing.
- Loyal buyers can be more valuable than marginal buyers for word-of-mouth and platform spread.
