IEPR applies to any firm facing a downward-sloping demand curve for its products, not just a monopolist.

Question

Quizplus · Accepted Answer

IEPR (increasing effective price of rivalry) is a concept that can apply to any firm facing a downward-sloping demand curve. It refers to the ability of a firm to increase its price without losing all of its customers to competitors, due to factors such as brand loyalty, product differentiation, or high switching costs. While monopolists may be the most extreme case of having market power and thus the ability to use IEPR, any firm that has some level of market power can potentially utilize it. IEPR, or the inverse elasticity pricing rule, applies to any firm facing a downward-sloping demand curve for its products, regardless of whether they hold a monopoly or not. It is a pricing strategy that takes into account the responsiveness of consumers to changes in price, and aims to maximize profit by setting prices based on the elasticity of demand.

IEPR Applies to Any Firm Facing a Downward-Sloping Demand Curve