We suggest moving in the market socialist direction--toward marginal cost pricing
combined with subsidization targeted to consumers who are both poor and high risk.
I knew I wanted marginal cost pricing
, but that was regulatory.
Based on conservative estimates of the price elasticity of demand, these distortions impose annual welfare losses of $2.7 billion compared to marginal cost pricing
, roughly 3 percent of total market value.
If one observes marginal cost pricing
in laboratory sessions, this must due directly to competition among sellers rather than buyers' market power.
Other papers that we have had the privilege of publishing over a three-decade period include a second-best problem in featherbedding (1976), price searching and tatonnement in general equilibrium models (1979), Hotelling's proof and the marginal cost pricing
theorem (with Pfouts, 1981), price searching in general equilibrium models (1987), welfare effects of income and excise taxes (1995), price makers and non-clearing markets (1996), and modern game theory (1998).
While recognizing that marginal cost pricing
may not be the equilibrium strategy employed by the defendant (because products may be differentiated, for example), we recommend assuming that the plaintiff otherwise would compete against the defendant's product(s) priced at marginal cost.
effectively compel marginal cost pricing
, and would frustrate entry into
General theory is covered in sections on marginal cost pricing
, Ramsey pricing, peak load pricing, pricing under uncertainty, two-part tariffs and nonlinear pricing, and game theoretic approaches.
It can be seen that in fact the majority of asking prices are in between the equilibrium prediction and the marginal cost pricing
Under the marginal cost pricing
mechanism that applies in the European energy market, this means the "market price" of energy will go up by the extra cost incurred by the ETS.
(1.) If the overriding objectives were to ensure economic efficiency, marginal cost pricing
would theoretically provide the "best" user charges.