Two-Part Marginal Pricing
The marginal pricing rule has deserved special attention, because it satisfies the necessary conditions for optimality, and coincides with profit maximization when production sets are convex. Hence it describes competitive behaviour in the convex case, and defines a specific regulation policy when there are increasing returns to scale (even though its efficiency properties are far from satisfactory).
KeywordsBudget Balance Marginal Price Production Equilibrium Linear Price Average Cost Price
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