Two-part marginal cost pricing equilibria: Existence and efficiency

Marginal cost pricing versus insurance

The regulator of a natural monopoly that sets a two-part tariff and whose marginal cost is stochastic will generally want the price to vary less than marginal cost when the lump-sum charge in the tariff is fixed. A trade-off exists between efficient pricing and an optimal allocation of risk. Pricing at marginal cost is only optimal when the consumer’s marginal utility is independent of the pric...

Marginal Cost Pricing and Eminent Domain

There are three separate strands of literature in economics that are related to the efficiency of takings under eminent domain: one addresses the question of optimal compensation for properties that are taken, the second inquires how governments might learn the values of properties that they consider taking, while the third analyzes solutions to the problem of land assembly. This essay reviews ...

Efficiency and Existence of Nash Equilibria with Multidimensional Screening

Existence and Efficiency of Nash Equilibria under Deterministic Voting

This paper considers an economy with a public good where a decision must be made both about the level of the public good and the taxation imposed on each citizen (multi-dimensional policy space). In this context, we derive two results: i) we show that a Nash equilibrium exists under deterministic voting, ii) we show that political competition is a necessary but not sufficient condition for the ...

On Marginal Cost Pricing with Given Tax-Subsidy Rules*

We provide an existence proof for Generalized Marginal Cost Pricing with given tax-subsidy rules. The novelty is that our approach allows for economic environments where all the generalized marginal cost pricing equilibria are inefficient in the aggregate. An example is recalled in order to suggest how non-pathological these environments are. Journal of Economic Literature Classification Number...