In the short run, marginal cost pricing
may not cover average costs in an industry with any market structure.
His friend and former graduate student, Irwin Stelzer, urged him to take the job, arguing "you've just written the book [urging marginal cost pricing
for utilities] and here's your chance to do it." Kahn accepted the chairmanship and never regretted it.
Using marginal cost pricing
as the benchmark makes it more difficult for a plaintiff to establish that a nonlinear pricing plan is exclusionary, but this benchmark also reduces the likelihood of making errors in which an uncompetitive firm prevails in court when it could not prevail in the marketplace.
effectively compel marginal cost pricing
, unless applied in so draconian a fashion as to prohibit all parallel increments in price.
When the firm has more information about demand when choosing prices than it does when choosing capacity (typically referred to as tactical pricing), marginal cost pricing
Given that natural monopolies will earn enormous profit if unchecked by the government, or they will not produce if they are forced to charge marginal cost pricing
, what options are available to the government to provide services to its consumers?
The time is ripe for a reexamination of the efficacy of the marginal cost pricing
doctrine for other states that have adopted it, as well as for California.
(i) Least-bad Departures from Marginal Cost Pricing
Such a rate, also known as a marginal cost pricing
, has the advantage of being economically efficient.
First, their analysis presents evidence that the welfare gains associated with marginal cost pricing
of solid waste collection services will arise as a natural outcome when waste collection services are competitively provided.
The firm underinvests to increase equilibrium price.(4) In other words, imposing marginal cost pricing
the regulator reduces the private return from investment.
Denny, Fuss and Waverman , for example, identify two additional attributes to differences in TFP across time: exploitation of economies of scale, and changes in deviation from marginal cost pricing