optimal pricing for natural monopoly
DESCRIPTION
Optimal Pricing for Natural Monopoly. Marginal Cost pricing implies losses and the need for subsidy Optimal second-best pricing (Ramsey Pricing). Ramsey Pricing. Cross-Subsidization and Ramsey Pricing. Stand-Alone Cost test (SAC). The Incremental-Cost Test. - PowerPoint PPT PresentationTRANSCRIPT
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Optimal Pricing for Natural Monopoly
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• Marginal Cost pricing implies losses and the need for subsidy
• Optimal second-best pricing (Ramsey Pricing)
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Ramsey Pricing
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1 2
p mc p mcR
p p
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Cross-Subsidization and Ramsey Pricing
• Stand-Alone Cost test (SAC)
( )i i ip q SAC q
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The Incremental-Cost Test
( )i i i ip q IC q
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