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Capacity-contingent nonlinear pricing by regulated firms

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Abstract

Second-best Pareto optimal pricing by a regulated firm subject to demand and capacity shocks is examined. Nonlinear price schedules for the firm's customers are obtained that are contingent on capacity realizations. The second-best Pareto optimal mechanism also is implemented by an allocation mechanism based on the consumer's choice of a minimum demand or firm power level. The optimal mechanism is implemented as well by a general form of priority pricing.

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Authors and Affiliations

  1. Northwestern University J.L. Kellogg Graduate School of Management, Leverone Hall, 60208-2001, Evanston, IL, USA

    Daniel F. Spulber

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  1. Daniel F. Spulber
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Spulber, D.F. Capacity-contingent nonlinear pricing by regulated firms. J Regul Econ 4, 299–319 (1992). https://doi.org/10.1007/BF00134924

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