Capacity-contingent nonlinear pricing by regulated firms
- Cite this article as:
- Spulber, D.F. J Regul Econ (1992) 4: 299. doi:10.1007/BF00134924
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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.