Journal of Regulatory Economics

, Volume 4, Issue 4, pp 299-319

First online:

Capacity-contingent nonlinear pricing by regulated firms

  • Daniel F. SpulberAffiliated withNorthwestern University J.L. Kellogg Graduate School of Management, Leverone Hall

Rent the article at a discount

Rent now

* Final gross prices may vary according to local VAT.

Get Access


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.