Abstract
Necessary conditions characterizing optimal nonlinear multiproduct tariffs are derived from aggregate data about customers' responses to linear tariffs. These conditions are amenable to numerical solution with standard software by using a discrete formulation of an associated nonlinear optimization problem cast in terms of the marginal prices charged for incremental bundles. This approach avoids integrability restrictions that otherwise encumber the computations. However, this method does not ensure that customers' second-order conditions for optimality of their demands are satisfied. Some numerical examples are provided, and the extension of the method to Ramsey pricing is also demonstrated.
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Wilson, R. Multiproduct tariffs. J Regul Econ 3, 5–26 (1991). https://doi.org/10.1007/BF00157608
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DOI: https://doi.org/10.1007/BF00157608