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Should Ramsey-price markups differ?

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Abstract

Little adjustment in labor or leisure time is possible because of standardized work weeks in many countries. Without such labor-leisure adjustment, the logic of the inverse-elasticity-rule form of Ramsey price, with its differing percentage markups, is undermined. Moreover, if consumption of a good or service requires a certain amount of the consumer's time, that fact should be an influence on the socially optimal price. These two considerations of consumers' time are shown to warrant serious attention in applications of Ramsey prices.

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Authors and Affiliations

  1. Department of Economics, University of Virginia, 22901, Charlottesville, VA

    Roger Sherman

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  1. Roger Sherman
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Sherman, R. Should Ramsey-price markups differ?. J Regul Econ 5, 217–225 (1993). https://doi.org/10.1007/BF01065367

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