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Ramsey pricing with long run competition

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  • William C. Miller

    (Postal Regulatory Commission)

Abstract

Ramsey pricing of regulated firm services is often considered impractical because of stringent informational requirements. However in cases where demands for regulated firm services are independent and a marginal cost pricing competitive fringe exists, the simple inverse elasticity rule for Ramsey pricing has been shown to apply. This paper extends this result to show that only limited demand elasticity data for the regulated firm is required to apply the same rule, more generally, when zero profits and constant prices exist in the competitive sector in the long run.

Suggested Citation

  • William C. Miller, 2007. "Ramsey pricing with long run competition," Economics Bulletin, AccessEcon, vol. 12(34), pages 1-5.
    • Handle: RePEc:ebl:ecbull:eb-07l50006
    as

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume12/EB-07L50006A.pdf
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    References listed on IDEAS

    as
    1. Ronald R. Braeutigam, 1984. "Socially Optimal Pricing with Rivalry and Economies of Scale," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 127-134, Spring.
    2. Prieger, James E, 1996. "Ramsey Pricing and Competition: The Consequences of Myopic Regulation," Journal of Regulatory Economics, Springer, vol. 10(3), pages 307-321, November.
    3. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    4. Ware, Roger & Winter, Ralph A., 1986. "Public pricing under imperfect competition," International Journal of Industrial Organization, Elsevier, vol. 4(1), pages 87-97, March.
    5. Braeutigam, Ronald R, 1979. "Optimal Pricing with Intermodal Competition," American Economic Review, American Economic Association, vol. 69(1), pages 38-49, March.
    6. Felix Höffler, 2006. "Monopoly Prices versus Ramsey-Boiteux Prices: Are they “Similar”, and: Does it Matter?," Journal of Industry, Competition and Trade, Springer, vol. 6(1), pages 27-43, March.
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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy

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