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On Marginal Cost Pricing When Consumers Can Also Produce

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  • S. Abraham Ravid

Abstract

Marginal cost pricing, so often praised in theoretical as well as empirical studies, is correct only for a very idealised economy. When a theoretical model is adjusted for some real world concerns, pricing at marginal cost begins to seem impractical and often incorrect. Baumol and Bradford (1970) wrote perhaps the most striking article along these lines, showing that in an economy where the government has authority to tax, marginal cost pricing is not optimal and second-best solutions are called for.

Suggested Citation

  • S. Abraham Ravid, 1987. "On Marginal Cost Pricing When Consumers Can Also Produce," The Energy Journal, , vol. 8(4), pages 17-22, October.
    • Handle: RePEc:sae:enejou:v:8:y:1987:i:4:p:17-22
    DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No4-2
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    Keywords

    Marginal cost pricing; Electric utilities;

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