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On Deriving Pricing Rules in the Theory of Second Best

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  • John P. Walsh

    (Gulf Oil Corporation)

Abstract

The purpose of this article is to generalize the Lipsey-Lancaster "mixed economy" example in order to establish the second-best pricing rules exactly. We establish the required assumptions concerning the relationship between the monopoly and the competitive industry. We also establish a partial characterization of the second-best optimum. The general principles developed in the article can be applied to a number of other public sector problems .

Suggested Citation

  • John P. Walsh, 1982. "On Deriving Pricing Rules in the Theory of Second Best," Public Finance Review, , vol. 10(4), pages 499-509, October.
    • Handle: RePEc:sae:pubfin:v:10:y:1982:i:4:p:499-509
    DOI: 10.1177/109114218201000406
    as

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    References listed on IDEAS

    as
    1. Richard Dusansky & John Walsh, 1976. "Separability, Welfare Economics and the Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(1), pages 49-51.
    2. Otto A. Davis & Andrew B. Whinston, 1965. "Welfare Economics and the Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(1), pages 1-14.
    3. Sandler, Todd, 1978. "Public Goods and the Theory of Second Best," Public Finance = Finances publiques, , vol. 33(3), pages 331-344.
    4. Abram Bergson, 1972. "Optimal Pricing for a Public Enterprise," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(4), pages 519-544.
    5. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
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