Abstract
Two-part tariffs are explored in a general equilibrium model with increasing returns to scale. Two-part marginal cost pricing equilibria are not generally Paretoefficient. The Second Fundamental Theorem of Welfare Economics may also fail. We introduce a notion of consumer surplus as the willingness to pay for access to the increasing returns good. The individuals's hookup charge is set to a fixed fraction of his consumer surplus. If aggregate consumer surplus exceeds the losses of the regulated monopoly, then exact two-part marginal cost pricing equilibria exist. Further, for efficient allocations having positive net surplus, the Second Fundamental Theorem of Welfare Economics holds.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
