The Theory of Peak-Load Pricing: A Final Note

George W. Wilson

Bell Journal of Economics, 1972, vol. 3, issue 1, 307-310

Abstract: This note presents a formal reconciliation of two approaches to the analysis of peak and off-peak pricing. It argues that the differences reside in varying conceptions of the time period over which costs and revenues are calculated. Both versions yield formally correct solutions so that no substantive problems emerge, as noted in the reconciliation. However, varying rates of production, implicit in the two approaches, may violate the cost linearity assumptions made in both and hence vitiate the traditional conclusions.

Date: 1972
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