Pareto-Superior Nonlinear Outlay Schedules

Robert Willig

Bell Journal of Economics, 1978, vol. 9, issue 1, 56-69

Abstract: An outlay schedule gives the expenditures required of consumers for the purchase of different quantities of a good or service. For any uniform price unequal to marginal cost, there is a nonlinear outlay schedule that is preferred by each consumer and that yields greater vendor profit. In fact, Pareto efficiency requires an outlay schedule that offers the largest consumer a marginal price equal to marginal cost. A nonlinear outlay schedule can only be effective if the product cannot be readily traded among consumers and if the vendor can monitor individuals' total purchases. Many public utilities meet these criteria.

Date: 1978
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