Two-Part Marginal Cost Pricing Equilibria with n Firms: Sufficient Conditions for Existence and Optimality

Aaron Edlin () and Mario Epelbaum

International Economic Review, 1993, vol. 34, issue 4, 903-22

Abstract: The authors explore the interactions among firms with increasing returns regulated to break even by pricing with two-part tariffs. They provide conditions for existence and for efficiency of general equilibria with n firms. This involves finding hookup fees that are voluntarily paid and cover the firms' losses from marginal cost pricing--a problem that because of both substitution and income effects is complicated by multiple firms using two-part tariffs, but that must be solved to ensure the continuity of demands necessary to prove break-even equilibria exist. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1993
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