Why equity cannot be separated from efficiency: the welfare economics of progressive social pricing

Ron Baiman
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Ron Baiman: Roosevelt University, Department of Economics, 430 Michigan Avenue, Chicago, IL 60605-1394, USA; Tel.: + 1-312-341-3794. baiman5@aol.com

Review of Radical Political Economics, 2001, vol. 33, issue 2, 203-221

Abstract: Applied neoclassical microeconomists maintain that when profits are constrained, and average costs are higher than marginal costs, Ramsey "inverse elasticity" pricing optimizes static consumer welfare. However, when weighted, instead of unweighted, consumer surplus aggregation is used, the Ramsey pricing rule becomes a "progressive social pricing rule," which suggests that under plausible conditions "direct-elasticity" rather than "inverse-elasticity" pricing is consumer welfare optimal.

Keywords: Social pricing; Ramsey pricing; Consumer welfare; Price Regulation; Deregulation (search for similar items in EconPapers)
Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:sae:reorpe:v:33:y:2001:i:2:p:203-221

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