Marginal-cost pricing rule. mediator or menace

Journal Article · Thu Mar 31 04:00:00 EST 1977 · Public Util. Fortn.; (United States)

OSTI ID:7294044

Killoch, M G

The theory of marginal-cost pricing is examined in the context of the Ramsey rule and found to promote cross-subsidization rather than efficiency. Ramsey's rule is used to determine how high prices can be set above marginal costs without lowering demand. This allows a utility to set rates that will cover both total operating costs and capital-investment costs and to put higher charges on services with inelastic price levels. The result is that basic services with costly alternatives subsidize services with reasonable alternatives. Modifications of the rule can require that each service be charged enough to cover its cost and only that portion of the overhead that demand will allow, which could be zero. The amount of overhead is determined at the point where marginal revenues equal average incremental costs. (DCK)

• OSTI ID: 7294044
• Journal Information: Public Util. Fortn.; (United States), Journal Name: Public Util. Fortn.; (United States) Vol. 99:7; ISSN PUFNA
• Country of Publication: United States
• Language: English

Related Subjects

20 FOSSIL-FUELED POWER PLANTS
200106 -- Fossil-Fueled Power Plants-- Economics
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
296000 -- Energy Planning & Policy-- Electric Power
CHARGES
COST
DEMAND FACTORS
ECONOMIC ELASTICITY
ECONOMICS
EFFICIENCY
ELECTRIC POWER
INCOME
MANAGEMENT
MATHEMATICAL MODELS
POWER
PUBLIC UTILITIES
SOCIO-ECONOMIC FACTORS