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A note on Ramsey pricing and the structure of preferences

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  • Bertoletti, Paolo

Abstract

We represent quasi-linear preferences by the dual measure of consumer surplus, and investigate demand and the associated optimal pricing. In particular, we discuss substitutability with respect to the outside commodity, deriving a Slutsky-like decomposition of the price effects. We use our results to show that commodities with larger outside substitutability have smaller optimal Lerner indexes, and that Ramsey prices are always proportional to marginal costs only if preferences are fully homothetic.

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  • Bertoletti, Paolo, 2018. "A note on Ramsey pricing and the structure of preferences," Journal of Mathematical Economics, Elsevier, vol. 76(C), pages 45-51.
    • Handle: RePEc:eee:mateco:v:76:y:2018:i:c:p:45-51
    DOI: 10.1016/j.jmateco.2018.03.001
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    Cited by:

    1. Paolo Bertoletti, 2021. "Ramsey pricing: a simple example of a subordinate commodity," Working Papers 459, University of Milano-Bicocca, Department of Economics.

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