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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.

Suggested Citation

  • 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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    References listed on IDEAS

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    Cited by:

    1. Paolo Bertoletti, 2024. "Ramsey pricing: a simple example of a subordinate commodity," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(2), pages 241-247, May.
    2. Yao, Xiangming & Chen, Linshan & Zhao, Peng & Zou, Qingru & Wang, Zijia, 2025. "Exploring travelers’ responses to a prepeak discount fare policy and optimizing the pricing strategy to ease peak congestion: The case of Beijing subway," Transportation Research Part A: Policy and Practice, Elsevier, vol. 191(C).
    3. Yongsheng Ju & Yongyan Sun & Wenqin Ning & Qingguo Li & Yiya Lin & Hao Chen & Shuxia Yang, 2024. "Cost Apportionment Method for Transmission and Distribution Projects Based on Multiple Apportionment Factors," Sustainability, MDPI, vol. 16(20), pages 1-17, October.
    4. Paolo Bertoletti & Federico Etro, 2024. "Insufficient Entry in Monopolistic Competition," Working Papers 543, University of Milano-Bicocca, Department of Economics.

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