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

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  • Edlin, Aaron S
  • Epelbaum, Mario

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.

Suggested Citation

  • Edlin, Aaron S & Epelbaum, Mario, 1993. "Two-Part Marginal Cost Pricing Equilibria with n Firms: Sufficient Conditions for Existence and Optimality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(4), pages 903-922, November.
    • Handle: RePEc:ier:iecrev:v:34:y:1993:i:4:p:903-22
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    Cited by:

    1. Antonio Villar, 1994. "Existence and efficiency of equilibrium in economics with increasing returns to scale: an exposition," Investigaciones Economicas, Fundación SEPI, vol. 18(2), pages 205-243, May.
    2. Yin, Xiangkang, 2004. "Two-part tariff competition in duopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 799-820, June.
    3. Moriguchi, Chiaki, 1996. "Two-part marginal cost pricing in a pure fixed cost economy," Journal of Mathematical Economics, Elsevier, vol. 26(3), pages 363-385.

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