IDEAS home Printed from https://ideas.repec.org/p/ags/aaea92/271379.html
   My bibliography  Save this paper

Self Rationing With Nonlinear Prices

Author

Listed:
  • Srinagesh, Padmanabhan

Abstract

This paper is concerned with pricing problems that arise when a service and the capacity to consume that service are jointly sold to consumers with random demand. It builds on the work of Oren, Smith & Wilson (1985) and Panzar & Sibley (1978). We show that profit maximizing firms that can use fully nonlinear prices will satisfy the usual right end point condition: the last unit sold to the largest consumer will be marginally priced at marginal cost. We also provide conditions under which marginal prices exceed marginal cost. When the firm is restricted to using a partly nonlinear price structure, selling capacity at a linear price and the service itself at a nonlinear price, we show that marginal prices will generally lie below marginal cost over some portion of their domain. The intuition underlying this result can be found in the loss leader problem first studied by Allen.

Suggested Citation

  • Srinagesh, Padmanabhan, 1992. "Self Rationing With Nonlinear Prices," 1992 Annual Meeting, August 9-12, Baltimore, Maryland 271379, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea92:271379
    DOI: 10.22004/ag.econ.271379
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/271379/files/aaea-1992-005.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/271379/files/aaea-1992-005.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.271379?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea92:271379. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: http://www.aaea.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.