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Congestion pricing of inputs in vertically related markets

  • isamu matsukawa

    (musashi university)

This paper conducts a welfare analysis of a two-part tariff that is applied to the congestion pricing of inputs supplied by a natural monopolist with increasing returns to scale to competitive firms that require an input in a fixed proportion to output. Congestion pricing of inputs is optimal for both the welfare-maximizing regulator and the profit-maximizing monopolist if it is applied in the form of a uniform price for the input. However, a two-part tariff for the congestion pricing of inputs is optimal if competition in the downstream market is imperfect or if there is demand uncertainty in the market.

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File URL: http://128.118.178.162/eps/io/papers/0506/0506012.pdf
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Paper provided by EconWPA in its series Industrial Organization with number 0506012.

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Length: 35 pages
Date of creation: 28 Jun 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0506012
Note: Type of Document - pdf; pages: 35
Contact details of provider: Web page: http://128.118.178.162

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