Marginal Cost Pricing versus Insurance.
The regulator of a natural monopoly that sets a two-part tariff and whose marginal cost is stochastic will generally want the price to vary less than marginal cost when the lump-sum charge in the tariff is fixed. A trade-off exists between efficient pricing and an optimal allocation of risk. Pricing...
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| Format: | Working paper |
| Language: | English |
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Department of Economics (University of Oxford)
2002
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