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A Simple Characterization of the Second-best Two-part and Block-rate Tariffs Theory and Applications (2003)

Borrmann, Jörg

Oxford, UK : Blackwell Publishing Ltd

Annals of public and cooperative economics 74 (2003), S. 0

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ISSN: 1467-8292

Source: Blackwell Publishing Journal Backfiles 1879-2005

Topics: Economics

Notes: The general necessary optimality conditions for second-best discrete multipart tariffs are rather complex. In this paper, we derive a simplified characterization of these conditions for two-part tariffs and for block-rate tariffs for given thresholds of these tariffs. The simplified necessary optimality conditions are equivalent to the necessary conditions for a Ramsey-optimum for goods with continuously variable individually demanded quantities. We demonstrate that this characterization of second-best multipart tariffs can be helpful, when applying the usual regulatory mechanisms to these tariffs. In particular, we consider Vogelsang–Finsinger (1979) regulation as well as a particular form of price-cap regulation which is related to the Laspeyres index of prices.

Type of Medium: Electronic Resource

URL: http://dx.doi.org/10.1111/1467-8292.00222

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