Cost-axiomatic regulatory pricing |
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Authors: | Dieter Bös Georg Tillmann |
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Affiliation: | Institute of Economics, University of Bonn, D-5300 Bonn 1, FRG |
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Abstract: | The axioms of the Shapley value and semi-values of non-atomic games can be taken as the starting point for axioms on the relation between costs and prices of a regulated multiproduct monopoly. The price mechanisms that result from this system of axioms are called cost- axiomatic prices. This paper shows the applicability of such pricing to all cases of regulatory constraints that require revenue to be a given percentage of costs (including cost-plus regulation, break-even pricing or Amtrak's 50% clause). Moreover, we show that all such price mechanisms, including a fairly general system of taxation or subsidization of consumers, are demand compatible if cost-axiomatic pricing leads to deficits or profits. |
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