The Inefficiency of Marginal-Cost Pricing and The Apparent Rigidity of Prices [report]

Robert Hall
1984 unpublished
Under conditions of natural monopoly, private contracts or government regulation may attempt to avoid inefficiency by setting up a pricing formula. Once the capital stock is chosen, the right price to charge the buyer is marginal cost. But the point of this paper is that marginal-cost pricing provides the wrong incentives + or the choice of the capital stock by the
doi:10.3386/w1347 fatcat:ywv2yf3c5nbohl2eh7w3yezxte