Chen, Fuliang; Xu, Tao --- "A comparative study on Welfare results of nonlinear and linear pricing: based on asymmetric duopoly market" [2013] ELECD 999; in Faure, Michael; Zhang, Xinzhu (eds), "The Chinese Anti-Monopoly Law" (Edward Elgar Publishing, 2013) 218

Book Title: The Chinese Anti-Monopoly Law

Editor(s): Faure, Michael; Zhang, Xinzhu

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781781003237

Section: Chapter 6

Section Title: A comparative study on Welfare results of nonlinear and linear pricing: based on asymmetric duopoly market

Author(s): Chen, Fuliang; Xu, Tao

Number of pages: 15

Abstract/Description:

Since the 1970s, nonlinear pricing has been widely used in public utilities, such as electricity, telecommunications, tap water, gas, railways and civil aviation, because industrialized countries have deregulated these industries. However, nonlinear pricing is still a second-best pricing strategy, as theoretical research of nonlinear pricing strategy is derived from the defect of marginal cost pricing (MCP).Microeconomic theory states that without externality, monopoly and commodity tax, MCP is the only pricing method to achieve best resource allocation and social welfare maximum. For a long time, MCP had been proved to be the first-best in theory; however, problems appeared when natural monopoly enterprises put MCP into use.