Essays on Nonlinear Pricing and Welfare
(2004)- Abstract
- The price of a good is said to be nonlinear if the unit price not is constant but depends on some aspect of the quantity (or quality) purchased. This form of pricing is commonly used in many industries, e.g. the electricity and water industries, and has many desirable properties. For example, nonlinear pricing is often necessary for (Pareto) efficiency and nonlinear pricing can be used as an instrument to redistribute income among consumers.
This thesis consists of three theoretical essays on nonlinear pricing and welfare. Our main objective is to characterize “optimal” nonlinear pricing schedules and investigate their welfare properties. The economy under consideration consists of a finite set of differing consumer... (More) - The price of a good is said to be nonlinear if the unit price not is constant but depends on some aspect of the quantity (or quality) purchased. This form of pricing is commonly used in many industries, e.g. the electricity and water industries, and has many desirable properties. For example, nonlinear pricing is often necessary for (Pareto) efficiency and nonlinear pricing can be used as an instrument to redistribute income among consumers.
This thesis consists of three theoretical essays on nonlinear pricing and welfare. Our main objective is to characterize “optimal” nonlinear pricing schedules and investigate their welfare properties. The economy under consideration consists of a finite set of differing consumer types and one publicly owned monopoly. The preferences of the consumers are assumed to be linear in money and the demand curves are assumed not to cross. The monopoly is restricted by a balanced-budget requirement.
In the first essay, we consider an economy that is based on the above premises with the additional assumption that net utility from consumption is so high that that every consumer in the economy receives a non-negative utility by consuming the publicly provided good. The chapter contributes to the existing literature in two senses. Firstly, we completely characterize the set that consists of all envy-free (i.e. incentive compatible), budget-balanced and Pareto efficient nonlinear pricing schedules. Secondly, we introduce a new procedure to investigate and analyze nonlinear pricing schedules.
In the second essay, we investigate nonlinear pricing schedules that are based on a cooperative surplus sharing game with transferable utility. The chapter contributes to the existing literature in three senses. Firstly, we characterize the envy-free core of the cooperative pricing game and provide necessary and sufficient conditions for the envy-free core to be non-empty. Secondly, we implement nonlinear outlay schedules that are based on a cooperative surplus pricing game with transferable utility in a nonlinear pricing environment with asymmetric information. Lastly, we investigate and analyze nonlinear pricing schedules that are based on some well known solution concepts for the cooperative game (the Shapley value, the Lorentz criterion and the equal share rule).
In the third essay, we implement the equality of opportunity (EOp, henceforth) criterion in a nonlinear pricing environment that is based on the same premises as in the first essay, and investigate the welfare properties of the optimal nonlinear EOp outlay schedule. In our analysis, the maximin and the utilitarian nonlinear schedules serve as benchmarks. We demonstrate that the optimal EOp policy is a reasonable compromise between the optimal maximin and the optimal utilitarian policy in that the EOp policy is more (less) efficient, from a first-best perspective, than the maximin (utilitarian) policy and, at the same time, more (less) egalitarian than the utilitarian (maximin) policy. The main contribution to the literature is that we present a framework under which the EOp criterion can be applied in order to derive optimal EOp nonlinear pricing schedules. (Less) - Abstract (Swedish)
- Popular Abstract in Swedish
Priset på en produkt sägs vara icke-lineärt om styckpriset på produkten inte är konstant utan beror på den kvantitet (eller kvalitet) som konsumenten köper. Denna typ av prissättning är vanligt förekommande när man exempelvis prissätter vatten eller elektricitet och har många önskvärda egenskaper. Till exempel är det ofta nödvändigt med icke-lineära priser för att uppnå (Pareto) effektivitet. Vidare kan man använda icke-lineära priser för att omfördela inkomst mellan konsumenter.
Denna avhandling består av tre teoretiska uppsatsen som alla handlar om icke-lineär prissättning och välfärd. Vi undersöker en ekonomi som består av ett ändligt antal konsumenter och ett offentligt ägt... (More) - Popular Abstract in Swedish
Priset på en produkt sägs vara icke-lineärt om styckpriset på produkten inte är konstant utan beror på den kvantitet (eller kvalitet) som konsumenten köper. Denna typ av prissättning är vanligt förekommande när man exempelvis prissätter vatten eller elektricitet och har många önskvärda egenskaper. Till exempel är det ofta nödvändigt med icke-lineära priser för att uppnå (Pareto) effektivitet. Vidare kan man använda icke-lineära priser för att omfördela inkomst mellan konsumenter.
Denna avhandling består av tre teoretiska uppsatsen som alla handlar om icke-lineär prissättning och välfärd. Vi undersöker en ekonomi som består av ett ändligt antal konsumenter och ett offentligt ägt monopol. Konsumenternas preferenser antas vara lineära i pengar och konsumenternas efterfrågekurvor antas inte skära varandra. Vidare antar vi att monopolet måste balansera sin budget.
I den första uppsatsen betraktar vi en ekonomi som baseras på förutsättningarna från ovan med det tillägget att nettonyttan från konsumtion är så hög att varje konsument erhåller en icke-negativ nytta genom att konsumera produkten som utbjuds av monopolet. Uppsatsen bidrar till litteraturen i två avseenden. För det första så fullständig karaktäriserar vi mängden av avundsfria, budget balanserade och (Pareto) effektiva icke-lineära priser. För det andra utvecklar vi en ny metod för att analysera icke-lineära priser.
I den andra uppsatsen undersöker vi icke-lineära priser som baseras på ett kooperativt spel med transfererbar nytta. Denna uppsats bidrar till litteraturen i tre avseenden. För det första så karaktäriserar vi den avundsfria kärnan till det kooperativa spelet och tillhandahåller nödvändiga och tillräckliga villkor för att den avundsfria kärnan skall vara icke-tom. Vidare så implementerar vi icke-lineära priser som baseras på ett kooperativt spel i en ekonomi med asymmetrisk information. Slutligen så undersöker vi icke-lineära priser som baseras på tre välkända lösningsbegrepp till det kooperativa spelet (Shapley-värdet, Lorentz-kriteriet och lika fördelning).
I den tredje uppsatsen implementerar vi ”equality of opportunity” (EOp) kriteriet i en ekonomi som baseras på samma förutsättningar som i den första uppsatsen. Vidare undersöker vi de välfärdsegenskaper som det optimala icke-lineära EOp priset har. I vår analys använder vi maximin kriteriet och det utilitaristiska kriteriet som jämförelsekriterier. Vi demonstrerar att de icke-lineära priserna som baseras på EOp-kriteriet är en resonabel kompromiss mellan de icke-lineära priserna som baseras på maximin-kriteriet och det utilitaristiska kriteriet. Denna slutsats baseras på det faktum att EOp priserna är mer (mindre) effektiva, från ett first-best perspektiv, än maximin (utilitarism) priserna samtidigt som de är mindre (mer) egalitära än maximin (utilitarism) priserna. Vårt huvudsakliga bidrag till litteraturen är att vi introducerar en ram som kan användas för att härleda optimala icke-lineära priser som baseras på EOp kriteriet. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/467175
- author
- Andersson, Tommy LU
- supervisor
- opponent
-
- Auriol, Emmanuelle
- organization
- publishing date
- 2004
- type
- Thesis
- publication status
- published
- subject
- keywords
- ekonomisk teori, ekonomiska system, ekonomisk politik, economic policy, Nationalekonomi, ekonometri, economic systems, economic theory, econometrics, Economics, Monopoly., Welfare, Budget-balance, Redistribution, Envy-freeness, Nonlinear pricing
- pages
- 127 pages
- publisher
- Department of Economics, Lund University
- defense location
- Sal EC3:210, Holger Crafoords Ekonomicentrum
- defense date
- 2004-09-11 10:15:00
- language
- English
- LU publication?
- yes
- additional info
- Article: 1. An Introduction to Nonlinear Pricing and Welfare2. Nonlinear Pricing under a Balanced-Budget Requirement3. Nonlinear Pricing as a Cooperative Game4. Nonlinear Pricing and Equality of Opportunity
- id
- 6fe68a14-4691-4c86-b7ec-900502c95183 (old id 467175)
- date added to LUP
- 2016-04-01 15:53:54
- date last changed
- 2018-11-21 20:37:12
@phdthesis{6fe68a14-4691-4c86-b7ec-900502c95183,
abstract = {{The price of a good is said to be nonlinear if the unit price not is constant but depends on some aspect of the quantity (or quality) purchased. This form of pricing is commonly used in many industries, e.g. the electricity and water industries, and has many desirable properties. For example, nonlinear pricing is often necessary for (Pareto) efficiency and nonlinear pricing can be used as an instrument to redistribute income among consumers.<br/><br>
<br/><br>
This thesis consists of three theoretical essays on nonlinear pricing and welfare. Our main objective is to characterize “optimal” nonlinear pricing schedules and investigate their welfare properties. The economy under consideration consists of a finite set of differing consumer types and one publicly owned monopoly. The preferences of the consumers are assumed to be linear in money and the demand curves are assumed not to cross. The monopoly is restricted by a balanced-budget requirement.<br/><br>
<br/><br>
In the first essay, we consider an economy that is based on the above premises with the additional assumption that net utility from consumption is so high that that every consumer in the economy receives a non-negative utility by consuming the publicly provided good. The chapter contributes to the existing literature in two senses. Firstly, we completely characterize the set that consists of all envy-free (i.e. incentive compatible), budget-balanced and Pareto efficient nonlinear pricing schedules. Secondly, we introduce a new procedure to investigate and analyze nonlinear pricing schedules.<br/><br>
<br/><br>
In the second essay, we investigate nonlinear pricing schedules that are based on a cooperative surplus sharing game with transferable utility. The chapter contributes to the existing literature in three senses. Firstly, we characterize the envy-free core of the cooperative pricing game and provide necessary and sufficient conditions for the envy-free core to be non-empty. Secondly, we implement nonlinear outlay schedules that are based on a cooperative surplus pricing game with transferable utility in a nonlinear pricing environment with asymmetric information. Lastly, we investigate and analyze nonlinear pricing schedules that are based on some well known solution concepts for the cooperative game (the Shapley value, the Lorentz criterion and the equal share rule).<br/><br>
<br/><br>
In the third essay, we implement the equality of opportunity (EOp, henceforth) criterion in a nonlinear pricing environment that is based on the same premises as in the first essay, and investigate the welfare properties of the optimal nonlinear EOp outlay schedule. In our analysis, the maximin and the utilitarian nonlinear schedules serve as benchmarks. We demonstrate that the optimal EOp policy is a reasonable compromise between the optimal maximin and the optimal utilitarian policy in that the EOp policy is more (less) efficient, from a first-best perspective, than the maximin (utilitarian) policy and, at the same time, more (less) egalitarian than the utilitarian (maximin) policy. The main contribution to the literature is that we present a framework under which the EOp criterion can be applied in order to derive optimal EOp nonlinear pricing schedules.}},
author = {{Andersson, Tommy}},
keywords = {{ekonomisk teori; ekonomiska system; ekonomisk politik; economic policy; Nationalekonomi; ekonometri; economic systems; economic theory; econometrics; Economics; Monopoly.; Welfare; Budget-balance; Redistribution; Envy-freeness; Nonlinear pricing}},
language = {{eng}},
publisher = {{Department of Economics, Lund University}},
school = {{Lund University}},
title = {{Essays on Nonlinear Pricing and Welfare}},
year = {{2004}},
}