Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2004:21: Nonlinear Pricing under a Balanced-Budget Requirement: The Two-Type Case

Tommy Andersson ()
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Tommy Andersson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: An economy consisting of two different types of consumers and one publicly owned natural monopoly is under consideration. The preferences of the consumers are assumed to be linear in money and the demand curves are assumed not to cross. We also suppose that the net utility from consumption is so high that we do not have to consider the individual rationality constraints. Given these assumptions, we completely characterize the set of budget-balanced and Pareto efficient nonlinear pricing schedules. This complete characterization has not been presented in the literature before.

Keywords: Nonlinear Pricing; Budget-Balance

JEL-codes: D63; D82; H40

19 pages, October 8, 2004

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