Nonlinear Pricing

Front Cover
Oxford University Press, 1993 - Nature - 429 pages
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What do phone rates, frequent flyer programs, and railroad tariffs all have in common? They are all examples of nonlinear pricing. Pricing is nonlinear when it is not strictly proportional to the quantity purchased. The Electric Power Research Institute has commissioned Robert Wilson to review the various facets of nonlinear pricing. The work starts with a general non-mathematical discussion, followed by a more technical presentation intended for readers with a fairly advanced background. Thorough and detailed, this study has ample examples of case studies from a variety of industries.
  

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Contents

Introduction
3
11 Motivations for Nonlinear Pricing
5
12 Practical Uses for Nonlinear Pricing
7
13 Feasibility of Nonlinear Pricing
10
The Electric Power Industry
15
15 Overview of the Chapters
17
16 Summary
23
FUNDAMENTALS OF NONLINEAR PRICING
25
85 A General DemandProfile Formulation
200
86 Summary
206
MULTIDIMENSIONAL TARIFFS
209
Multidimensional Pricing
211
91 A Multidimensional Formulation
212
92 Design of Multidimensional Tariffs
219
93 Examples
223
94 An ItemAssignment Formulation
228

Illustrations of Nonlinear Pricing
27
21 Time and Newsweeks Advertising Rates
28
22 EDFs Tariffs for Electric Power
30
23 PGEs Curtailable Service
36
24 MCIs and ATTs Telephone Tariffs
39
25 Federal Express Mail Rates
41
27 Summary
44
Models and Data Sources
46
31 Descriptions of Demand Behavior
49
32 Estimation of the Demand Profile
57
33 Welfare Considerations
62
34 Cautions and Caveats
66
35 Standard Assumptions
67
36 Summary
71
Tariff Design
73
42 Extensions and Qualifications
81
43 The Bundling Interpretation
88
44 Fixed Costs and Fixed Fees
89
45 Multipart Tariffs
91
46 Summary
96
Ramsey Pricing
98
51 The Price Schedule of a Regulated Firm
99
52 ParetoImproving Tariffs
108
53 LongDistance Telephone Tariffs
118
54 Summary
121
DISAGGREGATED DEMAND MODELS
123
SingleParameter Disaggregated Models
125
61 A Model with Discrete Types
126
62 Models with OneDimensional Types
132
63 TwoPart Tariffs
136
64 Multipart Tariffs
141
65 Nonlinear Tariffs
150
66 Some Examples
153
67 Fixed Costs and Fixed Fees
158
68 Summary
163
INCOME EFFECTS
164
72 Characterization of the Optimal Tariff
165
73 Examples
166
74 Fixed Fees
173
75 Summary
175
Technical Amendments
177
82 Derivations of the Optimal Tariff
185
83 Approximate Optimality of Multipart Tariffs
190
84 Multiple Dimensions of Customers Types
194
95 Summary
235
Priority Pricing
236
Priority Pricing
237
102 Ramsey Pricing of Priority Service
244
103 Nonlinear Pricing in a Priority Queuing System
253
104 Summary
257
Capacity Pricing
259
112 Cost Recovery of LoadDuration Demands
261
113 Pricing LoadDuration Demands
266
114 Summary
276
MULTIPRODUCT TARIFFS
279
Multiproduct Products and Competitive Tariffs
281
121 Separable Multiproduct Tariffs
282
122 Monopolistic Competition
301
123 Oligopoly
303
124 Nonlinear Supply Schedules
309
125 Summary
311
Multiproduct Pricing
313
131 Special Features of Multiproduct Tariffs
314
132 Formulation
317
133 A Reprise of Priority Service
325
134 Single Type Parameters
327
135 Multiple Type Parameters
332
136 Construction of Multiproduct Prices
344
137 Summary
348
Multiproduct Tariffs
350
141 Formulation
351
142 The Optimal Multiproduct Tariff
354
143 Numerical Examples
359
LoadFactor Tariffs
363
145 An Alternative Formulation
368
146 Summary
371
SUPPLEMENT
373
Other Applications of Nonlinear Pricing
375
152 Incentives in Markets with Private Information
382
153 Incentives in Labor Contracting
390
154 Taxation and Regulatory Policies
395
155 Summary
398
Bibliography
401
162 Chapter References
406
References
411
Index
423
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About the author (1993)

Robert B. Wilson is at Stanford University.

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