Optimal Nonlinear Pricing and Contingent Contracts, International Economic Review
Abstract: Nonlinear pricing is extended to allow for demand, cost, and capacity uncertainty. Incentive schedules are developed that implement the Pareto optimal allocation. Consumers choose a reference point, e.g., baseload demand. This determines both their payment level and the state-contingent output allocation. The approximate efficiency of alternative implementation procedures with discrete customer classes and with a linear prorated service rule is also examined. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Spulber, Daniel. 1992. Optimal Nonlinear Pricing and Contingent Contracts. International Economic Review. 33(4): 747-772.