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The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to maximize social welfare (the sum of producer and consumer surplus) while earning enough revenue to cover its fixed costs.
Frank Ramsey's social discount rate is calculated as follows: r = d + n g {\displaystyle r=d+ng} , where d {\displaystyle d} is time preference, n {\displaystyle n} is the elasticity of marginal utility of consumption and g {\displaystyle g} is the growth rate .
Frank P. Ramsey (1927) developed a theory for optimal commodity sales taxes in his article "A Contribution to the Theory of Taxation". The problem is closely linked to the problem of socially optimal monopolistic pricing when profits are constrained to be positive, known as the Ramsey problem. He was the first to make a significant contribution ...
In welfare economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied. [1] The economists Richard Lipsey and Kelvin Lancaster showed in 1956 that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would ...
"Fully Distributed Cost Pricing, Ramsey Pricing, and Shapley Value Pricing: A Simulated Welfare Analysis for the Telephone Exchange" (with D. Gabel), Review of Industrial Organization, 1997. "Innovations in Economic Measurement: Comments", Proceedings of the Joint Statistical Meetings of the American Statistical Association , Section on ...
In 1926, Frank Ramsey introduced Ramsey's Representation Theorem. This representation theorem for expected utility assumes that preferences are defined over a set of bets where each option has a different yield. Ramsey believed that we should always make decisions to receive the best-expected outcome according to our personal preferences.
A two-part tariff (TPT) is a form of price discrimination wherein the price of a product or service is composed of two parts – a lump-sum fee as well as a per-unit charge. [1] [2] In general, such a pricing technique only occurs in partially or fully monopolistic markets.
Cost-plus pricing is the most basic method of pricing. A store will simply charge consumers the cost required to produce a product plus a predetermined amount of profit. Cost-plus pricing is simple to execute, but it only considers internal information when setting the price and does not factor in external influencers like market reactions, the weather, or changes in consumer va