Econometrica: May 1985, Volume 53, Issue 3

Capacity Pricing

https://doi.org/0012-9682(198505)53:3<545:CP>2.0.CO;2-Q
p. 545-566

Robert Wilson, Shmuel Oren, Stephen Smith

We study the problem of optimal pricing for a bundle of services characterized by two attributes (e.g., quantity and quality) and subject to capacity limitations or peakloading. An application is to services that take the form of a load-duration curve. Using separability assumptions on the demand and cost functions, we derive the optimal pricing policy for a monopolist seller. An example is solved completely.

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