An Analysis of Fully Distributed Cost Pricing in Regulated Industries
Volume: Volume 11, No. 1
Issue: Spring 1980
Pages: pp. 182-196
Authors: Ronald R. Braeutigam
Title: An Analysis of Fully Distributed Cost Pricing in Regulated Industries
Abstract: This paper examines the economic consequences of allocating common costs by (1) gross revenues, (2) directly attributable costs, and (3) relative output levels (such as ton-miles) to determine fully distributed cost prices for regulated firms. The analysis characterizes FDC tariffs by examining the nature of the economic inefficiency associated with the rules and explains how opportunities for entry by unregulated firms might change if Ramsey optional pricing was used instead of FDC pricing.
JEL Classification