This document analyzes the peak demand pricing model, which, with a fixed-coefficient production technology, establishes different prices over time to control demand and promote the efficient use of a company's limited capacity, especially in sectors such as electricity, natural gas, and transportation. With this approach, production is based on inputs combined in fixed proportions. The objective is to choose prices that cover the higher cost of providing the service during peak hours (when capacity is scarce), while incentivizing consumers to shift some of their consumption to off-peak hours, when prices are lower. 

This document reviews the regulatory scheme of the rate-of-return, analyzing in particular the Averch-Johnson effect in a single-product company. 

This document reviews the definitions of relevant markets, product markets, and geographic markets. It also analyzes different measures of concentration and market power.

Furthermore, it relates measures of concentration and market power. Concentration is then analyzed using conjectural Variation models. Finally, techniques for measuring and identifying market power are studied.

This brief note examines the relationship between returns to scale associated with a homogeneous production function and economies of scale linked to the minimum cost function, which is derived from the production function analyzed. It also shows that the link between returns and economies of scale is the degree of homogeneity of the production function. Finally, this relationship is analyzed for the case of a Cobb-Douglas production function.

This document analyzes how producers decide (in the long term) on the optimal combination of production factors (inputs) that maximizes the profits they obtain from the production and sale of a single product. To this end, three cases are analyzed: i) the producer maximizes profits while facing a restriction on the level of production, ii) the producer maximizes profits while facing a restriction on the level of costs, and iii) the producer maximizes profits without cost restrictions and without restrictions on the level of production. The analysis shows that: case i) is equivalent to minimizing costs subject to a given level of production, and case ii) is equivalent to maximizing production subject to a given level of costs. Furthermore, case iii) is resolved using two equivalent methodologies: I) focused on choosing the optimal quantities of inputs (in a single stage), and II) focused on choosing the optimal level of production (in two stages: in the first stage, production costs are minimized for a fixed level of production; and in the second stage, once the minimum costs for each level of production are known, the optimal level of production that maximizes profits is decided). In all cases, it is assumed that the technology is given and fixed (represented by the functional form of production), and that both the unit price of the product and the prices of the inputs are given and fixed (i.e., the producer is a price taker in the product market and in the inputs market). As a result of this analysis, case i) yields the demands for inputs conditioned by the level of production and the minimum long-term costs, case ii) yields the demands for inputs conditioned by the level of costs and the optimal level of production conditioned by the level of costs, and case iii) yields the demands for inputs (unconditioned), the supply function, and the optimal profit function. Likewise, the duality relationships between case i) and case ii), and between case i) and case iii) are examined.

This document examines the model developed by Laffont and Tirole (2000), in which they determine the set of optimal prices—those that maximize unweighted social welfare—that a benevolent regulator should set in three final markets: the incumbent’s local network services, the incumbent’s long-distance network services, and the entrant’s long-distance network services. In these markets, marginal-cost pricing is not feasible because the presence of fixed costs cannot be subsidized externally by the government, and because the incumbent must be allowed to earn normal economic profits.

The document also analyzes the calculation of the optimal access charge that an entrant to the long-distance network services market (which is in the process of being liberalized) should pay the incumbent. To provide long-distance calling services to its end users, the entrant must not only deploy its own long-distance facilities but also obtain “access” to the incumbent’s local network facilities at both the originating and terminating ends. The incumbent holds an exclusive concession over local network facilities and is vertically integrated into the provision of both local and long-distance calls.

This document analyzes the Ramsey-Boiteux pricing strategy, a second-best-quality pricing approach for a multi-product public monopoly. Its objective is to maximize social welfare by setting prices that vary inversely with the elasticity of demand, subject to achieving non-negative but lower profits than those that an unregulated monopolist would obtain. 

This document analyzes consumer theory. First, it examines how consumers decide on the optimal combination of quantities of goods they wish to consume so that this combination maximizes their utility (a function that reflects consumer preferences and measures the degree of satisfaction they obtain from consuming certain quantities of two consumer goods), subject to a budget constraint (primal problem). Second, it analyzes the problem of minimizing consumer expenditure subject to a certain level of utility (dual problem). In both cases, it is assumed that consumer preferences (the utility function) are known and that consumer income and the prices of consumer goods are given and fixed. As a result of this analysis, the primal problem yields uncompensated (Marshallian) demands for consumer goods, while the dual problem yields compensated (Hicksian) demands for consumer goods.