Armstrong, Christopher Mark;
Vickers, John;
(2023)
Multiproduct cost passthrough: Edgeworth's Paradox revisited.
Journal of Political Economy
, 131
(10)
pp. 2645-2665.
10.1086/724573.
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Abstract
Edgeworth’s paradox of taxation occurs when an increase in the unit cost of a product causes a multiproduct monopolist to reduce prices. We give simple illustrations of the paradox and a general analysis of the case of linear marginal cost and demand conditions, and we characterize which matrices of cost pass-through terms are consistent with profit maximization. When the firm supplies at least one pair of substitute products, we show how Edgeworth’s paradox always occurs with a suitable choice of cost function. We then establish a connection between Ramsey pricing and the paradox in a form relating to consumer surplus.
| Type: | Article |
|---|---|
| Title: | Multiproduct cost passthrough: Edgeworth's Paradox revisited |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1086/724573 |
| Publisher version: | https://doi.org/10.1086/724573 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10163926 |
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