Average cost pricing
Average cost pricing is one of the ways government regulate a monopoly market. Monopolists tend to produce less than the optimal quantity pushing the prices up. Government may use average cost pricing as a tool to regulate prices monopolists may charge.
- Increase production and decrease price.
- Increase social welfare (efficient resource allocation).
- Generate a normal profit for monopolist (Price = ATC) *
- RePEc "Marginal vs. Average Cost Pricing in the Presence of a Public Monopoly", American Economic Review v.73:189-93 (1983).
- Average Cost Pricing Rule on Investopedia
- Chen, Yan. "An Experimental Study of the Serial and Average Cost Pricing Mechanisms," Journal of Public Economics (2003).
- "Marginal Cost versus Average Cost Pricing with Climatic Shocks in Senegal: A Dynamic Computable General Equilibrium Model Applied to Water" by ANNE BRIAND, University of Rouen, November 2006
- Average cost pricing at Statistics Canada