Abstract A dynamic program for generating monopoly profit-maximizing pricing and expansion policies for a port facing a continuously shifting, price-dependent demand and a series of discrete investment alternatives is described. A related algorithm for generating the societal income-maximizing policy is presented. These models demonstrate the coupling between short-run pricing and investment timing. In contrast to much of the literature in the area, they argue that under all but completely theoretical situations there is no “structural” conflict between short-run allocative efficiency (marginal cost pricing) and long-run allocative efficiency (attracting the proper level of capital).
The relationship between short-run pricing and investment timing: The port pricing and expansion example
1974-11-19
9 pages
Article (Journal)
Electronic Resource
English
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