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| Author: | Tsuneki, A. |
| Title: | A Partial Rehabilitation of Hotelling's Mc-Pricing Theorem |
| Journal: | International Economic Review
2001 : FEB, VOL. 42:1, p. 237-244 |
| Index terms: | REHABILITATION PRICING OPTIMIZATION |
| Language: | eng |
| Abstract: | Harold Hotelling's celebrated theorem on the optimality of marginal cost pricing was criticized first by Frisch and later by Silberberg on the grounds that he did not use the marginal cost pricing condition in his original proof and hence that it did not constitute a valid proof. This note demonstrates that a key equation in Hotelling's proof is locally satisfied if and only if prices are set equal to marginal cost at the initial equilibrium and re-examines the validity of Hotelling's proof. The purpose of the present note is to provide a rigorous proof of Hotelling's assertion under general technology, thus putting to rest once and for all any doubt about Hotelling's "obscure" assertion. |
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