Optimal deviations from marginal pricing in the oil products' market

Michel Strawczynski*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Deviating from marginal cost is a common practice in oil products pricing. Israeli pricing sets deviations according to the price relationships of an exogenous selected market. In this article we compare this solution with the solution obtained from a maximizer model that takes into account efficiency and income distribution considerations. Through welfare index calculations and comparative statics exercises we show that welfare can be affected by exogenous developments from the point of view of the local market.

Original languageAmerican English
Pages (from-to)232-236
Number of pages5
JournalEnergy Economics
Volume12
Issue number3
DOIs
StatePublished - Jul 1990

Keywords

  • Efficiency and income distribution
  • Marginal pricing
  • Optimal deviations

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