Question: Marginal cost pricing as well as the use of incremental
“Marginal cost pricing, as well as the use of incremental analysis, is looked upon with favor by economists, especially those on the staffs of regulatory agencies. With this encouragement, regulated industries do indeed employ these rational techniques quite frequently. Unregulated firms, on the other hand, use marginal or incremental cost pricing much less frequently, sticking to cost-plus, or full-cost, pricing except under unusual circumstances. In my opinion, this goes a long way toward explaining the problems of the regulated firms vis-à-vis unregulated industry.” Discuss this statement.
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