The Engineering Connection: Nineteenth Century Contributions To Monopoly Pricing Theory

Abstract

Dupuit's early treatment of monopoly pricing was derived from his interest in the French railroad companies which were sheltered from competition. His investigation of the case of an unregulated monopolist providing rail service incorporated an early use of the concept of consumers' surplus. He recognized that the consumers' surplus could be enhanced by discriminatory pricing, and demonstrated that dual pricing could be profitable, when a single tariff produced a loss. He also showed that price discrimination could affect the distribution of welfare without affecting the total utility produced, and applied this finding to the provision of public goods by demonstrating that the welfare of society could be improved by public intervention in a private economy which was not effectively competitive. (B00,140)