Determining long run marginal cost for pricing

This paper examines the economic issues of determining long-run marginal cost (LRMC) for the pricing of services. It describes and analytically compares the main methods used for estimating LRMC and discusses the issues in using these to set prices. While the paper has been developed in the context of a review of water and waste-water service pricing, the principles discussed are largely common to most utilities.


Dr Richard Tooth

Richard’s expertise is in economic policy, regulation and applied econometrics.

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