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Optimal Pricing of Publicly Supplied Private Goods: A Case Study of the Pricing of NIST Standard Reference Materials.


pdf icon Optimal Pricing of Publicly Supplied Private Goods: A Case Study of the Pricing of NIST Standard Reference Materials. (11316 K)
Fuller, S. K.

UMI Number 9817619; Thesis; 209 p. January 30, 1998.

Keywords:

standard reference materials; costs

Abstract:

The objective of this study was to provide a framework for determining optimal prices and production plans for a welfare-maximizing public enterprise that produces multiple goods, faces a budget constraint, and is obligated to meet all demand. Public enterprises often operate under conditions of decreasing marginal cost where first-best profit-maximizing rules lead to deficits. In order to cover costs, prices therefore need to deviate from marginal cost. A public-sector pricing model in the Boiteux tradition computes price and output combinations that minimize the resulting deadweight loss. We first described the Boiteux model and its extensions. We focused on the Ramsey version of the model and applied it to the pricing problem of the Standard Reference Materials (SRM) Program at the National Institute of Standards and Technology (NIST). It supplies samples of materials whose physical or chemical properties are precisely characterized; they are used as intermediate goods by firms and science laboratories who use them to calibrate manufacturing equipment or scientific apparatus for quality control.