The Chinese Anti-Monopoly Law
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The Chinese Anti-Monopoly Law

New Developments and Empirical Evidence

Edited by Michael Faure and Xinzhu Zhang

This book focuses on experiences with the Anti-Monopoly Law (AML) of 2007 in China. It uses carefully-chosen case studies to examine how the competition authorities in China discuss cases and how they use economic reasoning in their decision-making process.
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Chapter 6: A comparative study on Welfare results of nonlinear and linear pricing: based on asymmetric duopoly market

Fuliang Chen and Tao Xu


Since the 1970s, nonlinear pricing has been widely used in public utilities, such as electricity, telecommunications, tap water, gas, railways and civil aviation, because industrialized countries have deregulated these industries. However, nonlinear pricing is still a second-best pricing strategy, as theoretical research of nonlinear pricing strategy is derived from the defect of marginal cost pricing (MCP).Microeconomic theory states that without externality, monopoly and commodity tax, MCP is the only pricing method to achieve best resource allocation and social welfare maximum. For a long time, MCP had been proved to be the first-best in theory; however, problems appeared when natural monopoly enterprises put MCP into use.

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