Surplus Maximization and Price Discrimination in General Equilibrium: Part II

Our companion paper introduced a new general equilibrium concept, called PDME, in which a natural monopoly maximizes its industry's surplus. While PDME's are always efficient, decentralization and existence sometimes fail under increasing returns to scale. This paper derives conditions under which PDME's exist and under which optima can be decentralized. We also link PDME to other equilibrium concepts with equilibrium conversion theorems. This allows us to provide new conditions when these earlier euilibrium concepts are efficient, and when the other equilibira exist. It also allows us to rank equilibrium concepts by the size of the set of decentralizable optimal allocations.