Leopold
Monjoie

This article studies peak-load pricing in essential-goods markets such as electricity, transport, and network industries, when consumers have private information about their willingness to pay, belong to observable categories, and a market designer has redistributive objectives. I characterize the optimal mechanism and answer the following: who benefits from capacity expansion, and how redistributive preferences shape the optimal allocation. I derive structural conditions under which the consumers who gain or lose from the mechanism do not coincide with redistributive priorities. This occurs because allocating to one type propagates to others through informational rents and capacity scarcity, and these effects are evaluated at different social values. The same mechanism governs three policy results. First, I characterize the optimal tagging rule for peak-load pricing and show how observable categories should be ranked by capacity allocation and budget contribution. Second, in contrast to the utilitarian case, I establish a new peak-load investment rule in which the distortion from private information and redistribution persists at the optimum. Third, I further discuss the optimal nonlinear tariff that implements the mechanism, showing that spot pricing fails and that optimal block tariffs are generically neither increasing nor decreasing for consumers with strong redistributive priority.

We study equilibrium contract adoption in retail electricity markets in which consumers differ in their willingness to pay over time and can choose between a fixed-price contract (FP) and real-time pricing contract (RTP). Self-selection alters the consumption profile and, in turn, the cost of serving FP customers, creating an adverse-selection channel with endogenous costs. In a competitive retail segment, this channel unravels the FP contract, any private retailer that attracts FP customers is left with a pool that is too costly to serve at break-even. Under a regulated monopoly offering the FP contract, contract choice instead disciplines pricing, the monopoly internalizes consumer sorting to the RTP contract and may cut its price to retain low-cost customers. This pricing response can increase inefficient peak consumption and reduce welfare relative to a benchmark without an RTP contract. We characterize the monopoly’s pricing rule, show how consumer heterogeneity governs the strength of the sorting incentive, and discuss regulatory instruments (two-part tariffs and loss-financing rules) that mitigate the welfare cost of opt-in RTP contracts.