A Robust Methodology for Ramsey Pricing with an Application to UK Postal Services

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The policy relevance of Ramsey pricing calculations naturally turns on their robustness. This paper sets out a methodology for a "minimal information" approach in examining the sensitivity of Ramsey prices to changes in demand and cost parameters. The "minimal information" required for the approach to be operational is (i) a set of estimated demand functions for the products involved, and (ii) some idea of the "ball-park" for marginal costs for these products. A case study of the UK letters business is used to illustrate the approach.