Ramsey Pricing: A Method for Setting Fees in Social Service Organizations

In non-profit social services, there is a tendency to avoid setting prices because of the distributional concerns and incompetence on the part of some consumers. Arguments for prices and cash transfers versus in-kind subsidies are reviewed. The appropriateness is examined of "Ramsey pricing&quo...

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Bibliographic Details
Published in:The American journal of economics and sociology 1988-01, Vol.47 (1), p.97-110
Main Author: Mc Cready, Douglas J.
Format: Article
Language:English
Subjects:
Agencies
Charities
Consumer prices
Costs
Economic efficiency
Economic theory
Fees
Financial Support
Government agencies
Human Service Organizations
Marginal cost pricing
Marginal costs
Nonprofit organizations
Ontario
Pricing
Pricing policies
Resource allocation
Social services
Studies
Subsidies
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Summary:In non-profit social services, there is a tendency to avoid setting prices because of the distributional concerns and incompetence on the part of some consumers. Arguments for prices and cash transfers versus in-kind subsidies are reviewed. The appropriateness is examined of "Ramsey pricing" in achieving efficient resource allocation in a zero-profit firm when marginal cost pricing would lead to a profit. A survey of social service agencies in Ontario, Canada, found none was using the principles of "Ramsey pricing" and most were using no fees or prices at all. Some agencies had set prices but then waived them while others set fees equivalent to services provided by nonsocial service agencies. Most view fees as supplemental additions to the budget and consequently do not consider resource allocation. "Ramsey pricing," it is believed, could be beneficially tried by social service agencies.
ISSN:0002-9246
1536-7150
DOI:10.1111/j.1536-7150.1988.tb02013.x