Despite the clear prescription from economic theory that a firm should set price based only on variable costs, firms routinely factor fixed costs into pricing decisions. We show that full-cost pricing (FCP) can achieve the optimal price. FCP marks up variable cost with the contribution margin...

Using information on desired and actual hours of work, we formulate a discrete choice model of constrained labor supply. Using the German Socio-Economic Panel and the microsimulation model STSM, we find that hours and participation elasticities are substantially smaller than those in the...