Suppose firm has 2 products and cost structure C(y1,y2) = F + m1y1 + m2y2
Fis common cost (e.g., R&D); m1 andm2 are marginal production costs.

ICC & FCC have various ad hoc “fully distributed costs” (FDC)
All try to be fair (and fail in particular respects)
FDC algorithm assigns fiF to service i, where f1 + f2 = 1

Revenue from service i consumers who consume yi, piyi = fiF +miyi

Examples of FDC: (i) f1/f2 = p1y1/p2y2 ;(ii) f1/f2 = y1/y2
(iii)  f1/f2 = m1y1/m2y2 , “directly attributable costs” (nottrivial to compute prices)

Question:

Consider linear demand, i.e., pi = ai – biyi   (i=1,2)

Say firm’s cost structure, C(y1,y2) = F+ m1y1 + m2y2
Obtain equations that determine the solutions (p1, p2) for the “directly attributable costs”FDC（fully distributed costs）