# Choke Price

## Choke Price

The price at which demand for an asset drops to zero. That is, when a company charges the choke price or higher for a good or service, all potential customers believe that the price is too high and, as a result, do not buy. Most often, the choke price is associated with natural resources. For example, economists may discuss the price per barrel of oil at which consumers simply no longer buy oil. Colloquially, a choke may refer to a price at which demand drops, but it is important to note that the choke price refers to no demand at all.
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References in periodicals archive ?
First we provide interval estimates of the choke price of cigarettes by state.
Using our estimates of the parameters of this model presented in the first column of Table I we can obtain estimates of the long run choke price [Mathematical Expression Omitted].
Table II presents our choke price estimates computed according to this procedure.
The bounds on our interval estimates form a 95% asymptotic confidence interval on the true choke price for the representative consumer in each state.
Resource nonusers are assumed to currently (with degraded quality) face a price for on-site use which is greater than or equal to their choke price. That is, they face a price that drives recreation demand to zero.
where [Mathematical Expression Omitted] is the choke price which depends on the quality level.
Since the choke price appears in  and  for on-site use of resource 1, the own-price effect for nonusers will differ from that of users.
Total quantity demanded at distance r is given by(4) (1) q(P(r)) = [Beta] [P.sub.2] - [Beta] P(r), q([Beta]) = 0, where P(r) is the delivered price and [Beta] is a parameter equal to the choke price.(5) Subsequent measures of consumer surplus will be based on the area under this demand function.
Pricing over space is determined by P(r) = P(0) + etr, r [Epsilon] [0, R], but the monopolist must choose P(R) [is less than or equal to] [Beta], the choke price. Thus the general pattern of spatial pricing is a function of P(0) and e, which vary independently of R except when the choke price is binding--i.e., in the case where P(R) = [Beta].
A single-plant spatial monopolist under transportation cost absorption regulation will charge the choke price at r = R if regulated e [Epsilon] [1/2, 1]; otherwise it will charge a price less than the choke price at r = R if regulated e [Epsilon] [0, 1/2).
This switching arises for a variety of demand curves, convex, concave, and linear, but it does require that there be a choke price. In such cases, there are two factors which can produce a market boundary at R.
This non-constancy of choke price has non-linear effects on CS.
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