Kuhn-Tucker Optimality Conditions in Equilibrium Models of Network Industries Market

Currently a considerable attention to the subject of network industries is being paid in discussions on various levels. It is understandable as network industries in fact ensure the production and distribution of energy sources which play a key role in developed economies. The discussions are usually focused on the question of reasonable profit of network industries subjects and on the other hand the question of generally acceptable costs. Equilibrium on the network industries market, as well as on any market, is being created based on the level of demand and supply on relevant market. In this article we will discuss the analysis of optimization models of consumers and producers behavior on the network industries market as well as the question of effectiveness of this specific market. We will point out certain features of network industries market where the consumer usually is not able to substitute a product of network industry with other product of appropriate characteristics in a short time period, thus considering the product being exclusive. This exclusivity can be formally represented in the utility function and other related analytical tasks. In paper we study the properties of a network industry optimization problem and economically interpretable implications of Kuhn-Tucker optimality conditions of this model.

Keywords: utility function, network industries, social welfare, consumer preferences, consumers´ surplus, producers´ surplus, Kuhn-Tucker optimality conditions