||The traditional pricing mechanism examined in the economic literature
on cooperatives is uniform (or linear) pricing. The conclusion of the literature
is that uniform pricing mechanisms will often give rise to economic inefficiencies.
These inefficiencies emerge when the cooperative is operating in a region
of either increasing average cost or decreasing average cost. The reason
for these inefficiencies is that uniform pricing schemes cannot allocate
the profits or losses of a cooperative among its members without distorting
the decisions members make. The purpose of this paper is to explore the
role of non-uniform pricing in generating efficient outcomes and to examine
the distributional effects of simple non-uniform pricing schemes. Although
the focus of this paper is specifically on cooperatives, the results are
applicable in other situations in which average cost pricing is used.