A partial rehabilitation of Hotelling's MC-pricing theorem

Harold Hotelling's celebrated theorem on the optimality of marginal cost pr icing was criticized first by Frisch and later by Silberberg on the grounds that he did not use the marginal cost pricing condition in his original pr oof and hence that it did not constitute a valid proof. This note demonstra tes that a key equation in Hotelling's proof is locally satisfied if and on ly if prices are set equal to marginal cost at the initial equilibrium and reexamines the validity of Hotelling's proof.