In mainstream microeconomics, there are two "methods" to explain full-cost pricing (or full-cost plus pricing):

(1) to use kinked demand curves.

(2) to use price elasticity.

Marginalists wanted to explain that the full-cost pricing is compatible with the full-cost pricing and did not view these explanation critically. If we examine a little the logic of the explanations, we easily know that they are not well founded.

Full-cost principle is the pricing behavior of firms. Once it sets a price of a product,  the firm continues to sell the product at the fixed price for a certain lapse of time, for example a year. Both of the two explanations do not satisfy this invariability criterion of the full-cost pricing.

in the case of (1), the kinked demand curve has a kink at the actual quantity and price. It cannot explain how the kink moves horizontally when the demand flow changes.

In the case of (2), we have to assume that price elasticity remains constant for all price levels. If not the price setting by a constant markup rate does not coincide with the profit maximizing price.  

You may consider the behaviour of suppliers in a wholesale energy market, where periodic demand is met by a periodic supply at the costs of marginal supply that sets the clearing price for the system. 

Under this system, I have used real options reasoning to evaluate the optimisation problem. That is, unlike NPV, under volume and price flexibility, I view the system as follows from a firm's perspective: 

1. Periodic despatch, rather than creating uncertainty in supply (hence, cash flows), actually offers a real option where firms avoid making a loss by not supplying when prices are lower than the costs of supply.  

2. Interacting effects of competing supplies shift the clearing prices periodically. That is, when more hydro, nuclear or renewables are available, they displaced the most expensive supplies at that point in time (which is usually fossil fuels). Conversely, when the opposite happens, more of the "expensive" supplies are despatched, hence setting higher periodic power prices.

This implies that your optimisation function is dynamic, where the payoffs vary with fluctuating prices and volumes. I have addressed this in my forthcoming book - Energy Investments: An adaptive approach to profiting from uncertainties.

https://www.researchgate.net/publication/274731802_Renewable_Energy_with_Volatile_Prices_Why_NPV_Fails_to_Tell_the_Whole_Story

In the meantime, you may have an example of the reasoning in the paper that I wrote on the value of flexibility. 

Trust this offers an alternative narrative.

Article Renewable Energy with Volatile Prices: Why NPV Fails to Tell...

Dear Ricardo Barcelona,

thank you for your detailed answer. Energy prices are highly and largely volatile. I want to study it as such. It may not be a good example of markup pricing. In my understanding, the products are divided  into two categories: One is industrial products the volume of production of which can be easily changed. Another is the products that does not satisfy this condition.

Crude oil is an example of the second category. In oil production,  the controllable margin of each oil well is restricted and the extracting cost  widely varies for each well. Each well is exhaustible. Another important feature is that they are quoted in a market and prices are changed everyday. With these characteristics oil prices are similar to asset prices like stocks in the security markets. I want to learn what is happening in these markets in the future but, for the moment, I want to concentrate on the first category of industrial products.  

As for the Net Present Value, I agree with you. It is a dominant doctrine but not a good theory. Future cash flows are hard to grasp. As an ex post ground, you can say that the expectation was wrong. 

In this regard, I like the paper by André Orléan:

Le rôle des influences interpersonnelles dans la détermination des cours boursiers, Revue économique, 41(5), Fonctionnement micro-économique et organisation des marchés financiers (Sep., 1990), pp. 839-868.

He is a member of the RG, but unfortunately this paper is quoted but not available there. It is a paper a quarter century ago and he may have written a paper with more extended results. Orléan is also very critical of the NPV.

Thanks for the information on Andre Orlean's work.

On energy prices, you may divide the market into a) traded spot market for fuels such as coal, oil, gas, or power, where prices are set periodically, hence the volatility; or b) retail market which may correspond to your "industrial customer" category, where there is a lag in the output (i.e. pump prices for fuels or power prices to customers). 

My paper deals with (a). For fuels and power prices, the transmission of price volatilities to the "retail" prices is often a function of how the markets are regulated. In highly competitive markets, the adjustments tend to be shorter, given that this is a function of the lag in inventory prices (which are subjected to LIFO or FIFO for fuels) and output prices. In reality, they tend to be downward sticky for output prices, while inventory costs depend on the amount of the stock producers or refiners are required to keep in inventory. For power, the more advance systems offer time-dependent pricing to consumers, where off-peak demand is priced cheaper (or vice versa for peak), as a way of using pricing to shift volumes to off-peak hours.    

In regulated systems, fuel costs tend to be passed through to consumers, although the price adjustments does not always perfectly fit the actual costs. The mismatch in costs and prices tend to experience a similar problem as fuels' inventory costing policy. In the end, whatever mismatches, in theory, are corrected as end period adjustments.   

Regards and good luck in your project.

Nice discussion! A still interesting article on this subject is F.S. Lee, "Full cost pricing: a new wine in a new bottle", Australian Economic Papers, June 1984.

Dear Andrea Salanti,

thank you for information. I have Lee's book Post Keynesian Price Theory. Does the paper you indicated  contain a theory of his own? I cannot afford buying all the papers. 

I see. Just today I recovered a copy from my library services. If you let me have your e-mail, I can send it to you. All my best.

Dear Professor Yoshinori Shiozawa,

Even in this topic does not belong to my research priorities, I have just found a paper written by Niklas HALLBERG, Department of Business Administration, School of Economics and Management, Lund University, PO Box 7080, SE-220 07 Lund, Sweden. It might be of interest for you.

Best regards from Bucharest,

Monica

Thank you, Monica.

this is just one of what I am searching for.

Yoshinori

Dear Yoshimory,

I herewith enclose a paper of mine on the possible Sraffian foundations of full-cost pricing.

Best regards,

Sergio

Article Classical-type temporary positions: A "cost-plus" model

 Dear Sergio,

thank you for sending me your research paper. I will read it carefully and attentively.

Yoshinori 

Dear Sergio,

I am sorry to be late in responding. I had been quite busy in these two weeks and could not take time to read your paper.

I have read your paper rapidly. It was full of information. I am particularly informed of the delicate relations between Sraffians and Lee. In my opinion, Lee is more realist and Sraffians are idealists. The key question must be the construction of a coherent price theory which reflects the modern economic practices.

As for the period analysis, I feel that we should restructure Hicks's temporary equilibrium framework. The first thing  to do is to distinguish production period and price setting period. Although the price setting is not simultaneous, the standard period for a normal period is around one year or so. If we think of the  possibility that the firm decides to keep the present price, the average life of a price may be more long.

Production period for most of modern industry is much shorter than a year. It may be a day or a week. Price adjustment and quantity adjustment have different paces. If we take into account this fact, the argument may become much different from what you have developed in the Hicksian framework.