Evaluating Welfare with Nonlinear Prices
AbstractThis paper examines how to evaluate consumer welfare when consumers face nonlinear prices. This problem arises in many settings, such as devising optimal pricing strategies for firms, assessing how price discrimination affects consumers, and evaluating the efficiency costs of many transfer programs in the public sector. We extend prior methods to accommodate a broad range of modern pricing practices, including menus of pricing plans. This analysis yields a simpler and more general technique for evaluating exact consumer surplus changes in settings where consumers face nonlinear prices. We illustrate our method using recent changes in mobile phone service plans.
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Date of creation: Jul 2006
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Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- D40 - Microeconomics - - Market Structure and Pricing - - - General
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-08-05 (All new papers)
- NEP-COM-2006-08-05 (Industrial Competition)
- NEP-MIC-2006-08-05 (Microeconomics)
- NEP-MKT-2006-08-05 (Marketing)
- NEP-PBE-2006-08-05 (Public Economics)
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