IDEAS home Printed from https://ideas.repec.org/p/ucy/cypeua/0207.html
   My bibliography  Save this paper

Consumer Demand and Welfare under Increasing Block Pricing

Author

Listed:
  • Panos Pashardes
  • Soteroula Hajispyrou

Abstract

This paper argues that an increasing block pricing structure needs to be supplemented by allowances for household size and composition to be equitable. Household behaviour is modelled as the outcome of a two-stage budgeting resulting in an integrable water demand model. The welfare effects of block pricing are studied using the concept of relative equivalence scale, modified to allow for the dependence of price on household size and composition. We use individual household data to estimate residential demand for water, provide empirical illustration of the welfare effects of increasing block pricing on demographically different households and show how these effects can be compensated.

Suggested Citation

  • Panos Pashardes & Soteroula Hajispyrou, 2002. "Consumer Demand and Welfare under Increasing Block Pricing," University of Cyprus Working Papers in Economics 0207, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:0207
    as

    Download full text from publisher

    File URL: https://papers.econ.ucy.ac.cy/RePEc/papers/0207.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mamuneas, Theofanis P. & Ishaq Nadiri, M., 1996. "Public R&D policies and cost behavior of the US manufacturing industries," Journal of Public Economics, Elsevier, vol. 63(1), pages 57-81, December.
    2. Michaelides, Alexander & Ng, Serena, 2000. "Estimating the rational expectations model of speculative storage: A Monte Carlo comparison of three simulation estimators," Journal of Econometrics, Elsevier, vol. 96(2), pages 231-266, June.
    3. Michael Haliassos & Alexander Michaelides, 2003. "Portfolio Choice and Liquidity Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 143-177, February.
    4. Kalaitzidakis, Pantelis & Mamuneas, Theofanis P. & Stengos, Thanasis, 1999. "European economics: An analysis based on publications in the core journals," European Economic Review, Elsevier, vol. 43(4-6), pages 1150-1168, April.
    5. Spiros Bougheas & Panicos O. Demetriades & Theofanis P. Mamuneas, 2000. "Infrastructure, specialization, and economic growth," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(2), pages 506-522, May.
    6. Haliassos, Michael, 1994. "On Perfect Foresight Models of a Stochastic World," Economic Journal, Royal Economic Society, vol. 104(424), pages 477-491, May.
    7. Panayiota Lyssiotou & Panos Pashardes & Thanasis Stengos, 2002. "Age effects on consumer demand: an additive partially linear regression model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(1), pages 153-165, February.
    8. Eicher, T-S & Kalaitzidakis, P, 1997. "The Human Capital Dimension to Foreign Direct Investment : Training, Adverse Selection and Firm Location," Discussion Papers in Economics at the University of Washington 97-03, Department of Economics at the University of Washington.
    9. Sydney C. Ludvigson & Alexander Michaelides, 2001. "Does Buffer-Stock Saving Explain the Smoothness and Excess Sensitivity of Consumption?," American Economic Review, American Economic Association, vol. 91(3), pages 631-647, June.
    10. Michael S. Michael & Panos Hatzipanayotou, 1999. "General Equilibrium Effects of Import Constraints under Variable Labour Supply, Public Goods and Income Taxation," Economica, London School of Economics and Political Science, vol. 66(263), pages 389-401, August.
    11. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 903-947.
    12. Panos Hatzipanayotou & Michael S. Michael, 1997. "Real Exchange Rate Effects of Fiscal Expansion under Trade Restrictions," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 42-56, February.
    13. Bertaut, Carol C. & Haliassos, Michael, 1997. "Precautionary portfolio behavior from a life-cycle perspective," Journal of Economic Dynamics and Control, Elsevier, vol. 21(8-9), pages 1511-1542, June.
    14. Cukierman, Alex & Kalaitzidakis, Pantelis & Summers, Lawrence H. & Webb, Steven B., 1993. "Central bank independence, growth, investment, and real rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 95-140, December.
    15. Panayiota Lyssiotou, 2000. "Dynamic analysis of British demand for tourism abroad," Empirical Economics, Springer, vol. 25(3), pages 421-436.
    16. Haliassos, Michael & Hassapis, Christis, 2001. "Non-expected Utility, Saving and Portfolios," Economic Journal, Royal Economic Society, vol. 111(468), pages 69-102, January.
    17. Elena Andreou & Rita Desiano & Marianne Sensier, 2001. "The behaviour of stock returns and interest rates over the business cycle in the US and UK," Applied Economics Letters, Taylor & Francis Journals, vol. 8(4), pages 233-238.
    18. Hassapis, Christis & Kalyvitis, Sarantis & Pittis, Nikitas, 1999. "Cointegration and joint efficiency of international commodity markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(2), pages 213-231.
    19. Haliassos, Michael & Bertaut, Carol C, 1995. "Why Do So Few Hold Stocks?," Economic Journal, Royal Economic Society, vol. 105(432), pages 1110-1129, September.
    20. Michael, Michael S. & Hatzipanayotou, Panos, 2001. "Welfare effects of migration in societies with indirect taxes, income transfers and public good provision," Journal of Development Economics, Elsevier, vol. 64(1), pages 1-24, February.
    21. Pantelis Kalaitzidakis & Theofanis P. Mamuneas & Thanasis Stengos, 2000. "A non-linear sensitivity analysis of cross-country growth regressions," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 604-617, August.
    22. Demetriades, Panicos O & Mamuneas, Theofanis P, 2000. "Intertemporal Output and Employment Effects of Public Infrastructure Capital: Evidence from 12 OECD Economics," Economic Journal, Royal Economic Society, vol. 110(465), pages 687-712, July.
    23. Hassapis, Christis & Pittis, Nikitas & Prodromidis, Kyprianos, 1999. "Unit roots and Granger causality in the EMS interest rates: the German Dominance Hypothesis revisited," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 47-73, January.
    24. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
    25. Luigi Guiso & Michael Haliassos & Tullio Jappelli, 2000. "Household Portfolios: An International Comparison," CSEF Working Papers 48, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    26. Mamuneas, Theofanis P., 1999. "Spillovers from publicly financed R&D capital in high-tech industries," International Journal of Industrial Organization, Elsevier, vol. 17(2), pages 215-239, February.
    27. Elena Andreou & Denise R. Osborn & Marianne Sensier, 2000. "A Comparison of the Statistical Properties of Financial Variables in the USA, UK and Germany over the Business Cycle," Manchester School, University of Manchester, vol. 68(4), pages 396-418, June.
    28. Panayiota Lyssiotou, 1997. "Comparison Of Alternative Tax And Transfer Treatment Of Children Using Adult Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(1), pages 105-117, March.
    29. Pashardes, Panos, 1993. "Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation," Economic Journal, Royal Economic Society, vol. 103(419), pages 908-915, July.
    30. Dickens, Richard & Fry, Vanessa & Pashardes, Panos, 1993. "Non-linearities and Equivalence Scales," Economic Journal, Royal Economic Society, vol. 103(417), pages 359-368, March.
    31. Nikitas Pittis, 1999. "Efficient Estimation Of Cointegrating Vectors and Testing for Causality in Vector Autoregressions," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 1-35, February.
    32. Lyssiotou, Panayiota & Pashardes, Panos & Stengos, Thanasis, 1999. "Preference Heterogeneity and the Rank of Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 248-252, April.
    33. Sylvester Eijffinger (ed.), 1997. "Independent central banks and economic performance," Books, Edward Elgar Publishing, number 1143.
    34. Pashardes, Panos, 1995. "Equivalence scales in a rank-3 demand system," Journal of Public Economics, Elsevier, vol. 58(1), pages 143-158, September.
    35. Spanos, Aris, 1995. "On theory testing in econometrics : Modeling with nonexperimental data," Journal of Econometrics, Elsevier, vol. 67(1), pages 189-226, May.
    36. Aris Spanos, 2001. "Revisiting data mining: 'hunting' with or without a license," Journal of Economic Methodology, Taylor & Francis Journals, vol. 7(2), pages 231-264.
    37. Zacharias, Eleftherios & Williams, Steven R., 2001. "Ex Post Efficiency in the Buyer's Bid Double Auction When Demand Can Be Arbitrarily Larger Than Supply," Journal of Economic Theory, Elsevier, vol. 97(1), pages 175-190, March.
    38. Fry, Vanessa & Pashardes, Panos, 1994. "Abstention and Aggregation in Consumer Demand: Zero Tobacco Expenditures," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 502-518, July.
    39. Spanos, Aris, 1994. "On Modeling Heteroskedasticity: The Student's t and Elliptical Linear Regression Models," Econometric Theory, Cambridge University Press, vol. 10(2), pages 286-315, June.
    40. Lyssiotou, Panayiota & Pashardes, Panos & Stengos, Thanasis, 1999. "Testing the rank of Engel curves with endogenous expenditure," Economics Letters, Elsevier, vol. 64(1), pages 61-65, July.
    41. Lyssiotou, Panayiota, 1997. "Comparison of Alternative Tax and Transfer Treatment of Children Using Adult Equivalence Scales," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 43(1), pages 105-117, March.
    42. Caporale, Guglielmo Maria & Hassapis, Christis & Pittis, Nikitas, 1998. "Unit roots and long-run causality: investigating the relationship between output, money and interest rates," Economic Modelling, Elsevier, vol. 15(1), pages 91-112, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
    2. Otieno, James Origa, 2019. "Valuing water services: A review of what water pricing and demand management would mean for Nairobi city," EconStor Preprints 191052, ZBW - Leibniz Information Centre for Economics.
    3. Hoffmann, Mark & Worthington, Andrew & Higgs, Helen, 2006. "Urban water demand with fixed volumetric charging in a large municipality: the case of Brisbane, Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 1-13, September.
    4. Ramón Barberán & Fernando Arbués, 2009. "Equity in Domestic Water Rates Design," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(10), pages 2101-2118, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Panos Hatzipanayotou & Sajal Lahiri & Michael S. Michael, 2002. "Reforms of Environmental Policies in the Presence of Cross-border Pollution and two Stage Clean Up," University of Cyprus Working Papers in Economics 0203, University of Cyprus Department of Economics.
    2. Michael Haliassos, 2003. "Stockholding: Recent Lessons from Theory and Computations," Palgrave Macmillan Books, in: Luigi Guiso & Michael Haliassos & Tullio Jappelli (ed.), Stockholding in Europe, chapter 2, pages 30-49, Palgrave Macmillan.
    3. Michael Haliassos & Alexander Michaelides, 2003. "Portfolio Choice and Liquidity Constraints," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 143-177, February.
    4. Thanasis Stengos & Yiguo Sun & Dianqin Wang, 2006. "Estimates of semiparametric equivalence scales," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 629-639, July.
    5. Panayiota Lyssiotou, 2003. "On estimating the cost of characteristics indices from consumer demand analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 36(2), pages 326-349, May.
    6. Michael Haliassos & Christis Hassapis, 1998. "Borrowing Constraints, Portfolio Choice, and Precautionary Motives: Theoretical Predictions and Empirical Complications," CSEF Working Papers 11, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    7. Aline Bütikofer, 2012. "Semiparametric Base-Independent Equivalence Scales and the Cost of Children in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(I), pages 1-35, March.
    8. Michael Haliassos & Christis Hassapis, 1998. "Borrowing Constraints, Portfolio Choice, and Precautionary," Macroeconomics 9809008, University Library of Munich, Germany.
    9. Haliassos, Michael & Hassapis, Christis, 2001. "Non-expected Utility, Saving and Portfolios," Economic Journal, Royal Economic Society, vol. 111(468), pages 69-102, January.
    10. Xavier Labandeira & José M. Labeaga & Miguel Rodríguez, 2006. "A Residential Energy Demand System for Spain," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 87-112.
    11. Takashi Unayama, 2006. "The Engel curve for alcohol and the rank of demand systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1019-1038, November.
    12. Guiso, Luigi & Sodini, Paolo, 2013. "Household Finance: An Emerging Field," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 1397-1532, Elsevier.
    13. Korniotis, George & Bonaparte, Yosef & Kumar, Alok, 2020. "Income Risk and Stock Market Entry/Exit Decisions," CEPR Discussion Papers 15370, C.E.P.R. Discussion Papers.
    14. Francisco Gomes & Alexander Michaelides, 2008. "Asset Pricing with Limited Risk Sharing and Heterogeneous Agents," The Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 415-448, January.
    15. Kannyiri Thadious Banyen & Joseph Kofi Nkuah, 2015. "Limited Stock Market Participation in Ghana: A Behavioral Explanation," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(6), pages 286-305, June.
    16. Alla A. Melkumian, 2006. "The opportunity cost of being constrained by the type of assets: Bonds only or stocks only," Journal of Applied Economics, Universidad del CEMA, vol. 9, pages 325-343, November.
    17. Pashardes, Panos, 1995. "Equivalence scales in a rank-3 demand system," Journal of Public Economics, Elsevier, vol. 58(1), pages 143-158, September.
    18. Lyssiotou, Panayiota & Pashardes, Panos & Stengos, Thanasis, 2002. "Nesting quadratic logarithmic demand systems," Economics Letters, Elsevier, vol. 76(3), pages 369-374, August.
    19. Francisco Gomes & Alexander Michaelides, 2003. "Portfolio Choice With Internal Habit Formation: A Life-Cycle Model With Uninsurable Labor Income Risk," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 729-766, October.
    20. Gene Amromin, 2008. "Precautionary Savings Motives and Tax Efficiency of Household Portfolios: An Empirical Analysis," NBER Chapters, in: Tax Policy and the Economy, Volume 22, pages 5-41, National Bureau of Economic Research, Inc.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucy:cypeua:0207. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.ucy.ac.cy/econ/?lang=en .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.