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Seeking theta's Desperately: Estimating the Distribution of Consumers Under Increasing Block Rates

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Author Info
Pedro Delicado
Fidel Castro
Jose M. Da Rocha

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Abstract

This paper shows that the distribution of observed consumption is not a good proxy for the distribution of heterogeneous consumers when the current tariff is an increasing block tariff. We use a two step method to recover the "true" distribution of consumers. First, we estimate the demand function induced by the current tariff. Second, using the demand system, we specify the distribution of consumers as a function of observed consumption to recover the true distribution. Finally, we design a new two-part tariff which allows us to evaluate the equity of the existence of an increasing block tariff.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/250.pdf
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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 250.

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Date of creation: Dec 1997
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Handle: RePEc:upf:upfgen:250

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Heterogeneous demand; nonlinear pricing;

Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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