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Seeking theta's desperately: Estimating the distribution of consumers under increasing block rates

Author

Listed:
  • Pedro Delicado
  • Fidel Castro
  • Jose M. Da Rocha

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.

Suggested Citation

  • Pedro Delicado & Fidel Castro & Jose M. Da Rocha, 1997. "Seeking theta's desperately: Estimating the distribution of consumers under increasing block rates," Economics Working Papers 250, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:250
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    Cited by:

    1. Castro-Rodriguez, Fidel, 1999. "Wright tariffs in the Spanish electricity industry: The case of residential consumption," Utilities Policy, Elsevier, vol. 8(1), pages 17-31, March.

    More about this item

    Keywords

    Heterogeneous demand; nonlinear pricing;

    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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