IDEAS home Printed from
   My bibliography  Save this paper

Pricing Natural Gas in Mexico: An Application of the Little Mirrlees Rule: The Case of Quasi-Rents


  • Dagobert L. Brito
  • Juan Rosellón


In 1997, the Comisión Reguladora de Energía of Mexico implemented a netback rule for linking the Mexican natural gas price to the Texas price. At the time, the Texas price reflected a reasonably competitive market. Since that time, there have been dramatic increases in the demand for natural gas and there are various bottlenecks in the supply of natural gas. As a result, the price of natural gas in Texas now reflects the quasi-rents created by these bottlenecks. We address the optimality of the netback rule when the price of gas at the Texas market reflects the quasi-rents created by bottlenecks in the supply of natural gas to the United States pipeline system. In this paper, it is shown that it is optimal for the Mexican government to use the netback rule based on the Texas price of gas to set the price of natural gas in Mexico even though the Texas market cannot be considered a competitive market, and the Texas price for natural gas reflects quasi-rents created by various bottlenecks.

Suggested Citation

  • Dagobert L. Brito & Juan Rosellón, 2010. "Pricing Natural Gas in Mexico: An Application of the Little Mirrlees Rule: The Case of Quasi-Rents," Discussion Papers of DIW Berlin 1027, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1027

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    More about this item


    Natural gas; welfare; pricing; Mexico; regulation;

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation


    Access and download statistics


    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:diw:diwwpp:dp1027. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bibliothek). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.