Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 7-Day Trial for You or Your Team.

Learn More →

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

Desperately Seeking θ's: Estimating the Distribution of Consumers Under Increasing Block Rates This paper shows that increasing block rate pricing schedules usually applied by water utilities can reduce the efficiency and equity levels. To do this, we first present a two step method to estimate the demand and to recover the distribution of consumer tastes when increasing block rate pricing is used. We show that in this case the tariff induces a pooling equilibrium and customers with different taste parameters will be observed to choose the same consumption level. Second, we show that a two-part tariff that neither reduces the revenue for the firm nor increases the aggregate level of water consumption increases the welfare and equity levels in relation to an increasing block rates schedule. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Regulatory Economics Springer Journals

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

Download PDF
30 pages

Loading next page...
 
/lp/springer-journals/desperately-seeking-s-estimating-the-distribution-of-consumers-under-c0500zql4B

References (23)

Publisher
Springer Journals
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Public Finance; Microeconomics
ISSN
0922-680X
eISSN
1573-0468
DOI
10.1023/A:1019951702523
Publisher site
See Article on Publisher Site

Abstract

This paper shows that increasing block rate pricing schedules usually applied by water utilities can reduce the efficiency and equity levels. To do this, we first present a two step method to estimate the demand and to recover the distribution of consumer tastes when increasing block rate pricing is used. We show that in this case the tariff induces a pooling equilibrium and customers with different taste parameters will be observed to choose the same consumption level. Second, we show that a two-part tariff that neither reduces the revenue for the firm nor increases the aggregate level of water consumption increases the welfare and equity levels in relation to an increasing block rates schedule.

Journal

Journal of Regulatory Economics – Springer Journals

Published: Oct 9, 2004

There are no references for this article.