Paper #250

Title:

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

Authors:

Pedro Delicado, Fidel Castro and Jose M. Da Rocha

Date:

December 1997

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.

Keywords:

Heterogeneous demand, nonlinear pricing

JEL codes:

L15, L95

Area of Research:

Microeconomics

Published in:

Journal of Regulatory Economics, 22 (1), pp. 29-58, 2002
With the title:
Desperately seeking theta's: Estimating the distribution of consumers under increasing block rates

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