Estimating Demand under Block Rates: Electricity and Water

Electricity pricing is often declining block, i.e., the price per kilowatt hour is constant over a range of kilowatt hours (block) but declines with blocks involving increased consumption. Nordin (1976) argued that the correct variables in electricity pricing are marginal price and real income after...

Full description

Saved in:
Bibliographic Details
Published in:Land economics 1982-05, Vol.58 (2), p.181-188
Main Authors: Terza, Joseph V., Welch, W. P.
Format: Article
Language:English
Subjects:
Bias
Consistent estimators
Consumer prices
Consumer surplus
Demand
Demand curves
Electricity
Energy consumption
Estimates
Estimating techniques
Estimation bias
Estimation methods
Households
Housing demand
Pricing
Rates
Real income
Studies
Tariffs
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Electricity pricing is often declining block, i.e., the price per kilowatt hour is constant over a range of kilowatt hours (block) but declines with blocks involving increased consumption. Nordin (1976) argued that the correct variables in electricity pricing are marginal price and real income after accounting for intramarginal prices. Similarly, water may be priced with increasing block rates. This analysis of Nordin's work demonstrates that his suggestion involves the inappropriate use of ordinary least squares. A method is proposed by which consistent estimates of demand parameters can be obtained when a household's rule for selecting a block can be estimated.
ISSN:0023-7639
1543-8325
DOI:10.2307/3145892