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|Material Type:||Document, Internet resource|
|Document Type:||Internet Resource, Computer File|
|All Authors / Contributors:||
Koichiro Ito; National Bureau of Economic Research.
|Notes:||Title from http://www.nber.org/papers/18533 viewed November 19, 2012.
|Description:||1 online resource (45 pages) : illustrations, maps.|
|Series Title:||Working paper series (National Bureau of Economic Research), no. 18533.|
Nonlinear pricing and taxation complicate economic decisions by creating multiple marginal prices for the same good. This paper provides a framework to uncover consumers' perceived price of nonlinear price schedules. I exploit price variation at spatial discontinuities in electricity service areas, where households in the same city experience substantially different nonlinear pricing. Using household-level panel data from administrative records, I find strong evidence that consumers respond to average price rather than marginal or expected marginal price. This sub-optimizing behavior makes nonlinear pricing unsuccessful in achieving its policy goal of energy conservation and critically changes the welfare implications of nonlinear pricing.
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