Block Switching in Demand Subject to Declining Block Rates - A New Approach

Abstract

This paper considers the problem of estimating demand subject to a non-linear rate schedule for commodities such as electricity, water, and telecommunications. We calculate the probability of block switching for non-marginal changes in price. We also determine whether consistent estimation corrections for price endogeneity are likely to be of much value and whether the movement between marginal and intra-marginal blocks is a likely outcome of rate increases.

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