Do Americans consume too little natural gas? An empirical test of marginal cost pricing
This article measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991–2007. We find large departures from marginal cost pricing in all 50 states, with residential and commercial customers facing average markups of over 40%. Based on...
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| Veröffentlicht in: | The Rand journal of economics 2010-12, Vol.41 (4), p.791-810 |
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| container_title | The Rand journal of economics |
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| creator | Davis, Lucas W. Muehlegger, Erich |
| description | This article measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991–2007. We find large departures from marginal cost pricing in all 50 states, with residential and commercial customers facing average markups of over 40%. Based on conservative estimates of the price elasticity of demand, these distortions impose hundreds of millions of dollars of annual welfare loss. Moreover, current price schedules are an important preexisting distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs. |
| doi_str_mv | 10.1111/j.1756-2171.2010.00121.x |
| format | Article |
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An empirical test of marginal cost pricing</title><author>Davis, Lucas W. ; Muehlegger, Erich</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c6121-7a19a327da0c056297a6315e951c1dacaf1593a876cab1606700dec1b04d218a3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2010</creationdate><topic>Cost estimates</topic><topic>Customers</topic><topic>Demand analysis</topic><topic>Demand functions</topic><topic>Developing countries</topic><topic>Economic theory</topic><topic>Energy consumption</topic><topic>Energy economics</topic><topic>Energy policy</topic><topic>Energy prices</topic><topic>Fees</topic><topic>Fixed costs</topic><topic>Marginal cost pricing</topic><topic>Marginal costs</topic><topic>Markups</topic><topic>Natural gas</topic><topic>Natural gas distribution</topic><topic>Price elasticity</topic><topic>Studies</topic><topic>U.S.A</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Davis, Lucas W.</creatorcontrib><creatorcontrib>Muehlegger, Erich</creatorcontrib><collection>Istex</collection><collection>RePEc IDEAS</collection><collection>RePEc</collection><collection>CrossRef</collection><collection>ProQuest Central (Corporate)</collection><collection>ABI/INFORM Collection</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>Health & Medical Collection</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>Healthcare Administration Database (Alumni)</collection><collection>Medical Database (Alumni Edition)</collection><collection>ProQuest Pharma Collection</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>Hospital Premium Collection</collection><collection>Hospital Premium Collection (Alumni Edition)</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>International Bibliography of the Social Sciences</collection><collection>Business Premium Collection (Alumni)</collection><collection>Health Research Premium Collection</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>Health Research Premium Collection (Alumni)</collection><collection>International Bibliography of the Social Sciences</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ProQuest Health & Medical Complete (Alumni)</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Global</collection><collection>Health & Medical Collection (Alumni Edition)</collection><collection>Healthcare Administration Database</collection><collection>Medical Database</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central China</collection><collection>ABI/INFORM Collection China</collection><collection>ProQuest Central Basic</collection><collection>SIRS Editorial</collection><jtitle>The Rand journal of economics</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Davis, Lucas W.</au><au>Muehlegger, Erich</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Do Americans consume too little natural gas? An empirical test of marginal cost pricing</atitle><jtitle>The Rand journal of economics</jtitle><date>2010-12-01</date><risdate>2010</risdate><volume>41</volume><issue>4</issue><spage>791</spage><epage>810</epage><pages>791-810</pages><issn>0741-6261</issn><eissn>1756-2171</eissn><coden>RJECEA</coden><abstract>This article measures the extent to which prices exceed marginal costs in the U.S. natural gas distribution market during the period 1991–2007. We find large departures from marginal cost pricing in all 50 states, with residential and commercial customers facing average markups of over 40%. Based on conservative estimates of the price elasticity of demand, these distortions impose hundreds of millions of dollars of annual welfare loss. Moreover, current price schedules are an important preexisting distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs.</abstract><cop>Malden, USA</cop><pub>Blackwell Publishing Inc</pub><doi>10.1111/j.1756-2171.2010.00121.x</doi><tpages>20</tpages><oa>free_for_read</oa></addata></record> |
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| subjects | Cost estimates Customers Demand analysis Demand functions Developing countries Economic theory Energy consumption Energy economics Energy policy Energy prices Fees Fixed costs Marginal cost pricing Marginal costs Markups Natural gas Natural gas distribution Price elasticity Studies U.S.A |
| title | Do Americans consume too little natural gas? An empirical test of marginal cost pricing |
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