Nonlinear pricing, biased consumers, and regulatory policy

Abstract Recent empirical analyses show consumers in electricity and water markets respond to average price rather than marginal price, calling for information provision policies that help correct the consumers’ bias. This paper characterizes regulated tariff if regulator is informed about average-price response of consumers. I find biased promotes equity gains by featuring quantity premia providing access utility consumption a larger population world rational The can also yield higher total welfare. These results bring up opportunity costs programs