Plausibly Exogenous [1556] - Non-linear Pricing (05/07/2024)
LHS Variable
Welfare
RHS Variable
Non-linear prices
Source of Exogenous Variation
In October 2008, BC Hydro, the provincial electric utility serving 95% of the province, changed from a flat rate to a two-tier increasing block tariff whereby the price of electricity increases for consumption beyond a quantity threshold each billing cycle. Meanwhile, New Westminster—a city in the Greater Vancouver region and also one of the few locations in the province which for historical reasons sets its own electricity rates—chose to remain on a flat rate. The data for this paper consist of monthly billing records from 2005–2013, covering the universe of households in New Westminster and the neighbouring regions served by BC Hydro.
- Shaffer (2020), “Misunderstanding nonlinear prices: Evidence from a natural experiment on residential electricity demand”