TY  - JOUR
AU  - Davis,Lucas W.
AU  - Muehlegger,Erich
TI  - Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15885
PY  - 2010
Y2  - April 2010
UR  - http://www.nber.org/papers/w15885
L1  - http://www.nber.org/papers/w15885.pdf
N1  - Author contact info:
Lucas W. Davis
Haas School of Business
University of California
Berkeley, CA 94720-1900
Tel: 510/642-1651
E-Mail: ldavis@haas.berkeley.edu

Erich Muehlegger
Harvard Kennedy School
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-7735
E-Mail: erich_muehlegger@hks.harvard.edu
M2  - featured in NBER digest on 2010-07-01
AB  - This paper 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 pre-existing distortion which should be taken into account when evaluating carbon taxes and other policies aimed at addressing external costs.
ER  -