Evaluating Welfare with Nonlinear Prices

Abstract

Economists frequently evaluate the welfare consequences of nonlinear incentives and prices, ranging from the effects of price discrimination by firms to the benefits of many public-sector transfer programs. This paper extends existing methods to accommodate a broad range of modern pricing practices, including menus of pricing plans. The techniques we present are straightforward to implement in applied work with both parametric and nonparametric demand models, and do not require analytic representations for preferences.