A Note on Block Tariffs

Synopsis This paper has two purposes, closely connected with one another. The first is to fill a gap by presenting a consistent theory of block tariffs; the second is to dispel some misconceptions found in the works of standard authors concerning this form of pricing. The main misconceptions here discussed are three in number: first, that the extent to which the consumer's surplus can be exploited depends on the number of blocks; second, that a lower price is necessarily ineffective if it occurs at a quantity which is larger than what the consumer would have bought had the price of the preceding block been valid throughout; and third, that block tariffs may prove inefficient in practice.