Evaluating Welfare with Nonlinear Prices

This paper examines how to evaluate consumer welfare when consumers face non-linear prices. This problem arises in many settings, such as devising optimal pricing strategies for firms, assessing how price discrimination affects consumers, and evalu-ating the efficiency costs of many transfer programs in the public sector. We extend prior methods to accommodate a broad range of modern pricing practices, including menus of pricing plans. This analysis yields a simpler and more general technique for evaluating exact consumer surplus changes in settings where consumers face non-linear prices. We illustrate our method using recent changes in mobile phone service plans