Uncovering Regulators' Social Welfare Weights

Abstract

This article describes a procedure that can be used to infer interesting information about the preferences of regulators from the pricing decisions they make. This is done by using an adaptation of the familiar Ramsey pricing model, which allows benefits derived from the consumption of different goods or derived by different consumers to carry different social weights. These weights are then exposed by inverting the first-order conditions of the constrained-maximum problem.