A BEJTE Topics article.

Abstract

In order to incorporate demand interdependencies into the analysis of fairness between the different consumer groups of a multi-product public utility, Baumol (1986) designed the burden test. This test checks whether the price of a single good generates net incremental revenues which cover at least the incremental costs of the good. It is, however, more reasonable to compare net incremental revenues and net incremental costs. Furthermore, it is useful to extend the analysis to groups of goods. Therefore, we develop a new fairness test, which we call the net burden test, and characterize its properties.

Submitted: December 18, 2003 · Accepted: March 28, 2006 · Published: June 25, 2006

Originally published in Topics in Theoretical Economics.

Recommended Citation

Borrmann, Jörg and Zauner, Klaus G. (2006) "An Amendment to Baumol's Burden Test," Topics in Theoretical Economics: Vol. 6 : Iss. 1, Article 8.
Available at: http://www.bepress.com/bejte/topics/vol6/iss1/art8