The time domain inter-cell interference coordination techniques specified in LTE Rel. 10 standard improves the throughput of picocell-edge users by protecting them from macrocell interference. On the other hand, it also degrades the aggregate capacity in macrocell because the macro base station (MBS) does not transmit data during certain subframes known as almost blank subframes. The MBS data transmission using reduced power subframes was standardized in LTE Rel. 11, which can improve the capacity in macrocell while not causing high interference to the nearby picocells. In order to get maximum benefit from the reduced power subframes, setting the key system parameters, such as the amount of power reduction, carries critical importance. Using stochastic geometry, this paper lays down a theoretical foundation for the performance evaluation of heterogeneous networks with reduced power subframes and range expansion bias. The analytic expressions for average capacity and 5th percentile throughput are derived as a function of transmit powers, node densities, and interference coordination parameters in a heterogeneous network scenario, and are validated through Monte Carlo simulations. Joint optimization of range expansion bias, power reduction factor, scheduling thresholds, and duty cycle of reduced power subframes are performed to study the trade-offs between aggregate capacity of a cell and fairness among the users. To validate our analysis, we also compare the stochastic geometry based theoretical results with the real MBS deployment (in the city of London) and the hexagonal-grid model. Our analysis shows that with optimum parameter settings, the LTE Rel. 11 with reduced power subframes can provide substantially better performance than the LTE Rel. 10 with almost blank subframes, in terms of both aggregate capacity and fairness.