Peak-load pricing with stochastic demand

Journal Article · Thu Dec 01 04:00:00 EST 1977 · Am. Econ. Rev.; (United States)

OSTI ID:5355271

Carlton, D W

A peak-load model using two rationing schemes analyzes peak-load pricing under conditions of uncertainty and the appropriateness and equity of charging different prices to consumers. Two major points are made. First, with realistic rationing schemes and multiplicative demand, operating policies that maximize surplus to society are found to involve nonnegative profits and a price above long-run marginal costs in contrast to previous findings. For many situations, multiplicative demand uncertainty seems more relevant than additive uncertainty. If a competitive market is possible, then competition, perhaps with taxation, can achieve the social optimum. The second point emphasizes that using expected surplus as welfare function and charging the same price to all consumers may both be undesirable. The probability of obtaining a good is a characteristic of the good for which consumers have preference. 5 references.

• Research Organization: Univ. of Chicago
• OSTI ID: 5355271
• Journal Information: Am. Econ. Rev.; (United States), Journal Name: Am. Econ. Rev.; (United States) Vol. 67:5; ISSN AERNA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
296000 -- Energy Planning & Policy-- Electric Power
ALLOCATIONS
BEHAVIOR
CHARGES
COMPETITION
CONSUMER PROTECTION
COST
DEMAND FACTORS
ECONOMIC IMPACT
ECONOMIC POLICY
ENERGY CONSUMPTION
ENERGY DEMAND
MARKET
MONOPOLIES
PEAK-LOAD PRICING
PUBLIC UTILITIES
SOCIAL IMPACT
SOCIO-ECONOMIC FACTORS