Game theoretic approach to peak-load pricing

Journal Article · · Bell J. Econ. Manage. Sci.; (United States)

DOI:https://doi.org/10.2307/3003269· OSTI ID:7116755

Sorenson, J R ^[1]; Tschirhart, J T; Whinston, A B

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1. Valparaiso Univ., IN

This paper deals with the problem of pricing in decreasing-cost industries that exhibit the peak-load phenomenon. Because of decreasing costs, welfare-maximizing marginal-cost pricing results in deficits. Consequently, other pricing methods such as two-part tariffs are necessary if deficits are to be avoided. In a game-theoretic framework, these other pricing methods are analyzed. The game developed is one of sharing the benefits from cooperation among consumers. It is proved that the core of the game exists, but that two-part tariffs may yield pricing arrangements that are not in the core unless further constraints are added. Then the possibility of moving from existing to new rate structures is discussed, with particular emphasis on average cost pricing as an existing rate structure. 26 references.

• OSTI ID: 7116755
• Journal Information: Bell J. Econ. Manage. Sci.; (United States), Journal Name: Bell J. Econ. Manage. Sci.; (United States) Vol. 7:2; ISSN BJEMA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
99 GENERAL AND MISCELLANEOUS
990200 -- Mathematics & Computers
ALLOCATIONS
CHARGES
COMMUNICATIONS
COST
DECISION MAKING
DEMAND FACTORS
ECONOMICS
ENERGY CONSUMPTION
GAME THEORY
INDUSTRY
MATHEMATICS
PEAK-LOAD PRICING
POWER GENERATION
PUBLIC UTILITIES
STATISTICS
TAXES
TRANSPORTATION SYSTEMS