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Residential Demand for Electricity under Inverted Block Rates: Evidence from a Controlled Experiment

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  • Herriges, Joseph A
  • King, Kathleen Kuester

Abstract

Block-rate structures are used extensively in public-utility pricing, including residential electricity. Estimating price elasticities in this context is complicated by the resulting nonlinearity of the consumer's budget constraint. This article estimates the demand for electricity under inverted block rates using data from a residential rate experiment. The study provides an opportunity to obtain short-run price elasticities in an experimental setting and to compare alternative estimators developed for nonlinear budget constraints. Elasticities of demand with respect to individual components of the block rate are developed using a modification of the structural maximum likelihood estimator.

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Bibliographic Info

Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 12 (1994)
Issue (Month): 4 (October)
Pages: 419-30

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Handle: RePEc:bes:jnlbes:v:12:y:1994:i:4:p:419-30

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Cited by:
  1. Borenstein, Severin, 2010. "The Redistributional Impact of Non-Linear Electricity Pricing," Working paper 602, Regulation2point0.
  2. Koji Miyawaki & Yasuhiro Omori & Akira Hibiki, 2009. "Bayesian Estimation of Demand Functions under Block Rate Pricing," CIRJE F-Series CIRJE-F-631, CIRJE, Faculty of Economics, University of Tokyo.
  3. Medina, Eva & Vicéns, José, 2011. "Factores determinantes de la demanda eléctrica de los hogares en España: una aproximación mediante regresión cuantílica/Determinants of Household Electricity Demand in Spain: An Approach through ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 29, pages 515-538, Agosto.
  4. E. Strazzera, 2006. "Application of the ML Hausman approach to the demand of water for residential use: heterogeneity vs two-error specification," Working Paper CRENoS 200604, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  5. Reiss, Peter C. & White, Matthew W., 2002. "Household Electricity Demand, Revisited," Research Papers 1830, Stanford University, Graduate School of Business.
  6. Fell, Harrison & Li, Shanjun & Paul, Anthony, 2010. "A New Look at Residential Electricity Demand Using Household Expenditure Data," Discussion Papers dp-10-57, Resources For the Future.
  7. Koji Miyawaki & Yasuhiro Omori & Akira Hibiki, 2013. "A Discrete/Continuous Choice Model on the Nonconvex Budget Set," CIRJE F-Series CIRJE-F-881, CIRJE, Faculty of Economics, University of Tokyo.
  8. Tanaka, Makoto & Ida, Takanori, 2013. "Voluntary electricity conservation of households after the Great East Japan Earthquake: A stated preference analysis," Energy Economics, Elsevier, vol. 39(C), pages 296-304.
  9. Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April.
  10. Isamu Matsukawa, 2005. "The Benefits of Information on the Efficient Usage of Consumer Durables," Others 0501005, EconWPA.

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