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Designing the pricing mechanism of residents’ self-selection sales electricity based on household size

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  • Wang, Li
  • Zhang, Xin-Hua
  • Zhang, Yue-Jun

Abstract

The current tiered electricity pricing (TEP) system for residents in China reflects neither the cost of electricity supply nor the real demand of residents of different household sizes; therefore, we design a classified self-selection sales electricity pricing (CSSSEP) mechanism for different household sizes in this paper. First, based on the log-log model and single threshold model, residential electricity demand models of different household sizes are constructed. Then, the combination of factors other than electricity price is regarded as the residential electricity consumption type, and on this basis, a residential electricity price information screening model is proposed. Finally, the model is empirically compared and analysed. The results indicate that (1) the optimal power supply and electricity charges increase with changes in the type of residents. In addition, (2) the CSSSEP mechanism is better than the self-selection sales electricity pricing (SSSEP) mechanism and the TEP system; i.e., the CSSSEP mechanism can not only save energy and increase the income of power suppliers but also reduce residents' electricity consumption. Furthermore, (3) the average electricity price under the TEP system is relatively low, and the power regulation department should greatly increase it to better realize the reasonable allocation of resources. Finally, (4) the price cap has a positive impact on total social welfare, total profit and average surplus, but the increased total social welfare is mainly manifested in the profit of the power supplier.

Suggested Citation

  • Wang, Li & Zhang, Xin-Hua & Zhang, Yue-Jun, 2023. "Designing the pricing mechanism of residents’ self-selection sales electricity based on household size," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 860-878.
    • Handle: RePEc:eee:reveco:v:83:y:2023:i:c:p:860-878
    DOI: 10.1016/j.iref.2022.10.015
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    More about this item

    Keywords

    Information screening; Residential electricity price; Threshold model; Mechanism design;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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