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Responsive Pricing of Public Utility Services

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  • William Vickrey

Abstract

Utility prices that are made to respond appropriately to adventitious variations in demand or supply can produce substantial improvement in the efficiency of utilization of utility facilities, raising load factors and lowering average costs. More effective and less disruptive handling of emergency shortages is also facilitated. With telephone service, implementation can be on a virtually instantaneous basis through system monitoring and recorded quotation of currently effective rtes. In situations with a strong element of precommitment to the use of the service, such as airline travel, implementation can be handled through simulating a speculative market in reservations. Motivation for privately owned utilities to maintain service capability at desirable levels can be preserved through establishing fixed retention rates independent of the responsive rates, with revenues in excess of or below the retention rates being paid into or made up out of an escrow fund.

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Bibliographic Info

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 2 (1971)
Issue (Month): 1 (Spring)
Pages: 337-346

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Handle: RePEc:rje:bellje:v:2:y:1971:i:spring:p:337-346

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Cited by:
  1. Bergaentzlé, Claire & Clastres, Cédric & Khalfallah, Haikel, 2014. "Demand-side management and European environmental and energy goals: An optimal complementary approach," Energy Policy, Elsevier, vol. 67(C), pages 858-869.
  2. Changqi Wu & Leonard K. Cheng, 2000. "Hong Kong’s Business Regulation in Transition," NBER Chapters, in: Deregulation and Interdependence in the Asia-Pacific Region, NBER-EASE Volume 8, pages 157-194 National Bureau of Economic Research, Inc.
  3. Mirucki, Jean, 1980. "Comportement de l'entreprise réglementée: étude de l'hypothèse Averch-Johnson
    [Behavior of the Regulated Firm: A Study of the Averch-Johnson Hypothesis]
    ," MPRA Paper 27669, University Library of Munich, Germany, revised 1982.
  4. Pascal Courty & Mario Pagliero, 2008. "Do Consumers Care about how Prices are Set?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(1), pages 27-43.
  5. Pascal Courty & Mario Pagliero, 2006. "Responsive Pricing," 2006 Meeting Papers 315, Society for Economic Dynamics.
  6. Courty, Pascal & Pagliero, Mario, 2003. "Does Responsive Pricing Increase Efficiency? Evidence from Pricing Experiments in an Internet Café," CEPR Discussion Papers 4149, C.E.P.R. Discussion Papers.
  7. Courty, Pascal & Pagliero, Mario, 2007. "Price Variation Antagonism and Firm Pricing Policies," CEPR Discussion Papers 6663, C.E.P.R. Discussion Papers.
  8. Mirucki, Jean, 1980. "Vérification des conditions d'efficacité dans la production chez Bell Canada
    [Checking the conditions of efficient production in Bell Canada]
    ," MPRA Paper 30147, University Library of Munich, Germany, revised Jun 1980.
  9. Claire Bergaentzlé & Cédric Clastres & Haikel Khalfallah, 2014. "Demand-side management and European environmental and energy goals: an optimal complementary approach," Post-Print halshs-00928678, HAL.
  10. Lindsey, Robin, 2009. "Cost recovery from congestion tolls with random capacity and demand," Journal of Urban Economics, Elsevier, vol. 66(1), pages 16-24, July.
  11. Hung-po Chao, 2012. "Competitive electricity markets with consumer subscription service in a smart grid," Journal of Regulatory Economics, Springer, vol. 41(1), pages 155-180, February.
  12. Courty, Pascal & Pagliero, Mario, 2008. "Does Responsive Pricing Smooth Demand Shocks?," CEPR Discussion Papers 6662, C.E.P.R. Discussion Papers.
  13. Kaplan, Jonathan D. & Howitt, Richard E. & Kroll, Stephan, 2012. "Private Provision of a Stochastic Common Property Resource," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124855, Agricultural and Applied Economics Association.
  14. Hung-po Chao & Mario DePillis, 2013. "Incentive effects of paying demand response in wholesale electricity markets," Journal of Regulatory Economics, Springer, vol. 43(3), pages 265-283, June.

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