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Peak Load Pricing with a Diverse Technology

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  • Michael A. Crew
  • Paul R. Kleindorfer
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    Abstract

    This paper examines simultaneously the effects of a diverse technology (i.e., multiple plant types), stochastic demand, and rationing costs on the pricing policy of a welfare maximizing public utility where peak loads are present. Optimal pricing and operating policies are derived where the technology fulfills certain convexity conditions. The approach shows the efficiency of peak load pricing under stochastic demand conditions which contrasts with the results of earlier writers. Bounds on prices are derived. Comparisons with the deterministic demand case are made, and a numerical example shows the effects of changes in various parameters on prices and capacity.

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    File URL: http://links.jstor.org/sici?sici=0361-915X%28197621%297%3A1%3C207%3APLPWAD%3E2.0.CO%3B2-G&origin=repec
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    Bibliographic Info

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

    Volume (Year): 7 (1976)
    Issue (Month): 1 (Spring)
    Pages: 207-231

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    Handle: RePEc:rje:bellje:v:7:y:1976:i:spring:p:207-231

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    Web page: http://www.rje.org

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    Cited by:
    1. Léautier, Thomas-Olivier, 2014. "Transmission constraints and strategic underinvestment in electric power generation," IDEI Working Papers 816, Institut d'Économie Industrielle (IDEI), Toulouse.
    2. Léautier, Thomas-Olivier, 2013. "Fred Schweppe meets Marcel Boiteux and Antoine-Augustin Cournot: transmission constraints and strategic underinvestment in electric power generation," IDEI Working Papers 796, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Peter Cramton & Axel Ockenfels, 2012. "Economics and Design of Capacity Markets for the Power Sector," Papers of Peter Cramton 12cocap, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
    4. Léautier, Thomas-Olivier, 2013. "Fred Schweppe meets Marcel Boiteux and Antoine-Augustin Cournot: transmission constraints and strategic underinvestment in electric power generation," TSE Working Papers 13-432, Toulouse School of Economics (TSE).
    5. Léautier, Thomas-Olivier, 2014. "The "demand side" effect of price caps: uncertainty, imperfect competition, and ration," TSE Working Papers 14-460, Toulouse School of Economics (TSE).
    6. Léautier, Thomas-Olivier, 2014. "The "demand side" effect of price caps: uncertainty, imperfect competition, and rationing," IDEI Working Papers 815, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Böckers, Veit & Haucap, Justus & Jovanovic, Dragan, 2013. "Diskriminierende Gebotsbeschränkungen im deutschen Großhandelsmarkt für Strom: Eine wettbewerbsökonomische Analyse," DICE Ordnungspolitische Perspektiven 52, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Léautier, Thomas-Olivier, 2014. "Transmission constraints and strategic underinvestment in electric power generation," TSE Working Papers 13-459, Toulouse School of Economics (TSE).

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