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Some Simple Analysis Of Peak-Load Pricing

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Author Info

  • BERGSTROM, T.
  • MACKIE-MASON, J.

Abstract

Consider a public utility that offers its service at two different times. We study the effects of a change from uniform pricing throughout the day to peak-load pricing. We show that for a utility constrained to operate with a fixed rate of return on capital, the introduction of peak-load pricing can plausibly reduce the price of the service both in peak and off-peak times. We also find that peak-load pricing can lead to either greater or smaller capacity than uniform pricing. We find a simple criterion for determining whether a particular individual gains or loses from peak-load pricing.

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Bibliographic Info

Paper provided by Michigan - Center for Research on Economic & Social Theory in its series Papers with number 89-02.

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Length: 16 pages
Date of creation: 1988
Date of revision:
Handle: RePEc:fth:michet:89-02

Contact details of provider:
Postal: UNIVERSITY OF MICHIGAN, DEPARTMENT OF ECONOMICS CENTER FOR RESEARCH ON ECONOMIC AND SOCIAL THEORY, ANN ARBOR MICHIGAN U.S.A.

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Keywords: pricing;

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Cited by:
  1. Frank Limehouse & Michael Maloney & Kurt Rotthoff, 2012. "Peak-Load Versus Discriminatory Pricing: Evidence from the Golf Industry," Review of Industrial Organization, Springer, vol. 40(3), pages 151-165, May.

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