Does it Matter When a Power Outage Occurs? - A Choice Experiment Study on the Willingness to Pay to Avoid Power Outages
AbstractUsing a choice experiment survey, the marginal willingness to pay (WTP) among Swedish households for reductions in power outages is estimated. The results from the random parameter logit estimation indicate that the marginal WTP increases with the duration of the outages, and is higher if the outages occur during weekends and during winter months. The random parameter logit model allows us to estimate a sample distribution of WTP. We find a significant unobserved heterogeneity in some of the outage attributes but not all. Furthermore we show that the sample distribution of WTP does not to any large extent suffer from the problem of reverse sign of the WTP. Therefore, choosing an unconstrained normal distribution might not be as problematic as one would think. Given that households have negative welfare effects from outages, which differ in timing and duration, and are rarely compensated for them, it is important that policy makers consider these negative impacts on households utility when regulating the electricity market.
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 155.
Length: 21 pages
Date of creation: 20 Dec 2004
Date of revision:
Publication status: Published in Energy Economics, 2008, pages 1332-1345.
Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
More information through EDIRC
Choice experiment; Power outages; Random parameters; Willingness to pay;
Other versions of this item:
- Carlsson, Fredrik & Martinsson, Peter, 2008. "Does it matter when a power outage occurs? -- A choice experiment study on the willingness to pay to avoid power outages," Energy Economics, Elsevier, vol. 30(3), pages 1232-1245, May.
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-02 (All new papers)
- NEP-DCM-2005-01-02 (Discrete Choice Models)
- NEP-DCM-2005-01-04 (Discrete Choice Models)
- NEP-ENE-2005-01-02 (Energy Economics)
- NEP-EXP-2005-01-02 (Experimental Economics)
- NEP-RES-2005-01-02 (Resource Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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