Carlsson, Fredrik () (Department of Economics, School of Economics and Commercial Law, Göteborg University) Martinsson, Peter () (Department of Economics, School of Economics and Commercial Law, Göteborg University)
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Using 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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Paper provided by Göteborg University, 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. Handle: RePEc:hhs:gunwpe:0155
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden Phone: 031-773 10 00 Web page: http://www.handels.gu.se/econ/ More information through EDIRC
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