The Value of Continuous Power Supply for Flemish Households
AbstractThis paper estimates the willingness to pay of Flemish households for continuous power supply, based on a stated preference approach. The data were collected via choice experiments which were then used to estimate a set of logit models ranging from a main effects conditional logit model to random parameter logit model with interaction effects and correlated preferences. Power outages are characterized by 6 attributes: annual frequency, duration, peak or off peak, announced or unannounced, winter or summer and invoice impact. All estimates have the expected sign and are used to assess the marginal willingness to pay by Flemish households for each of these attributes. Overall, the estimates suggest that Flemish households have heterogeneous preferences regarding power outage attributes, and that a significant share of them is willing to switch to a lower reliability level if that would be compensated by a relatively small electricity bill discount. We further illustrate i) how the model estimates can be used to assess the impact on a households consumer surplus of a transition from an initial power outage state of the world (the status quo in the choice experiment) to a new state of the world, and ii) how the estimates can be used to assess the market potential of different power outage profiles if they would be offered for sale by electricity suppliers and/or distribution companies. Again, these illustrations show that some market potential exists for differentiated power outage contracts.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2010/24.
Length: 35 page
Date of creation: Jul 2010
Date of revision:
Power outage; Willingness to pay; Survey; Choice experiment; Random parameter logit;
Other versions of this item:
- Pepermans, Guido, 2011. "The value of continuous power supply for Flemish households," Energy Policy, Elsevier, vol. 39(12), pages 7853-7864.
- Pepermans, Guido, 2010. "The Value of Continuous Power Supply for Flemish Households," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/408755, Katholieke Universiteit Leuven.
- 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
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.:
- James Murphy & P. Allen & Thomas Stevens & Darryl Weatherhead, 2005. "A Meta-analysis of Hypothetical Bias in Stated Preference Valuation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 30(3), pages 313-325, 03.
- Provencher, Bill & Bishop, R.C.Richard C., 2004. "Does accounting for preference heterogeneity improve the forecasting of a random utility model? A case study," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 793-810, July.
- Abdullah, Sabah & Mariel, Petr, 2010. "Choice experiment study on the willingness to pay to improve electricity services," Energy Policy, Elsevier, vol. 38(8), pages 4570-4581, August.
- Horowitz, John K. & McConnell, Kenneth E., 2002. "A Review of WTA/WTP Studies," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 426-447, November.
- David Hensher & William Greene, 2003. "The Mixed Logit model: The state of practice," Transportation, Springer, vol. 30(2), pages 133-176, May.
- Edward Morey & Kathleen Greer Rossmann, 2003. "Using Stated-Preference Questions to Investigate Variations in Willingness to Pay for Preserving Marble Monuments: Classic Heterogeneity, Random Parameters, and Mixture Models," Journal of Cultural Economics, Springer, vol. 27(3), pages 215-229, November.
- John List & Craig Gallet, 2001. "What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 20(3), pages 241-254, November.
- Hsu, George J. Y. & Chang, Pao-long & Chen, Tser-yieth, 1994. "Various methods for estimating power outage costs : Some implications and results in Taiwan," Energy Policy, Elsevier, vol. 22(1), pages 69-74, January.
- Arne Risa Hole, 2006.
"A comparison of approaches to estimating confidence intervals for willingness to pay measures,"
008cherp, Centre for Health Economics, University of York.
- Arne Risa Hole, 2007. "A comparison of approaches to estimating confidence intervals for willingness to pay measures," Health Economics, John Wiley & Sons, Ltd., vol. 16(8), pages 827-840.
- Chiara M. Travisi & Peter Nijkamp & Raymond J. G. M. Florax, 2004.
"A Meta-Analysis of the Willingness to Pay for Reductions in Pesticide Risk Exposure,"
2004.101, Fondazione Eni Enrico Mattei.
- Raymond J. G. M. Florax & Chiara M. Travisi & Peter Nijkamp, 2005. "A meta-analysis of the willingness to pay for reductions in pesticide risk exposure," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(4), pages 441-467, December.
- Florax, Raymond J.G.M. & Travisi, Chiara M. & Nijkamp, Peter, 2005. "A Meta-Analysis of the Willingness to Pay for Reductions in Pesticide Risk Exposure," 2005 Annual meeting, July 24-27, Providence, RI 19524, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- M. Munasinghe & A. Sanghvi, 1988. "Reliability of Electricity Supply, Outage Costs and Value of Service: An Overview," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 1-18.
- Herriges, Joseph A. & Caves, Douglas W. & Windle, R. J., 1990.
"Customer Demand for Service Reliability in the Electric Power Industry: A Synthesis of the Outage Cost Literature,"
Staff General Research Papers
10790, Iowa State University, Department of Economics.
- Caves, Douglas W & Herriges, Joseph A & Windle, Robert J, 1990. "Customer Demand for Service Reliability in the Electric Power Industry: A Synthesis of the Outage Cost Literature," Bulletin of Economic Research, Wiley Blackwell, vol. 42(2), pages 79-119, April.
- Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
- Douglas W. Caves & Joseph A. Herriges & Robert J. Windle, 1992. "The Cost of Electric Power Interruptions in the Industrial Sector: Estimates Derived from Interruptible Service Programs," Land Economics, University of Wisconsin Press, vol. 68(1), pages 49-61.
- Woo, C.K. & Kollman, E. & Orans, R. & Price, S. & Horii, B., 2008. "Now that California has AMI, what can the state do with it?," Energy Policy, Elsevier, vol. 36(4), pages 1366-1374, April.
- de Nooij, Michiel & Koopmans, Carl & Bijvoet, Carlijn, 2007. "The value of supply security: The costs of power interruptions: Economic input for damage reduction and investment in networks," Energy Economics, Elsevier, vol. 29(2), pages 277-295, March.
- Peter Boxall & Wiktor Adamowicz, 2002. "Understanding Heterogeneous Preferences in Random Utility Models: A Latent Class Approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 23(4), pages 421-446, December.
- Edward Morey & Jennifer Thacher & William Breffle, 2006. "Using Angler Characteristics and Attitudinal Data to Identify Environmental Preference Classes: A Latent-Class Model," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 34(1), pages 91-115, 05.
- Carlsson, Fredrik & Martinsson, Peter, 2004.
"Does it Matter When a Power Outage Occurs? - A Choice Experiment Study on the Willingness to Pay to Avoid Power Outages,"
Working Papers in Economics
155, University of Gothenburg, Department of Economics.
- 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.
- Hartman, Raymond S & Doane, Michael J & Woo, Chi-Keung, 1991. "Consumer Rationality and the Status Quo," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 141-62, February.
- Beenstock, Michael & Goldin, Ephraim & Haitovsky, Yoel, 1998. "Response bias in a conjoint analysis of power outages," Energy Economics, Elsevier, vol. 20(2), pages 135-156, April.
- Pablo Serra & Gabriel Fierro, 1996.
"Outage Cost in Chilean Industry,"
Documentos de Trabajo
10, Centro de Economía Aplicada, Universidad de Chile.
- Ajodhia, Virendra & Hakvoort, Rudi, 2005. "Economic regulation of quality in electricity distribution networks," Utilities Policy, Elsevier, vol. 13(3), pages 211-221, September.
- Moore, Rebecca, 2008. "Using Attitudes to Characterize Heterogeneous Preferences," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6488, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Carlsson, Fredrik & Martinsson, Peter, 2006. "Do Experience and Cheap Talk influence Willingness to Pay in an Open-Ended Contingent Valuation Survey?," Working Papers in Economics 190, University of Gothenburg, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabine Janssens).
If references are entirely missing, you can add them using this form.