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Household Electricity Demand, Revisited

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  • Peter C. Reiss
  • Matthew W. White
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    Abstract

    Recent efforts to restructure and partially deregulate electricity markets have renewed interest in understanding how consumers respond to price changes. Several interrelated problems complicate demand analyses of these markets, including nonlinear pricing, heterogeneity in households' price sensitivities, and data aggregation. This paper formulates a model of household electricity demand that addresses these difficulties. We estimate the model using data for a representative sample of California households, and summarize how electricity demand elasticities vary in that state. We then use the model to analyze the electricity consumption and expenditure effects of recent tariff structure changes in California.

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    File URL: http://www.nber.org/papers/w8687.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8687.

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    Date of creation: Dec 2001
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    Publication status: published as Reiss, Peter C. and Matthew W. White. "Household Electricity Demand, Revisited." Review of Economic Studies 72, 3 (July 2005): 853-83.
    Handle: RePEc:nbr:nberwo:8687

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    1. Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
    2. Barnes, Roberta & Gillingham, Robert & Hagemann, Robert, 1981. "The Short-run Residential Demand for Electricity," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 541-52, November.
    3. Soren Blomquist & Whitney Newey, 2002. "Nonparametric Estimation with Nonlinear Budget Sets," Econometrica, Econometric Society, vol. 70(6), pages 2455-2480, November.
    4. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
    5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    6. G. Burtless & J. A. Hausman, 1977. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiment," Working papers 211, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Hausman, Jerry A, 1985. "The Econometrics of Nonlinear Budget Sets," Econometrica, Econometric Society, vol. 53(6), pages 1255-82, November.
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    Cited by:
    1. Hanemann, W. Michael & Olmstead, Sheila M. & Stavins, Robert N., 2005. "Do Consumers React to the Shape of Supply? Water Demand Under Heterogeneous Price Structures," Working paper 360, Regulation2point0.
    2. Peter C. Reiss & Matthew W. White, 2003. "Demand and Pricing in Electricity Markets: Evidence from San Diego During California's Energy Crisis," NBER Working Papers 9986, National Bureau of Economic Research, Inc.

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