Are two-part tariffs efficient when consumers plan ahead?: An empirical study
AbstractDuring the last two decades there has been an increase in using dynamic tariffs for billing household electricity consumption. This has questioned the suitability of traditional pricing schemes, such as two-part tariffs, since they contribute to create marked peak and offpeak demands. The aim of this paper is to assess if two-part tariffs are an efficient pricing scheme using Spanish household electricity microdata. An ordered probit model with instrumental variables on the determinants of power level choice and non-paramentric spline regressions on the electricity price distribution will allow us to distinguish between the tariff structure choice and the simultaneous demand decisions. We conclude that electricity consumption and dwellings’ and individuals’ characteristics are key determinants of the fixed charge paid by Spanish households Finally, the results point to the inefficiency of the two-part tariff as those consumers who consume more electricity pay a lower price than the others.
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Bibliographic InfoPaper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number CREAP2006-04.
Length: 29 pages
Date of creation: Oct 2006
Date of revision: Oct 2006
Contact details of provider:
Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Web page: http://www.pcb.ub.edu/xreap
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Regulation; electricity; consumer behavior: empirical analysis.;
Find related papers by JEL classification:
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-DCM-2007-05-12 (Discrete Choice Models)
- NEP-ENE-2007-05-12 (Energy Economics)
- NEP-MIC-2007-05-12 (Microeconomics)
- NEP-MKT-2007-05-12 (Marketing)
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