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Does it matter when a power outage occurs? -- A choice experiment study on the willingness to pay to avoid power outages

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  • Carlsson, Fredrik
  • Martinsson, Peter

Abstract

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. Moreover, the random parameter logit model allows us to estimate a sample distribution of WTP and we find a significant unobserved heterogeneity in some of the outage attributes. Given that households have negative welfare effects from outages, it is important that policy makers consider these negative impacts on household utility when regulating the Swedish electricity market.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:eneeco:v:30:y:2008:i:3:p:1232-1245
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    More about this item

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • 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; Prices

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