IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v102y2017icp406-413.html
   My bibliography  Save this article

Policy implications of considering pre-commitments in U.S. aggregate energy demand system

Author

Listed:
  • Rowland, Christopher S.
  • Mjelde, James W.
  • Dharmasena, Senarath

Abstract

Linear approximations of the Generalized Almost Ideal Demand System and Almost Ideal Demand System for U.S. energy are compared to contrast the explicit inclusion and exclusion of pre-committed consumption levels. Results indicate that pre-commitment levels, the quantity of a good that is consumed in the short run with little regard for price, helps to better explain energy demand in the U.S. compared to the system that does not explicitly consider pre-commitments. Policy implications are if pre-commitments are a legitimate assumption, larger price changes are necessary to achieve a given policy objective than if there are no pre-commitments.

Suggested Citation

  • Rowland, Christopher S. & Mjelde, James W. & Dharmasena, Senarath, 2017. "Policy implications of considering pre-commitments in U.S. aggregate energy demand system," Energy Policy, Elsevier, vol. 102(C), pages 406-413.
    • Handle: RePEc:eee:enepol:v:102:y:2017:i:c:p:406-413
    DOI: 10.1016/j.enpol.2016.12.041
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421516307054
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
    2. Vardges Hovhannisyan & Brian W. Gould, 2014. "Structural change in urban Chinese food preferences," Agricultural Economics, International Association of Agricultural Economists, vol. 45(2), pages 159-166, March.
    3. Simona Bigerna and Carlo Andrea Bollino, 2014. "Electricity Demand in Wholesale Italian Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. Capps, Oral, Jr. & Tsai, Reyfong & Kirby, Raymond & Williams, Gary W., 1994. "A Comparison Of Demands For Meat Products In The Pacific Rim Region," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(1), pages 1-15, July.
    5. Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2012. "Estimation of elasticity price of electricity with incomplete information," Energy Economics, Elsevier, vol. 34(3), pages 627-633.
    6. Marsh, Thomas L. & Piggott, Nicholas E., 2013. "Measuring Pre-Commited Quantities Through Consumer Price Formation," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152165, Australian Agricultural and Resource Economics Society.
    7. Apostolos Serletis, 2012. "Interfuel Substitution in the United States," World Scientific Book Chapters, in: Interfuel Substitution, chapter 2, pages 11-35, World Scientific Publishing Co. Pte. Ltd..
    8. Karimu, Amin & Brännlund, Runar, 2013. "Functional form and aggregate energy demand elasticities: A nonparametric panel approach for 17 OECD countries," Energy Economics, Elsevier, vol. 36(C), pages 19-27.
    9. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    10. Zarnikau, Jay, 2003. "Functional forms in energy demand modeling," Energy Economics, Elsevier, vol. 25(6), pages 603-613, November.
    11. Xiao, Ni & Zarnikau, Jay & Damien, Paul, 2007. "Testing functional forms in energy modeling: An application of the Bayesian approach to U.S. electricity demand," Energy Economics, Elsevier, vol. 29(2), pages 158-166, March.
    12. David I. Stern, 2012. "Interfuel Substitution: A Meta‐Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 26(2), pages 307-331, April.
    13. Radwan, Amr & Gil, Jose Maria & Ben Kaabia, Monia & Serra, Teresa, 2009. "Food Safety Information And Meat Demand In Spain," 2009 Conference, August 16-22, 2009, Beijing, China 51540, International Association of Agricultural Economists.
    14. Serletis, Apostolos & Shahmoradi, Asghar, 2008. "Semi-nonparametric estimates of interfuel substitution in U.S. energy demand," Energy Economics, Elsevier, vol. 30(5), pages 2123-2133, September.
    15. Ryan, David L & Wales, Terence J, 1998. "A Simple Method for Imposing Local Curvature in Some Flexible Consumer-Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 331-338, July.
    16. William Barnett & Ikuyasu Usui, 2006. "The Theoretical Regularity Properties of the Normalized Quadratic Consumer Demand Model," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200609, University of Kansas, Department of Economics.
    17. C. Andrea Bollino & Federico Perali & Nicola Rossi, 2000. "Linear household technologies," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(3), pages 275-287.
    18. Bigerna, Simona & Bollino, Carlo Andrea, 2016. "Ramsey prices in the Italian electricity market," Energy Policy, Elsevier, vol. 88(C), pages 603-612.
    19. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-888, September.
    20. Dahl, Carol & Sterner, Thomas, 1991. "Analysing gasoline demand elasticities: a survey," Energy Economics, Elsevier, vol. 13(3), pages 203-210, July.
    21. Barnett, William A. & Serletis, Apostolos, 2008. "Measuring Consumer Preferences and Estimating Demand Systems," MPRA Paper 12318, University Library of Munich, Germany.
    22. Serletis, Apostolos & Timilsina, Govinda & Vasetsky, Olexandr, 2011. "International evidence on aggregate short-run and long-run interfuel substitution," Energy Economics, Elsevier, vol. 33(2), pages 209-216, March.
    23. Dagher, Leila, 2012. "Natural gas demand at the utility level: An application of dynamic elasticities," Energy Economics, Elsevier, vol. 34(4), pages 961-969.
    24. Deaton, Angus S, 1974. "The Analysis of Consumer Demand in the United Kingdom, 1900-1970," Econometrica, Econometric Society, vol. 42(2), pages 341-367, March.
    25. Hunt, Lester C. & Ryan, David L., 2015. "Economic modelling of energy services: Rectifying misspecified energy demand functions," Energy Economics, Elsevier, vol. 50(C), pages 273-285.
    26. Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
    27. Senarath Dharmasena & Oral Capps, 2012. "Intended and unintended consequences of a proposed national tax on sugar‐sweetened beverages to combat the U.S. obesity problem," Health Economics, John Wiley & Sons, Ltd., vol. 21(6), pages 669-694, June.
    28. Bollino, Carlo Andrea, 1987. "Gaids: a generalised version of the almost ideal demand system," Economics Letters, Elsevier, vol. 23(2), pages 199-202.
    29. Berndt, Ernst R & Savin, N Eugene, 1975. "Estimation and Hypothesis Testing in Singular Equation Systems with Autoregressive Disturbances," Econometrica, Econometric Society, vol. 43(5-6), pages 937-957, Sept.-Nov.
    30. Alston, Julian M. & Chalfant, James A. & Piggott, Nicholas E., 2001. "Incorporating demand shifters in the Almost Ideal demand system," Economics Letters, Elsevier, vol. 70(1), pages 73-78, January.
    31. John Muellbauer, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 525-543.
    32. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
    33. Tenkorang, Frank & Dority, Bree L. & Bridges, Deborah & Lam, Eddery, 2015. "Relationship between ethanol and gasoline: AIDS approach," Energy Economics, Elsevier, vol. 50(C), pages 63-69.
    34. Simona Bigerna and Carlo Andrea Bollino, 2015. "A System Of Hourly Demand in the Italian Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tarek Atalla & Simona Bigerna & Carlo Andrea Bollino, 2018. "Energy demand elasticities and weather worldwide," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 207-237, April.
    2. Rahman, Kazi Tamim & Shanoyan, Aleksan & Hovhannisyan, Vardges, 2020. "Pre-Committed Demand for Food in Bangladesh: Implications for Agri-Food Industry Stakeholders," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304644, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Senia, Mark & Dharmasena, Senarath, 2017. "Pre-Determined Demand and Theoretical Regularity Conditions: Their Importance for Consumer Food Demand Using AIDS and Policy Analysis Implications," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252740, Southern Agricultural Economics Association.
    2. Tarek Atalla & Simona Bigerna & Carlo Andrea Bollino, 2018. "Energy demand elasticities and weather worldwide," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 207-237, April.
    3. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    4. Jin, Man, 2018. "Measuring substitution in China's monetary-assets demand system," China Economic Review, Elsevier, vol. 50(C), pages 117-132.
    5. Salisu, Afees A. & Ayinde, Taofeek O., 2016. "Modeling energy demand: Some emerging issues," Renewable and Sustainable Energy Reviews, Elsevier, vol. 54(C), pages 1470-1480.
    6. Simona Bigerna & Carlo Andrea Bollino & Maria Chiara D’Errico, 2020. "A general expenditure system for estimation of consumer demand functions," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(3), pages 1071-1088, October.
    7. Barnett, William A. & Serletis, Apostolos, 2008. "Measuring Consumer Preferences and Estimating Demand Systems," MPRA Paper 12318, University Library of Munich, Germany.
    8. Guy Chapda Nana & Bruno Larue, 2014. "Imposing curvature conditions on flexible functional forms for GNP functions," Empirical Economics, Springer, vol. 47(4), pages 1411-1440, December.
    9. Paris, Quirino & Caracciolo, Francesco, 2014. "Testing the adding up condition in demand systems," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182827, European Association of Agricultural Economists.
    10. Chapda Nana, Guy & Larue, Bruno, 2012. "Imposing Curvature Conditions on Flexible Functional Forms to GNP Functions," Working Papers 123308, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
    11. Paris, Quirino & Caracciolo, Francesco, 2012. "Quantity Versus Shares in Estimating Demand Systems," Working Papers 124575, University of California, Davis, Department of Agricultural and Resource Economics.
    12. Karimu, Amin & Brännlund, Runar, 2013. "Functional form and aggregate energy demand elasticities: A nonparametric panel approach for 17 OECD countries," Energy Economics, Elsevier, vol. 36(C), pages 19-27.
    13. Serletis, Apostolos & Timilsina, Govinda & Vasetsky, Olexandr, 2009. "On interfuel substitution : some international evidence," Policy Research Working Paper Series 5026, The World Bank.
    14. Ali Jadidzadeh and Apostolos Serletis, 2016. "Sectoral Interfuel Substitution in Canada: An Application of NQ Flexible Functional Forms," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    15. Vardges Hovhannisyan & Marin Bozic, 2017. "Price Endogeneity and Food Demand in Urban China," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(2), pages 386-406, June.
    16. Jevgenijs Steinbuks, 2012. "Interfuel Substitution and Energy Use in the U.K. Manufacturing Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    17. Steinbuks, Jevgenijs & Narayanan, Badri G., 2015. "Fossil fuel producing economies have greater potential for industrial interfuel substitution," Energy Economics, Elsevier, vol. 47(C), pages 168-177.
    18. Lakkakula, Prithviraj & Schmitz, Andrew & Ripplinger, David, 2016. "U.S. Sweetener Demand Analysis: A QUAIDS Model Application," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), pages 1-16, September.
    19. Apostolos Serletis & Libo Xu, "undated". "Consumption, Leisure, and Money," Working Papers 2019-08, Department of Economics, University of Calgary, revised 06 Jul 2019.
    20. Ignacio, Escañuela Romana, 2019. "The elasticities of passenger transport demand in the Northeast Corridor," Research in Transportation Economics, Elsevier, vol. 78(C).

    More about this item

    Keywords

    Pre-commitments; Energy demand; Generalized Almost Ideal Demand System model; Almost Ideal Demand System model;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:102:y:2017:i:c:p:406-413. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nithya Sathishkumar). General contact details of provider: http://www.elsevier.com/locate/enpol .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.