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A Simple Method for Evaluating the Marginal Cost of Unsupplied Electricity


  • Benjamin Bental
  • S. Abraham Ravid


A method for calculating the marginal cost of industrial power cuts is developed. Firms are assumed to hedge against outages by acquiring back-up generators. The marginal cost of back-up power enables us to infer the marginal cost of a power cut.

Suggested Citation

  • Benjamin Bental & S. Abraham Ravid, 1982. "A Simple Method for Evaluating the Marginal Cost of Unsupplied Electricity," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 249-253, Spring.
  • Handle: RePEc:rje:bellje:v:13:y:1982:i:spring:p:249-253

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    References listed on IDEAS

    1. Samet, Dov & Tauman, Yair, 1982. "The Determination of Marginal Cost Prices under a Set of Axioms," Econometrica, Econometric Society, vol. 50(4), pages 895-909, July.
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    Cited by:

    1. Alastaire Sèna ALINSATO, 2015. "Economic Valuation of Electrical Service Reliability for Households’ in Developing Country: A Censored Random Coefficient Model Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 352-359.
    2. Roop Jyoti & Aygul Ozbafli & Glenn Jenkins, 2006. "The Opportunity Cost of Electricity Outages and Privatization of Substations in Nepal," Working Papers 1066, Queen's University, Department of Economics.
    3. Azam Chaudhry, 2010. "A Panel Data Analysis of Electricity Demand in Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(Special E), pages 75-106, September.
    4. Rehana Siddiqui & Hafiz Hanzla Jalil & Muhammad Nasir & Wasim Shahid Malik & Mahmood Khalid, 2008. "The Cost of Unserved Energy: Evidence from Selected Industrial Cities of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(3), pages 227-246.
    5. Kim, Kayoung & Cho, Youngsang, 2017. "Estimation of power outage costs in the industrial sector of South Korea," Energy Policy, Elsevier, vol. 101(C), pages 236-245.
    6. Serra, Pablo & Fierro, Gabriel, 1997. "Outage costs in Chilean industry," Energy Economics, Elsevier, vol. 19(4), pages 417-434, October.
    7. Yu, W. & Jamasb, T. & Pollitt, M., 2007. "Incorporating the Price of Quality in Efficiency Analysis: the Case of Electricity Distribution Regulation in the UK," Cambridge Working Papers in Economics 0736, Faculty of Economics, University of Cambridge.
    8. Diboma, B.S. & Tamo Tatietse, T., 2013. "Power interruption costs to industries in Cameroon," Energy Policy, Elsevier, vol. 62(C), pages 582-592.
    9. Marcos Perroni & Luciano Luiz Dalazen & Wesley Vieira da Silva & Sergio Eduardo Gouvêa da Costa & Claudimar Pereira da Veiga, 2015. "Evolution of Risks for Energy Companies from the Energy Efficiency Perspective: The Brazilian Case," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 612-623.
    10. Steinbuks Jevgenijs, 2012. "Firms' Investment under Financial and Infrastructure Constraints: Evidence from In-House Generation in Sub-Saharan Africa," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-34, October.
    11. Lamessa Tariku ABDISA, 2018. "Power Outages, its Economic Cost and Firm Performance: Evidence from Ethiopia," Departmental Working Papers 2018-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    12. Wolf, André & Wenzel, Lars, 2015. "Welfare implications of power rationing: An application to Germany," Energy, Elsevier, vol. 84(C), pages 53-62.
    13. Steinbuks, J., 2008. "Financial constraints and firms' investment: results of a natural experiment measuring firm response to power interruption," Cambridge Working Papers in Economics 0844, Faculty of Economics, University of Cambridge.
    14. Adenikinju, Adeola F., 2003. "Electric infrastructure failures in Nigeria: a survey-based analysis of the costs and adjustment responses," Energy Policy, Elsevier, vol. 31(14), pages 1519-1530, November.
    15. Steinbuks, J. & Foster, V., 2010. "When do firms generate? Evidence on in-house electricity supply in Africa," Energy Economics, Elsevier, vol. 32(3), pages 505-514, May.
    16. Piaszeck, Simon & Wenzel, Lars & Wolf, André, 2013. "Regional diversity in the costs of electricity outages: Results for German counties," HWWI Research Papers 142, Hamburg Institute of International Economics (HWWI).
    17. Musiliu 0. Oseni & Michael G. Pollitt, 2013. "The Economic Costs of Unsupplied Electricty: Evidence from Backup Generation among African Firms," Cambridge Working Papers in Economics 1351, Faculty of Economics, University of Cambridge.
    18. Wolf, André & Wenzel, Lars, 2016. "Regional diversity in the costs of electricity outages: Results for German counties," Utilities Policy, Elsevier, vol. 43(PB), pages 195-205.

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