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Some Simple Analytics of Peak-Load Pricing

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  • Ted Bergstrom
  • Jeffrey K. MacKie-Mason

Abstract

Consider a public utility that offers its service at two different times. We study the effects of a change from uniform pricing throughout the day to peak-load pricing. We show that for a utility constrained to operate with a fixed rate of return on capital, the introduction of peak-load pricing can plausibly reduce the price of the service both in peak and off-peak times. We also find that peak-load pricing can lead to either greater or smaller capacity than uniform pricing. We find a simple criterion for determining whether a particular individual gains or loses from peak-load pricing.

Suggested Citation

  • Ted Bergstrom & Jeffrey K. MacKie-Mason, 1991. "Some Simple Analytics of Peak-Load Pricing," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 241-249, Summer.
    • Handle: RePEc:rje:randje:v:22:y:1991:i:summer:p:241-249
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    Cited by:

    1. Saravut Yaipairoj & Fotios Harmantzis, 2008. "Achieving low-cost UMTS networks via pricing," Netnomics, Springer, vol. 9(2), pages 105-124, October.
    2. Antal-Pomázi, Krisztina, 2020. "A differenciált árazással kapcsolatos ösztönzőkről [Incentives related to differential pricing]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 244-262.
    3. Kim, Jeong-Yoo & Lee, Myeong Ho & Berg, Nathan, 2016. "Peak-load pricing in duopoly," Economic Modelling, Elsevier, vol. 57(C), pages 47-54.
    4. Frank Limehouse & Michael Maloney & Kurt Rotthoff, 2012. "Peak-Load Versus Discriminatory Pricing: Evidence from the Golf Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(3), pages 151-165, May.

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