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Some Simple Analysis Of Peak-Load Pricing

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  • BERGSTROM, T.
  • MACKIE-MASON, J.

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.
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Suggested Citation

  • Bergstrom, T. & Mackie-Mason, J., 1988. "Some Simple Analysis Of Peak-Load Pricing," Papers 89-02, Michigan - Center for Research on Economic & Social Theory.
  • Handle: RePEc:fth:michet:89-02
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    Cited by:

    1. Kim, Jeong-Yoo & Lee, Myeong Ho & Berg, Nathan, 2016. "Peak-load pricing in duopoly," Economic Modelling, Elsevier, vol. 57(C), pages 47-54.
    2. 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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    pricing;

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