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Willingness to Pay among Swedish Households to Avoid Power Outages - A Random Parameter Tobit Model Approach

  • Carlsson, Fredrik

    ()

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Martinsson, Peter

    ()

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Using a contingent valuation survey, we elicit Swedish households’ willingness to pay (WTP) to avoid power outages. In the study respondents are asked to state their WTP for avoiding nine different types of outages. We therefore apply a random parameter Tobit model since there is cross-sectional heterogeneity and a proportion of zero responses. Based on the estimations, we find that the WTP depends positively on the duration of the outages, and that WTP is significantly higher for unplanned outages. The overall variation in the WTP due to observed heterogeneity in housing and socio-economic variables is small compared to the pure effects of power outages. Policy implications of those findings are discussed.

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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 154.

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Length: 20 pages
Date of creation: 20 Dec 2004
Date of revision:
Publication status: Published in Energy Journal, 2007, pages 75-89.
Handle: RePEc:hhs:gunwpe:0154
Note: Published in Energy Journal, 2007, Vol 28, pp. 75-89.
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

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  1. Bengt Kriström, 1993. "Comparing continuous and discrete contingent valuation questions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 3(1), pages 63-71, February.
  2. Carson, Richard T & Flores, Nicholas A, 2000. "Contingent Valuation: Controversies and Evidence," University of California at San Diego, Economics Working Paper Series qt75k752s7, Department of Economics, UC San Diego.
  3. Fredrik Carlsson & Olof Johansson-Stenman, 2000. "Willingness to pay for improved air quality in Sweden," Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 661-669.
  4. John List & Craig Gallet, 2001. "What Experimental Protocol Influence Disparities Between Actual and Hypothetical Stated Values?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 20(3), pages 241-254, November.
  5. Michael J. Doane & Raymand S. Hartman & Chi-Keung Woo, 1988. "Household Preference for Interruptible Rate Options and the Revealed Value of Service Reliability," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 121-134.
  6. Thomas C. Brown & Patricia A. Champ & Richard C. Bishop & Daniel W. McCollum, 1996. "Which Response Format Reveals the Truth about Donations to a Public Good?," Land Economics, University of Wisconsin Press, vol. 72(2), pages 152-166.
  7. Beenstock, Michael & Goldin, Ephraim & Haitovsky, Yoel, 1998. "Response bias in a conjoint analysis of power outages," Energy Economics, Elsevier, vol. 20(2), pages 135-156, April.
  8. Carson, Richard T & Groves, Theodore, 2010. "Incentive and Information Properties of Preference Questions," University of California at San Diego, Economics Working Paper Series qt88d8644g, Department of Economics, UC San Diego.
  9. Fredrik Carlsson & Olof Johansson-Stenman & Peter Martinsson, 2004. "Is Transport Safety More Valuable in the Air?," Journal of Risk and Uncertainty, Springer, vol. 28(2), pages 147-163, 03.
  10. Michael J. Doane & Raymond S. Hartman & Chi-Keung Woo, 1988. "Households' Perceived Value of Service Reliability: An Analysis of Contingent Valuation Data," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 135-150.
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