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

Author

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  • 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)

Abstract

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.

Suggested Citation

  • Carlsson, Fredrik & Martinsson, Peter, 2004. "Willingness to Pay among Swedish Households to Avoid Power Outages - A Random Parameter Tobit Model Approach," Working Papers in Economics 154, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0154
    Note: Published in Energy Journal, 2007, Vol 28, pp. 75-89.
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    References listed on IDEAS

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    More about this item

    Keywords

    Power outages; Contingent Valuation; Random parameters; Tobit model;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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