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Analyzing Small Industrial and Commercial User Demand for Electricity

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  • Allen, Keighton R.
  • Fullerton, Thomas M., Jr.

Abstract

This study employs duality theory to develop a theoretical model for small commercial and industrial (CIS) electricity usage. The CIS production function is posited such that output is a function of three variable inputs (electricity, natural gas, and labor) and one fixed input (capital). A profit function dual to this production function is specified using a normalized quadratic functional form. CIS profits are functionally dependent upon output price, an electricity input price, and natural gas and labor input prices for a fixed quantity of capital. The derived input-demand equation results from differentiating the profit function with respect to the price of electricity. The input-demand equation for electricity is dependent upon the own-price of electricity, the CIS output price, and input cross-prices. The model may be of use to utilities and regulators for the analysis of CIS electricity usage.

Suggested Citation

  • Allen, Keighton R. & Fullerton, Thomas M., Jr., 2018. "Analyzing Small Industrial and Commercial User Demand for Electricity," MPRA Paper 98988, University Library of Munich, Germany, revised 22 Oct 2018.
    • Handle: RePEc:pra:mprapa:98988
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    Cited by:

    1. Keighton R. Allen & Thomas M. Fullerton, 2019. "Metropolitan Evidence Regarding Small Commercial and Industrial Electricity Consumption," International Journal of Energy Economics and Policy, Econjournals, vol. 9(6), pages 1-11.

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    More about this item

    Keywords

    Duality Theory; Derived Demand; Electricity; Small Industrial and Commercial Customers;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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