Generalized Mixed Estimation Of A Multinomial Discretecontinuous Choice Model For Electricity Demand

In this paper, we applied the generalized mixed estimation approach to the problem of estimating the Quebec residential electricity demand for space and water heating. A multinomial discrete-continuous choice model is used and estimated in two stages. The discrete choice is modelled as a multinomial probit model, while the continuous choice is estimated from a reduced form approach which corrects for the simultaneity biases. The results indicate that the GM estimator which combines prior and sample information dominates the classical ML estimator of the MNP models and hence, provides better prevision for electricity consumption. Evidence also shows that heating-system capital and operating costs, households characteristics, and energy prices have a significant impact on the choice of heating systems and electricity use. In particular, price substitution effects are well predicted.