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Regional Electricity Pricing With Ramsey Approach: Tehran Case Study

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  • Hamidreza Hajibabaei
  • Davood Manzoor

Abstract

In developing countries electricity power is not only used for energy’s demand responding, but also an essential element of developing. Furthermore the government pricing has comprehensive effect on economy of developing countries due to huge ratio of their governments. So in these countries the electricity pricing could affect welfare and development simultaneously. Therefore we use welfare maximizing as one of the most prevalent method for optimal price detection. As Ramsey rule (which is derived from welfare maximizing) is used in increasing return to scale situations it would be proper for natural monopoly position (that exist in electricity market). Elasticity and marginal cost is required to use Ramsey rule therefore we use Philippine rule and panel data approach to determine elasticity. We also use average cost and rate of return degree to detect marginal cost. Using these two numbers will eventually result in Ramsey prices. Finally we will drive that electricity prices should increase while steps differences should decrease.

Suggested Citation

  • Hamidreza Hajibabaei & Davood Manzoor, 2014. "Regional Electricity Pricing With Ramsey Approach: Tehran Case Study," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(3), pages 182-186, July.
    • Handle: RePEc:hur:ijaraf:v:4:y:2014:i:3:p:182-186
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    References listed on IDEAS

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