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A Neoclassical Approach to Peak Load Pricing

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  • John C. Panzar

Abstract

The well-known result that optimal peak load pricing requires only users who utilize plant to capacity to bear any fraction of the capacity costs is shown to result from the technological assumption of the traditional literature and not from the fundamental nature of the peak load problem. When a neoclassical technology is specified, optimal pricing requires that users in all periods contribute toward the cost of capacity.

Suggested Citation

  • John C. Panzar, 1976. "A Neoclassical Approach to Peak Load Pricing," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 521-530, Autumn.
    • Handle: RePEc:rje:bellje:v:7:y:1976:i:autumn:p:521-530
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    Citations

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    Cited by:

    1. Basso, Leonardo & Zhang, Anming, 2006. "Peak-Load Pricing In A Vertical Setting: The Case Of Airports And Airlines," 47th Annual Transportation Research Forum, New York, New York, March 23-25, 2006 208029, Transportation Research Forum.
    2. Tsur, Yacov & Zemel, Amos, 1993. "Stochastic Energy Demand And The Stabilization Value Of Energy Storage," Staff Papers 14267, University of Minnesota, Department of Applied Economics.
    3. Mark W. Gellerson & Shawna P. Grosskopf, 1980. "Public Utility Pricing, Investment, and Reliability under Uncertainty: A Review," Public Finance Review, , vol. 8(4), pages 477-492, October.
    4. Severin Borenstein & James Bushnell & Frank Wolak, 2000. "Diagnosing Market Power in California's Restructured Wholesale Electricity Market," NBER Working Papers 7868, National Bureau of Economic Research, Inc.
    5. Ma, Ching-To Albert & McGuire, Thomas G, 1993. "Paying for Joint Costs in Health Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 2(1), pages 71-95, Spring.
    6. Paul L. Joskow & Roger G. Noll, 1981. "Regulation in Theory and Practice: An Overview," NBER Chapters, in: Studies in Public Regulation, pages 1-78, National Bureau of Economic Research, Inc.
    7. A. K. Dragun, 1985. "Problems and Prospects for Water Reallocation in Australia," Natural Resources Forum, Blackwell Publishing, vol. 9(4), pages 239-251, November.
    8. Luis A. Guzman & Carlos A. Moncada & Santiago Gómez, 2018. "Fare discrimination and daily demand distribution in the BRT system in Bogotá," Public Transport, Springer, vol. 10(2), pages 191-216, August.
    9. Andreas Ehrenmann & Yves Smeers, 2011. "Generation Capacity Expansion in a Risky Environment: A Stochastic Equilibrium Analysis," Operations Research, INFORMS, vol. 59(6), pages 1332-1346, December.
    10. Richard Arnott, 1992. "Information and Usage of Congestible Facilities Under Free Access," Discussion Papers 974, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Ricard Gil, 2006. "Demand Shifts and Changes in Competition: Evidence from the Movie Theatre Industry," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 13(3), pages 407-428.
    12. Lipsman, Michael Aaron, 1994. "A theory of transportation clubs with special application to the domestic aviation system," ISU General Staff Papers 1994010108000012284, Iowa State University, Department of Economics.
    13. Hung, Yick-Hin & Li, Leon Y.O. & Cheng, T.C.E., 2022. "Uncovering hidden capacity in overall equipment effectiveness management," International Journal of Production Economics, Elsevier, vol. 248(C).

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