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

Fredrik Carlsson () and Peter Martinsson

No 154, Working Papers in Economics from Göteborg University, Department of Economics

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.

Keywords: Power outages; Contingent Valuation; Random parameters; Tobit model (search for similar items in EconPapers)
JEL-codes: C25 C93 D12 Q41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-ene and nep-res
Date: 2004-12-20
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Published in Energy Journal, 2007, pages 75-89.

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Journal Article: Willingness to Pay among Swedish Households to Avoid Power Outages: A Random Parameter Tobit Model Approach (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:gunwpe:0154

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