Optimal Pricing of Petroleum Products with Budget Constrain and Externality

Chung-Huang Huang, Hsing-Hua Lin and Han-Pang Su

No 330962, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper identifies the sources contributing to energy price distortion prevailing in Taiwan. These include market structure distortion, price distortion, taxation distortion, and cost distortion. A Ramsey pricing rule is developed that takes into account the environmental externalities generated by energy consumption. Empirical results indicate that the current price structure should be adjusted substantially to meet the objectives of Ramsey goals. The economic impacts from implementing the Ramsey pricing rule are evaluated by using the Dynamic Taiwan General Equilibrium Model (TAIGEM-D). The model is also used to evaluate the economic impacts of eliminating tariffs on imported energy as well as the market structure distortion.

Keywords: Demand and Price Analysis; Financial Economics (search for similar items in EconPapers)
Pages: 20
Date: 2002
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