The Response of Large Firms to Different Schemes of Time-of-Use Pricing When the Production Function is Quadratic
The Energy Journal, 1989, vol. Volume 10, issue Number 2, 69-90
This paper constructs a model of firms' behavior before and after the introduction of time-of-use (TOU) pricing of electricity, encompassing optimal behavior under both flat-rate and time-of-use pricing. The model aims to be consistent, constraining those parameters not affected by time-of-use pricing so that they are the same under both price schemes. However, it also accounts for the new conditions (structure) under which the firm must operate once time-of-use pricing is adopted. The results show that the optimal capital under the flat rate is identical to that under revenue-neutral TOU. Almost all the firm's adjustments take place at the time that the time-of-use pricing is introduced, and only very few additional adjustments take place in the long run. These results contradict the widely-held belief that the firm cannot redistribute its electricity use over the day very quickly but can do so in the long run, once the capital input has adjusted to the new conditions.
JEL-codes: F0 (search for similar items in EconPapers)
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to IAEE members and subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:1989v10-02-a06
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().