A self-selection pricing mechanism for residential electricity: Measures of sustainability and equity to balance market mechanisms and government controls

Xinhua Zhang, C. Hueng and Robert J. Lemke

Journal of Policy Modeling, 2023, vol. 45, issue 6, 1167-1183

Abstract: We design a self-selection-pricing mechanism in which an electricity supplier offers its customers an optimal menu of contracts subject to a price ceiling set by the government, a hybrid model of market mechanism and government controls. We calibrate the model using information from a residential electricity market in China. Our mechanism outperforms the tiered-electricity-pricing system in China in terms of environmental and industrial sustainability but comes at the cost of providing less protection for low-income households (i.e., less equity). We conclude by offering measures of sustainability and equity that governments could use when trying to balance the trade-off between the two.

Keywords: Information-screening; Residential electricity pricing; Regulation; Mechanism design (search for similar items in EconPapers)
JEL-codes: D86 Q41 Q48 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:45:y:2023:i:6:p:1167-1183

DOI: 10.1016/j.jpolmod.2023.10.002

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