A theory of directional pricing and its application to electricity policy

Akira Maeda and Makiko Nagaya

International Journal of Economics and Business Research, 2014, vol. 7, issue 1, 1-16

Abstract: This study is a first attempt of investigating a theory of directional pricing. Directional pricing is defined as price or rate designs that apply different prices to selling and buying the concerned goods. A typical example would be rate schedules in the feed-in-tariff (FIT) policy for electricity. This study discusses how the pricing is distinctive and shows that a new development of the theory is essential for the analysis of such emerging electricity markets.

Keywords: directional pricing; feed-in tariff; FIT; rate design; real options; digital options; binary options; electricity prices; electricity markets. (search for similar items in EconPapers)
Date: 2014
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