Conservation Incentives for Consumers

Franz Wirl

Journal of Regulatory Economics, 1999, vol. 15, issue 1, 23-40

Abstract: This paper investigates profit-maximizing conservation incentives of a utility, where the interest in conservation results from prices regulated below the marginal costs of supply and where consumers differ with respect to their subjective time preference. Conventional least-cost planning implies that a program should focus on inefficient consumers (those who apply high discount rates). However, this scheme provokes strategic reactions of the consumers. Hence, incentive-compatible conservation schemes--one tied to efficiency, the other tied to electricity consumption--are derived that differ starkly from the above finding and from actual programs. Copyright 1999 by Kluwer Academic Publishers

Date: 1999
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