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Is real-time pricing smart for consumers?

Anette Boom () and Sebastian Schwenen ()

Journal of Regulatory Economics, 2021, vol. 60, issue 2, No 5, 193-213

Abstract: Abstract We examine the effects of real-time pricing on welfare and consumer surplus in electricity markets. We model consumers on real-time pricing who purchase electricity on the wholesale market. A second group of consumers contracts with retailers and pays time-invariant retail prices. Electricity generating firms compete in supply functions. Increasing the number of consumers on real-time pricing increases welfare and consumer surplus of both types of consumers. Yet, risk averse consumers on traditional time-invariant retail prices are always better off. Collectively, our results point to a public good nature of demand response in power markets when consumers are risk averse.

Keywords: Electricity; Real-time pricing; Market power; Efficiency (search for similar items in EconPapers)
JEL-codes: D42 D43 D44 L11 L12 L13 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11149-021-09440-5

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