Some Simple Analytics of Peak-Load Pricing

Ted Bergstrom () and Jeffrey Mackie-Mason

RAND Journal of Economics, 1991, vol. 22, issue 2, 241-249

Abstract: Consider a public utility that offers its service at two different times. We study the effects of a change from uniform pricing throughout the day to peak-load pricing. We show that for a utility constrained to operate with a fixed rate of return on capital, the introduction of peak-load pricing can plausibly reduce the price of the service both in peak and off-peak times. We also find that peak-load pricing can lead to either greater or smaller capacity than uniform pricing. We find a simple criterion for determining whether a particular individual gains or loses from peak-load pricing.

Date: 1991
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Working Paper: SOME SIMPLE ANALYSIS OF PEAK-LOAD PRICING (1988)
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