Continuity of the equilibrium price density and its uses in peak-load pricing

Anthony Horsley and Andrew Wrobel

Economic Theory, 2005, vol. 26, issue 4, 839-866

Abstract: With $L^{\infty}$ as the commodity space, the equilibrium price density is shown to be a continuous function of the commodity characteristics. The result is based on symmetry ideas from the Hardy-Littlewood-Pólya theory of rearrangements. It includes, but is not limited to, the case of symmetric (rearrangement-invariant) production costs and additively separable consumer utility. Examples arise in continuous-time utility pricing, e.g., electricity pricing. In this context, a continuously varying price has two uses. First, it precludes demand jumps that would arise from discontinuous switches from one price rate to another. Second, in the problems of operating and valuing hydroelectric and pumped-storage plants (studied elsewhere), price continuity guarantees that their capacities (viz., the reservoir and the converter), the energy stocks, and in the case of hydro also the river flows, have well-defined marginal values. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Price continuity; Equilibrium existence; Efficiency rents. (search for similar items in EconPapers)
Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00199-004-0568-3 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Continuity of the Equilibrium Price Density and its Uses in Peak-Load Pricing (2001)
Working Paper: Continuity of the equilibrium price density and its uses in peak-load pricing (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:26:y:2005:i:4:p:839-866

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2

DOI: 10.1007/s00199-004-0568-3

Access Statistics for this article

Economic Theory is currently edited by Nichoals Yanneils

More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().