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Estimating Household Value of Electrical Service Reliability with Market Research Data

Andrew A. Goett, Daniel L. McFadden and Chi-Keung Woo

Year: 1988
Volume: Volume 9
Number: Special Issue 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol9-NoSI2-7
No Abstract

Willingness to Pay among Swedish Households to Avoid Power Outages: A Random Parameter Tobit Model Approach

Fredrik Carlsson and Peter Martinsson

Year: 2007
Volume: Volume 28
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No1-4
View Abstract

Using a contingent valuation survey, we elicit Swedish households� willingness to pay (WTP) to avoid power outages. In the study respondents are asked to state their WTP for avoiding nine different types of outages. We therefore apply a random parameter Tobit model since there is cross-sectional heterogeneity and a proportion of zero responses. Based on the estimations, we find that the WTP depends positively on the duration of the outages, and that WTP is significantly higher for unplanned outages. The overall variation in the WTP due to observed heterogeneity in housing and socio-economic variables is small compared to the pure effects of power outages. Policy implications of those findings are discussed.

Self-Generation and Households' Willingness to Pay for Reliable Electricity Service in Nigeria

Musiliu O. Oseni

Year: 2017
Volume: Volume 38
Number: Number 4
DOI: 10.5547/01956574.38.4.mose
View Abstract

Many households in developing countries often engage in self-generation to mitigate the impacts of poor public electricity provision. What is less well known, however, is whether (and how) self-generation influences households' willingness to pay (WTP) for service reliability. Using data collected from a sample of Nigerian households, the results reveal that engagement in self-generation is positively correlated with WTP for reliability. This is despite the fact that self-generation reduces the negative welfare impact of unreliability. Further analyses, however, show that backup households' decisions to pay a higher amount than non-backup households are influenced by the costs of self-generation: an increase of N1 (US$0.006) in self-generation's fuel cost per-hour is associated with WTP about N5.22 (US$0.032) more in the monthly bill. However, households' WTP US$0.15-0.16/kWh of improved reliability is smaller than the marginal costs of reliability from self-generation - US$0.27-0.41/kWh. We conclude by discussing the policy implications of our findings.

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