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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
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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.

Willingness to Pay for Improved Quality of Electricity Supply Across Business Type and Location

Mark Morrison and Craig Nalder

Year: 2009
Volume: Volume 30
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-6
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Regulatory authorities in many countries are experimenting with mechanisms for providing electricity distributors with financial incentives to improve quality of supply. In designing these incentives it is apparent that customers preferences have rarely been obtained for consideration in the regulatory process. As a result, there is relatively limited understanding of customers willingness to pay for improved quality of electricity supply. Several studies have examined the willingness of households to pay for improved quality of electricity supply, however, few studies have examined the willingness of businesses to pay for improved quality of supply. In this study we use choice modelling with random parameters logit models to identify the willingness to pay of business for various service related attributes. Furthermore, we examine the values held by both service and manufacturing businesses, from both rural/ regional and urban areas, and observe the differences between them. We find several differences in willingness to pay across business types and locations, however overall the value estimates are relatively homogeneous.

A Stochastic Frontier Analysis Approach for Estimating Energy Demand and Efficiency in the Transport Sector of Latin America and the Caribbean

Manuel Llorca, José Baños, José Somoza, and Pelayo Arbués

Year: 2017
Volume: Volume 38
Number: Number 5
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In this paper, a stochastic frontier analysis approach is applied to estimate energy demand functions in the transport sector. This approach allows us to obtain energy efficiency measures at country level that are a robust alternative to the energy intensity indicators commonly used for international comparisons. A transitive multilateral price index is constructed for aggregating the diverse energy components employed in the sector. Due to the likely unobserved heterogeneity among countries, the use of a random parameters model is proposed to accommodate these differences and to obtain different income and price elasticities per country. The estimated model is compared with alternative approaches of addressing this issue such as latent class, true fixed effects or true random effects models. This study is the first to use a random parameters stochastic frontier approach in the estimation of energy demand functions. The proposed procedure is applied to Latin America and the Caribbean, where the transport sector represents a large share of total energy consumption.

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