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The Cost of Power Outages in the Business and Public Sectors in Israel: Revealed Preference vs. Subjective Valuation

Abstract:
Cross-section data on investment in back-up generators and uninterruptable power supplies (UPS) are used to infer the implied cost of electricity outages in the business and public sectors in Israel. Two-limit tobit models of the demand for back-up are estimated and used to simulate the mitigated and unmitigated cost of power outages. These "revealed preference estimates of outage costs are then compared with estimates based on the method of subjective evaluation.

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Energy Specializations: Electricity – Markets and Prices ; Electricity – Policy and Regulation

JEL Codes: Q51: Valuation of Environmental Effects, Q41: Energy: Demand and Supply; Prices, D22: Firm Behavior: Empirical Analysis, D21: Firm Behavior: Theory, Q42: Alternative Energy Sources, D11: Consumer Economics: Theory, C51: Model Construction and Estimation

Keywords: Power outages, electricity supply, revealed preference, Israel

DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No2-3


Published in Volume18, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.