household electricity demand revisited respond to price changes this paper develops a model for evaluating the effects of alternative tariff designs on electricity use the model concurrently addresses several interrelated difficulties posed by nonlinear pricing heterogeneity in consumer price sensitivity and consumption aggregation over appliances and time we estimate the model using extensive data for a representative sample of 1300 california households the results imply a strikingly skewed distribution of household electricity price elasticities in the population with a small fraction of households accounting for most aggregate demand response we then estimate the aggregate and distributional consequences of recent tariff structure changes recent efforts to restructure electricity markets have renewed interest in electricity demand and pricing this interest reflects a broad desire to improve the efficiency of electricity markets and policy makers concerns over the impact of price changes on consumers how new pricing mechanisms would affect households consumption and expenditures is a matter of considerable uncertainty however this uncertainty has provoked controversy and debate in the regulatory policy arena hampering market reforms using econometric methods to assess the effects of electricity price changes presents several challenges these include the nonlinear structure of tariff schedules aggregation of metered consumption behaviour over time and appliances and the interdependence of energy use with longer term household decisions over appliance ownership and dwelling characteristics the first two issues introduce complex simultaneity problems between marginal prices and consumption the third issue imposes high data requirements information on household specific appliance holdings and residence features and creates heterogeneity in consumption responses related to the characteristics of these durable goods when the researcher s objective is to develop a model for simulating the effects of prospective tariff changes ignoring these issues will provide an incomplete assessment of demand responses and potentially misleading predictions of a new tariff s consumption and revenue consequences in this paper we estimate a model of household electricity demand that can be used

distortionary taxes and the provision of public goods economists have long been concerned with finding an efficient level of public expenditure the classic statement of the problem was given by paul samuelson 1954 an optimal level of expenditure is where the sum of the marginal rates of substitution between the public good and a reference good equals the marginal rate of transformation between the public good and the reference good mrs mrt however samuelson s formula assumes that all of the revenue needed to finance public goods can be raised with lump sum taxes since this is not generally possible the formula must be modified to account for the distortionary effects of the tax system an appropriate modification is to multiply the cost side of the equation by a term that is commonly called the marginal cost of public funds mcf in the case of samuelson s formula where government is entirely financed with lump sum taxes the mcf would be exactly 1 0 in the traditional view of economists distortionary taxes cause the mcf to be greater than one thus raising the cost of providing public goods in this paper we discuss some cases where the mcf may be less than one we will illustrate this possibility using numerical examples for labor taxes

the efficiency and equity consequences of two part tariffs in electricity pricing ahstrat t this paper evaluates electricity two part tariffs with both efficiency and equity criteria the efficiency of tariffs is analyzed by studying the relation between price and marginal cost for both customer connection and variable output the equity of tariffs is addressed by an analysis of cross subsidization to address these issues this paper presents a multiproduct cost function that can provide information on output and connection marginal costs for each customer class using a 1980 cross section of electric utilities it is shown that prices are not set in a first best efficient manner and least favor the commercial class

to know and to care how awareness and valuation of the future jointly shape consumer spending reducing spending in the present requires the combination of being both motivated to provide for one s future self valuing the future and actively considering long term implications of one s choices awareness of the future feeling more connected to the future self thinking that the important psychological properties that define your current self are preserved in the person you will be in the future helps motivate consumers to make far sighted choices by changing their valuation of future outcomes e g discount factors however this change only reduces spending when opportunity costs are considered correspondingly cues that highlight opportunity costs reduce spending primarily when people discount the future less or are more connected to their future selves implications for the efficacy of behavioral interventions and for research on time discounting are discussed

market structure and the pricing of electricity and natural gas us electricity and natural gas markets have traditionally been serviced by one of two market structures in some markets electricity and natural gas are sold by a regulated dual product monopolist while in other markets electricity and natural gas are sold by separate regulated single product monopolies i analyze whether electricity and natural gas prices depend on the market structure and compare these results to the predictions of a number of theories the results are most consistent with the political economy theories suggesting that regulators respond to interest group activity

the marginal welfare cost of public funds theory and estimates abstract we derive a general analytic formula for the marginal welfare cost mwc of public funds without imposing restrictive assumptions on preferences or technologies the framework encompasses the various special cases previously considered and reconciles the disparities among the reported estimates of mwc unresolved differences in existing estimates are fully explained by appropriate interpretations of intended thought experiments and alternative assumptions about the elasticity of labor supply with respect to public spending further progress in measuring mwc requires empirical estimation of labor supply functions that include government spending as an explanatory variable

rate of return regulation and two part tariffs in choosing a two part tariff a monopoly subject to rate of return regulation will rely more on demand elasticities and less on marginal costs than would a welfare maximizing firm the rate of return regulated firm also will reduce its access fee or its marginal usage fee more depending on whether adding consumers or increasing output requires marginally the most capital in the typical case these effects will favor declining block rate structures which helps to explain their widespread use by rate of return regulated firms

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

opportunity cost consideration normatively consumers should incorporate opportunity costs into every decision they make yet behavioral research suggests that consumers consider them rarely if at all this research addresses when consumers consider opportunity costs who considers opportunity costs which opportunity costs spontaneously spring to mind and what the consequences of considering opportunity costs are perceived constraints cue consumers to consider opportunity costs and consumers high in propensity to plan consider opportunity costs even when not cued by immediate constraints the specific alternatives retrieved and the likelihood of retrieval are functions of category structures in memory for a given resource some uses are more typical of the category of possible uses and so are more likely to be considered as opportunity costs consumers who consider opportunity costs are less likely to buy focal options than those who do not when opportunity costs are appealing but no less likely when opportunity costs are unappe

career concerns inaction and market inefficiency evidence from utility regulation we study how incentive conflicts known as career concerns can generate inefficiencies not only within firms but also in market outcomes career concerns may lead agents to avoid actions that while valueincreasing in expectation could potentially be associated with a bad outcome we apply this theory to natural gas procurement by regulated public utilities and show that career concerns may lead to a reduction in surplus increasing market transactions during periods when the benefits of trade are likely to be greatest we show that data from natural gas markets are consistent with this prediction and difficult to explain using alternative theories

measuring the impact of promotions on brand switching when consumers are forward looking abstract logit choice models have been used extensively to study promotion response this article examines whether brand switching elasticities derived from these models are overestimated as a result of rational consumer adjustment of purchase timing to coincide with promotion schedules and whether a dynamic structural model can address this bias using simulated data the authors first show that if the structural model is correct brand switching elasticities are overestimated by stand alone logit models a nested logit model improves the estimates but not completely second the authors estimate the models on real data the results indicate that the structural model fits better and produces sensible coefficient estimates the authors then observe the same pattern in switching elasticities as they do in the simulation third the authors predict sales assuming a 50 increase in promotion frequency the reduced form models predict much higher sales levels than does the dynamic structural model the autho

opportunity cost neglect to properly consider the opportunity costs of a purchase consumers must actively generate the alternatives that it would displace the current research suggests that consumers often fail to do so even under conditions promoting cognitive effort various cues to consider opportunity costs reduce purchase rates and increase the choice share of more affordable options sensitivity to such cues varies with chronic dispositional differences in spending attitudes we discuss the implications of these results for the marketing strategies of economy and premium brands

a generalizable scale of propensity to plan the long and the short of planning for time and for money planning has pronounced effects on consumer behavior and intertemporal choice we develop a six item scale measuring individual differences in propensity to plan that can be adapted to different domains and used to compare planning across domains and time horizons adaptations tailored to planning time and money in the short run and long run each show strong evidence of reliability and validity we find that propensity to plan is moderately domain specific scale measures and actual planning measures show that for time people plan much more for the short run than the long run for money short and long run planning differ less time and money adaptations of our scale exhibit sharp differences in nomological correlates short run and long run adaptations differ less domain specific adaptations predict frequency of actual planning in their respective domains a very long run money adaptation predicts fico credit scores low planners thus face materially higher cost of credit

rising inequality changes in the distribution of income and consumption in the 1980s this paper examines changes in the distribution of income and consumption in the united states during the 1980s using data from the current population survey income and consumer expenditure survey consumption we reach three primary conclusions first changes in the distribution of consumption parallel changes in the distribution of income the lowest quintile of the consumption distribution received 0 9 percentage points less of total consumption in 1988 than in 1980 the corresponding decline for income was 0 6 percentage points second broad conclusions concerning recent changes in the consumption distribution are not very sensitive to the exact choice of a measure of family needs under a wide variety of alternative household equivalence scales there is a widening in the consumption distribution in the 1980s third the usc of consumption measures of well being in place of measures based on current money income docs change conclusions concerning the extent of poverty in the united stales using the official federal poverty thresholds we find that the overall consumption poverty rate was three percentage points below the income poverty rate in 1988 comparisons of the poverty rates of the elderly and the non elderly are substantially affected by the choice of poverty measure the consumption poverty rare for the elderly was only 60 percent of the rate for adults and one third of the rate for children in 1988 this abstract was borrowed from another version of this item

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

the distributional impacts of u s energy policy abstract this paper surveys energy policy in the united states from a distributional perspective focusing on the distributional impacts of energy taxes is too narrow a framework the united states relies much more heavily on regulation than taxation to address energy related market failures it argues that most regulatory policies and tax subsidies to achieve energy policy goals are regressive this includes fuel economy standards ev purchase incentives and energy efficiency tax incentives in contrast a carbon tax is likely to be progressive even when ignoring the use of revenue the view that carbon taxes are regressive stems from an incomplete distributional analysis that assumes all impacts arise from increases in the costs of consumer goods and services recent analyses have emphasized the importance of impacts on sources of income in particular a carbon tax is likely to reduce returns to capital more than wages with capital disproportionately held by higher income households this differential factor income effect is progressive in addition transfer income more important for lower income households tends to be indexed and so contributes to a carbon tax s progressivity how carbon tax revenue is used can add even greater progressivity to a carbon tax reform

efficient retail pricing in electricity and natural gas markets a long line of research investigates whether the retail prices of electricity and natural gas send proper signals about scarcity in order to induce efficient consumption historically regulated utilities have not designed tariffs that set marginal prices equal to marginal costs currently some jurisdictions are opening the retail sectors to competition via retail choice these new regimes replace imperfect regulation with imperfect competition as the process by which retail tariffs are formed we discuss the challenges in evaluating the efficiency of tariffs and present evidence of how pricing has changed in markets with retail choice

the equity and efficiency of two part tariffs in u s natural gas markets abstractresidential natural gas customers in the united states face volumetric charges that average about 30 percent more than the marginal cost of gas this inefficient departure from marginal cost pricing allows gas utilities to cover their fixed infrastructure and operating costs proposals for recovering these costs instead through fixed monthly fees are often opposed because of a widespread belief that current rate schedules have desirable distributional consequences using nationally representative household level data we show that the correlation between household income and natural gas consumption is indeed positive but surprisingly weak so current rate schedules are only mildly progressive in part we argue that this is because poor households tend to have larger families and less energy efficient homes we calculate bill impacts under a variety of scenarios and show that even a modest energy assistance program would more than offset the distributional impact of tariff rebalancing for most low

discounting time and time discounting subjective time perception and intertemporal preferences abstract consumers often make decisions about outcomes and events that occur over time this research examines consumers sensitivity to the prospective duration relevant to their decisions and the implications of such sensitivity for intertemporal trade offs especially the degree of present bias i e hyperbolic discounting the authors show that participants subjective perceptions of prospective duration are not sufficiently sensitive to changes in objective duration and are nonlinear and concave in objective time consistent with psychophysical principles more important this lack of sensitivity can explain hyperbolic discounting the results replicate standard hyperbolic discounting effects with respect to objective time but show a relatively constant rate of discounting with respect to subjective time perceptions the results are replicated between subjects experiment 1 and within subjects experiments 2 with multiple time horizons and multiple descriptors and with different measurement ord

lifetime incidence and the distributional burden of excise taxes this implies that low income households in one year have some chance of being higher income households in other years and significantly affects the estimated distributional burden of excise taxes this paper shows that household expenditures on gasoline alcohol and tobacco as a share of total consumption a proxy for lifetime income are much more equally distributed than expenditures as a share of annual income from a longer horizon perspective excise taxes on these goods are therefore much less regressive than standard analyses suggest this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

on intertemporal selfishness how the perceived instability of identity underlies impatient consumption how does the anticipated connectedness between one s current and future identity help explain impatience in intertemporal preferences the less consumers are closely connected psychologically to their future selves the less willing they will be to forgo immediate benefits in order to ensure larger deferred benefits to be received by that future self when consumers measured or manipulated sense of continuity with their future selves is lower they accept smaller sooner rewards wait less in order to save money on a purchase require a larger premium to delay receiving a gift card and have lower long term discount rates

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

determining consumers discount rates with field studies abstract because utility profits state transitions and discount rates are confounded in dynamic models discount rates are typically fixed for the purpose of identification the authors propose a strategy of identifying discount rates the identification rests on imputing the utility profits using decisions made in a context in which the future is inconsequential the objective function is concave and the decision space is continuous they then use these utilities profits to identify discount rates in contexts in which dynamics become material the authors exemplify this strategy using a field study in which cell phone users transitioned from a linear to a three part tariff pricing plan they find that the estimated discount rate corresponds to a weekly discount factor 90 lower than the value typically assumed in empirical research 995 when using a standard 995 discount factor they find that the price coefficient is underestimated by 16 moreover the predicted intertemporal substitution pat

responsiveness to energy price changes when salience is high residential natural gas demand in ukraine abstract despite its importance for policy purposes evidence about the price elasticity of natural gas demand in the residential sector is very limited and based on inference from situations with modest variation in prices we focus on a locale and time when price changes were extreme and salient to consumers namely ukraine between 2013 and 2017 we exploit the tariff reforms and detailed micro level household consumption records to assess whether consumers adjust their consumption in response to the rate changes and estimate the price elasticity of the demand for natural gas to isolate behavior attention is restricted to those households that made no structural energy efficiency upgrades to their homes thus keeping the stock of gas using capital fixed we find that households are capable of reducing consumption even without installing insulation or making any other structural modifications to their homes the price elasticity is about 0 16 wealthier households people living in multifamily buildings and heavy users have more inelastic demands households reduced consumption even when they received government assistance this and the fact the demand is inelastic especially for wealthier households bode well for tariffs or energy tax schemes where wealthier households subsidize the consumption of the poorer ones

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

paying for permanence an economic analysis of epa s cleanup decisions at superfund sites we analyze epa s cleanup decisions at over 100 superfund sites and examine whether and how epa trades off the cost against the permanence of cleanup epa s decisions reveal both a preference for permanent solutions and an aversion to cost for example epa prefers incinerating soils to isolating and containing them in place but not at any price at larger sites epa appears willing to accept additional costs of as much as 40 million to incinerate with regard to environmental equity we find little evidence that epa s cost permanence tradeoff is affected by socioeconomic characteristics in the communities surrounding the sites