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- Title
Peak Load Pricing and Optimal Capacity: Comment.
- Authors
Crew, M. A.
- Abstract
The article focuses on the peak load pricing and optimal capacity. In his paper on the theory of peak load pricing, Oliver E. Williamson developed the analysis so that it was of greater general application than the earlier solutions to the problem of peak load pricing. In particular he develops the means of handling time periods of different length and of pricing optimally either when significant indivisibilities exist or otherwise. The purpose of the article is to extend Williamson's analysis to take into account differences in plant costs. His analysis can be extended to deal with the problems of choice in servicing peak loads. It can be used to show that it may be rational to install and/or replace plants in which average costs exceed those of an "efficiency unit." Study shows that where demand is increasing the choice is between a peak-load-plant giving an immediate net gain and an efficiency unit giving a net gain some time in the future. A simple discounting procedure would enable the decision as to which plant to invest in to be made.
- Subjects
PEAK load; PEAK load pricing (Public utilities); COST effectiveness; PRICING; INDUSTRIAL efficiency; DISCOUNT prices; ECONOMIC demand
- Publication
American Economic Review, 1968, Vol 58, Issue 1, p168
- ISSN
0002-8282
- Publication type
Article