Munich Personal RePEc Archive

Analyzing Small Industrial and Commercial User Demand for Electricity

Allen, Keighton R. and Fullerton, Thomas M., Jr. (2018): Analyzing Small Industrial and Commercial User Demand for Electricity. Published in: Theoretical Economics Letters , Vol. 8, No. 14 (25 October 2018): pp. 3109-3115.

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Abstract

This study employs duality theory to develop a theoretical model for small commercial and industrial (CIS) electricity usage. The CIS production function is posited such that output is a function of three variable inputs (electricity, natural gas, and labor) and one fixed input (capital). A profit function dual to this production function is specified using a normalized quadratic functional form. CIS profits are functionally dependent upon output price, an electricity input price, and natural gas and labor input prices for a fixed quantity of capital. The derived input-demand equation results from differentiating the profit function with respect to the price of electricity. The input-demand equation for electricity is dependent upon the own-price of electricity, the CIS output price, and input cross-prices. The model may be of use to utilities and regulators for the analysis of CIS electricity usage.

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