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Comparing Models of Electric Utility Behavior

Rothwell, Geoffrey S. (1985) Comparing Models of Electric Utility Behavior. Social Science Working Paper, 588. California Institute of Technology , Pasadena, CA. (Unpublished)

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Several models of electric utility behavior have been suggested and tested. Among them are profit and revenue maximization and cost and revenue minimization. The latter being the stated objective of many public utilities. These four models are compared empirically by examining power plant choice from 1970 to 1977. The net present value (profit) model yields the highest estimated likelihood and its parameters are consistent with a priori theory. Firms were attempting to maximize their return, while minimizing fixed and variable costs. Also, I find no evidence that the difference between the allowed rate of return and the cost of capital influenced technology choice.

Item Type:Report or Paper (Discussion Paper)
Additional Information:I would like to thank the following people for their valuable comments and support: R. Gilbert, J. Henly, P. Joskow, T. Keeler, P. Messinger, R. Noll, J. Quigley, N. Polin, and P. Ruud. This research was supported by a grant from the University-wide Energy Research Group, University of California, and by the California Institute of Technology. Previous versions were presented at the Western Economics Association's 1985 conference and to the Technology Innovation Project seminar at Stanford University. This paper reflects my own views and errors, and not those of these individuals or institutions.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:588
Record Number:CaltechAUTHORS:20170914-150200908
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:81460
Deposited By: Jacquelyn Bussone
Deposited On:15 Sep 2017 17:32
Last Modified:03 Oct 2019 18:43

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