Published September 15, 2017
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Comparing Models of Electric Utility Behavior
- Creators
- Rothwell, Geoffrey S.
Abstract
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.
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.Attached Files
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Additional details
- Eprint ID
- 81460
- Resolver ID
- CaltechAUTHORS:20170914-150200908
- Created
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2017-09-15Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 588