use of peak pricing markets paige kirstein. the market market production must continue at max output...
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USE OF PEAK PRICING MARKETSPaige Kirstein
THE MARKET Market production must continue at max output
all the time. Market demand fluctuates intensely in a
predictable pattern.
GOAL
Limit Peak Usage Environmental Benefits Economic/Efficiency Benefits Avoid Outages
METHOD
Price Fluctuations based on peak times of usage
Fluctuations must be… Expensive enough to change behavior Cheap enough to not debilitate those without the
option of changing when they utilize. ‘ Understandable
Relevance of the destination of the money
PRECEDENTS
NYC Train System Peak and not peak fares.
Cell Phone Minutes Peak minutes and not peak minutes.
Movie Theatre Tickets Matinee, super matinee, and evening tickets
EMERGING NEW MARKETS
INTERNET
Constrained Bandwidth Current: Flat Rate
Punishes light users Proposed: Fluctuating per usage rate
Limit excessive usage Encourage off peak usage (night time) Cisco charging plan
TRAFFIC Constrained Road Size
Current No tolls on most roads
Same tolls at all times of day
Proposed: Varying Fees Higher travel costs Changed travel behaviour Shorter travel times Revenue generation
STOCKHOLM TRAFFIC CASE STUDY Prices
$6.50 to go by car through city centre peak, $4.30 non peak
$4.30 via Essingleden during peak hours, and $0 non peak
Progressive Tax Employed affected more than unemployed Rich affected more than Poor
Overall effects on traffic reduce the number of car journeys by almost 5% for
the county number of journeys made by public transport is
estimated to increase by 3% walking and cycling increase by slightly more than 1%. Number of car trips during peak hours reduced by
20% in the inner city.
ELECTRICITY
Constrained electricity output Current: slight variation between peak (day) and
off peak (night) Pre-contract pricing and “spot” pricing Creation of over 15% demand in order to prevent black
outs. Proposed
Comprehensive, fluid method of charging. Distributed usage will require less electricity. Average prices cheaper if excess isn’t created.
ELECTRICITY PILOT RESULTS
Price Incentives B = - 0.15, p < 0.01 Presence of price incentives decreases peak
usage Magnitude has minimal effect
Behavioral Incentives B = 0.33, p < 0.001 Behavioral commitments More knowledge of system = Stronger
commitments Three times larger effect than price
LESSONS FROM OTHER MARKETS
Traffic Clear Alternatives Individuals know to take different routes ---> Easy peak energy tips
Internet Cisco’s system pricing is “tiered, detailed, and
itemized billing to subscribers” ---> detailed, frequent billing
ADDITIONAL NON-MONETARY INCENTIVES-Educate about the rate structure
- an understandable auction - Switch non-cooperative game theory to cooperative- Devices
-Subsidies on timers -Requirements for Smart Meters-Indoor meters