Zone Pricing in Retail Oligopoly

AbstractWhile instruments to price congestion exist since the 1970s, less than a dozen cities around the world have a cordon or zone pricing scheme. Geneva, Switzerland, may be soon joining them. This paper builds on a detailed review of the existing schemes to identify a set of plausible design options for the Geneva congestion charge. In turn, it analyzes their acceptability, leveraging a large survey of residents of both Geneva and the surrounding areas of Switzerland and France. Our original approach combines a discrete choice experiment with randomized informational treatments. We consider an extensive set of attributes, such as perimeter, price and price modulation, use of revenues, and exemption levels and beneficiaries. The informational treatments address potential biased beliefs concerning the charge’s expected effects on congestion and pollution. We find that public support depends crucially on the policy design. We identify an important demand for exemptions, which, albeit frequently used in the design of environmental taxation, is underexplored in the analysis of public support. This demand for exemptions is not motivated by efficiency reasons. It comes mostly by local residents, for local residents. Further, people show a marked preference for constant prices, even if efficiency would point to dynamic pricing based on external costs. Hence, we highlight a clear trade-off between efficiency and acceptability. However, we also show, causally, that this gap can in part be closed, with information provision. Analyzing heterogeneity, we show that preferences vary substantially with where people live and how they commute. Even so, we identify several designs that reach majority support.

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Zone Pricing in Retail Oligopoly

American Economic Journal Microeconomics ◽

10.1257/mic.20170130 ◽

2019 ◽

Vol 11 (1) ◽

pp. 124-156 ◽

Cited By ~ 4

Author(s):

Brian Adams ◽

Kevin R. Williams

Keyword(s):

Market Power ◽

Price Discrimination ◽

Consumer Surplus ◽

Welfare Effects ◽

Rural Markets ◽

Home Improvement ◽

Home Depot ◽

Zone Pricing

We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home-improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in rural markets, where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer price discrimination does. (JEL D43, L13, L81, M31, R32)

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BUSINESS CASE FOR APPLICATION OF ENERGY STORAGE UNITS IN URBAN TRANSPORT AND HOME POWER GRIDS

The National Transport University Bulletin ◽

10.33744/2308-6645-2020-1-46-003-013 ◽

2020 ◽

Vol 1 (46) ◽

pp. 3-13

Author(s):

Andrusenko S ◽

◽

Buhaichuk O ◽

Budnychenko V ◽

Podpisnov V ◽

...

Keyword(s):

Energy Storage ◽

Economic Effect ◽

Business Case ◽

Urban Transport ◽

Power Grids ◽

Electric Transport ◽

Electricity Pricing ◽

Zone Pricing ◽

Object Of Study ◽

Storage Units

The article deals with the methodology of business case for application of energy storage units in urban transport and home power grids while using dual- and three-zone pricing; in addition it provides an example of the methodology application. The object of study are electrical grids with energy storage units. The purpose of the work is to develop the business case for application of energy storage units in urban transport and home power grids while using dual- and three-zone pricing. Methods of investigations - mathematical modeling of processes. As a rule, the volumes of electricity production and its consumption do not coincide in time. Therefore, energy storage units are used to optimize energy flows. The drive is charged with an excess of energy and transfers the stored energy to the system at the moments of its absence. The development of such technologies can have a significant economic effect and is of great practical importance. In Ukraine, dualzone and three-zone pricing are set for the population and businesses. When using the dual-zone pricing, the energy price coefficients for households are 0.5 at night from 11 p.m. to 7 a.m. and 1.0 in the daytime. The maximum operation of urban electric transport, as well as power consumption by enterprises, organizations and households, occurs at the time of day with the highest energy price. To reduce overall consumption, you can charge energy storage units at night and use the stored energy during the day. The methodology for business case for application of energy storage units by using dual-zone and three-zone pricing is proposed. We have obtained the criteria for this need. To calculate the payback period of the project, we use the method of expected current clean price is used. It is shown that at the existing prices of energy storage systems and electricity pricing in Ukraine, the use of such systems to save money due to low night pricing is impractical. It was determined that business case for application of energy storage units when using a dual-zone pricing in Ukraine can take place if only specific electricity pricing from available units is less than 0.2 ... 0.7 UAH/kWh. The results of the study can be used in the design of electrical systems with energy storage units. The predicted assumption about the development of the object of study is to determine business case for application of energy storage units in consumer power circuits using alternative sources of electricity. KEYWORDS: ELECTRICITY, STORAGE UNITS, PRICING, ELECTRIC TRANSPORT, HOUSING, INVESTMENT, ECONOMIC EFFECT, EXPECTED CURRENT CLEAN PRICE, PAYBACK PERIOD.

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