Abstract
So far, in setting out the classic peak-load model and its extensions, we have retained the assumption of that model, i.e. that demand is deterministic. Many public utilities face demands that have not only the strong periodic element of the peak-load model, but also an important random element. Stochastic demand creates various complications which typically are not considered in the deterministic case. It is necessary to decide whether demand is to be met, and what happens, by way of rationing, when demand is not met.1 The analysis which follows is directed at answering these questions. In Section 5.1 we describe briefly some of the main contributions to the literature on peak-load pricing under uncertainty. In Section 5.2 we provide a general framework for analysing problems of stochastic demand, comparing the results with the deterministic solutions derived in Chapters 3 and 4. Section 5.3 is concerned with examining some major issues of the stochastic problem, namely dealing with excess demand and rationing. Section 5.4 presents a brief summary and conclusions of the arguments of this chapter.
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© 1979 Michael A. Crew and Paul R. Kleindorfer
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Crew, M.A., Kleindorfer, P.R. (1979). Stochastic Models of Peak-load Pricing. In: Public Utility Economics. Palgrave, London. https://doi.org/10.1007/978-1-349-03263-1_5
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DOI: https://doi.org/10.1007/978-1-349-03263-1_5
Publisher Name: Palgrave, London
Print ISBN: 978-1-349-03265-5
Online ISBN: 978-1-349-03263-1
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