Implementing Consumer Theory

Abstract

Several elements of the theory of consumer behavior are introduced in this chapter which will proof helpful later on for the analysis of electricity demand. The first section reviews the basic theoretical approaches to generate a system of demand equations. In the second section we present the two-stage budgeting approach in the analysis of consumer behavior. The third section shows different models to estimate demand functions using aggregate data sets. Whereas in section four the welfare measurement problems within the two-stage budgeting modelling are presented. In section five we introduce the functional form utilized in modelling the Swiss residential electricity demand by time-of-use, while in the last section a survey of the most important previous studies on electricity demand by time-of-use are presented.