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On estimating the effects of peak demand pricing
Author(s) -
Veall Michael R.
Publication year - 1986
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.3950010106
Subject(s) - econometrics , extreme value theory , economics , generalized extreme value distribution , sample (material) , value (mathematics) , demand curve , distribution (mathematics) , statistics , microeconomics , mathematics , physics , mathematical analysis , thermodynamics
Extreme value distributions are seldom used in economics, despite what seems to be a natural application to peak demand pricing. This paper estimates the effect of an individual peak demand charge which is a component of the standard industrial electricity rate structure. The extreme value distribution is used in forming the likelihood function of individual peak demand which is then estimated on a sample of five Ontario cement firms from 1970–1977. Goodness‐of‐fit tests tend to support the use of the extreme value distribution.